Home > Uncategorized > The Shareholder’s Credo: “Focus on Core Competence and Outsource the Rest”

The Shareholder’s Credo: “Focus on Core Competence and Outsource the Rest”

September 9, 2017

A New York Times article by Neil Irwin on changes in the employment of janitors by two different technology companies over the past three decades illustrates why our current corporate practices are contributing to the widening divide in earnings and opportunities. To illustrate the change in the nature of these substantive changes, Mr. Irwin profiles two janitors: Gail Evans and Marta Ramos who had one thing in common: “They have each cleaned offices for one of the most innovative, profitable and all-around successful companies in the United States.”

Ms. Evans worked at Eastman Kodak in Rochester NY in the late 1980s. Ms. Ramos is currently working for Apple in Cupertino, CA. Ms. Ramos earns the same amount per hour in inflation adducted wages… but while the wages are identical, the working conditions vary tremendously:

Evans was a full-time employee of Kodak. She received more than four weeks of paid vacation per year, reimbursement of some tuition costs to go to college part time, and a bonus payment every March. When the facility she cleaned was shut down, the company found another job for her: cutting film.

Ramos is an employee of a contractor that Apple uses to keep its facilities clean. She hasn’t taken a vacation in years, because she can’t afford the lost wages. Going back to school is similarly out of reach. There are certainly no bonuses, nor even a remote possibility of being transferred to some other role at Apple.

Yet the biggest difference between their two experiences is in the opportunities they created. A manager learned that Evans was taking computer classes while she was working as a janitor and asked her to teach some other employees how to use spreadsheet software to track inventory. When she eventually finished her college degree in 1987, she was promoted to a professional-track job in information technology.

Less than a decade later, Evans was chief technology officer of the whole company, and she has had a long career since as a senior executive at other top companies. Ramos sees the only advancement possibility as becoming a team leader keeping tabs on a few other janitors, which pays an extra 50 cents an hour.

They both spent a lot of time cleaning floors. The difference is, for Ramos, that work is also a ceiling.

Ms. Ramos’ experience is typical of today’s workforce because, as corporations, small businesses, and— yes— school districts employ more and more contracted employees. Why? The headline of this post is taken from this paragraph that sums up the trend:

In the 35 years between their jobs as janitors, corporations across America have flocked to a new management theory: Focus on core competence and outsource the rest. The approach has made companies more nimble and more productive, and delivered huge profits for shareholders. It has also fueled inequality and helps explain why many working-class Americans are struggling even in an ostensibly healthy economy.

Outsourcing transportation has a long history in public education. But as a result of following the credo to “focus on core competence and outsource the rest” public schools have outsourced things like payroll, custodial services, food services, hall monitors, and substitute teachers. Some “reform” advocates have even outsourced the core competence of teaching, hiring green Teach For America candidates instead of offering career track opportunities.

In the short run, this practice will pay dividends to shareholders as the ancillary costs like paid sick leave, paid vacation, paid benefits, tuition reimbursement, and pensions. But in the long run, this hiring of contractors instead of long term employees will corrode the economic system. In a world where every job is contracted out there will be fewer and fewer stories like that of Gail Evans, an under-educated but highly motivated blue collar worker who was able to advance up the corporate ladder through the largesse of her employer. When “working hard and playing by the rules” has no long term pay-off is it any wonder that fewer and fewer employees are committed to either hard work or adherence to a code of conduct that enables them to stay in one job?

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