Fungible Employee’s

America’s slow long-term employment recovery, one possible source is the Fungible Employee and their increased use.

First a little definition is required.  A good is considered to be fungible if one unit of the good is substantially equivalent to another unit of the same good of the same quality at the same time and place.

Having sat in on a great many management meeting where one of the major topics was reduction of operating cost as a means to increase profit, it became clear that many of my much younger managers had a complete and utter lack of sensitivity to or for our employees.

Many of these B school graduates were on a quest, for something more holy than the grail.  They were on the quest of the fungible employee.  These managers wanted to replace as many of our current employee with as many fungible employee as possible.  We were in the business that was quickly gravitating to what many in our industry considered to be a commodity.   So profit margins were being hammered every quarter.  Our competitors were pushing for market share just as we were. Product pricing was being squeezed.   Competitors are trying to differentiate his or her commodity from the other guy’s commodity in an attempt to justify their products cost.

It just like I remember from air combat training once you are in the merge it quickly becoming a knife fight to the bottom, both side losing energy as the fight spirals closer and closer to the ground as each side expends energy in an attempt to gain an advantage until some become a smoking hole.  Some of the competitors have deeper pockets and other revenue streams so that they could stay in the fight longer, others were not so fortunate.

Never in any of the discussions did I here an utterance about competence or quality, or what would it do to our product, or for that matter what it would do to the company’s reputation.   Almost every single discussion concern cost, and those that did not concern cost concerned plans to acquire these fungible employees.

The have many names, the most common being temp worker, and they did not have to work for a temp agency.  To some extent contract employees can be considered fungible in that they also have some of same endearing qualities.  I do not remember any discussions about reduction in demand for our products.  When I asked once about this, after I pulled all of the arrows out, I knew not to ask again.

I am no longer with that company, for even my position was determined to be fungible.  Funny thing is that for a significant percentage of the individuals in those meeting many also found that their positions were fungible.  I am much luckier than many of them I could afford to retire, and so I did, many of the others are still looking for the next Eldorado, to them I say Bonne Chance.

The following is a list of the endearing qualities of the fungible employee.  It is not meant to be exhaustive, but it does contain what I consider to be some of the more important elements that senior management finds attractive.

1.              Fungible employees have no hidden cost, all their costs are known.

2.              You do not have to find work for them when your contracted tasks are completed, they can be released.

3.              They are no long term or reoccurring commitments of corporate or company resources (Sick Leave, Retirement Contribution, Health Insurance).

4.              No employment taxes owed to the government.

5.              Reduced Human Resources department.

6.              Reduced or elimination of training costs.

7.              No Unemployment payments or claw backs.

8.              Can be released at any time for any reason, no justification required.

9.              No expectation of increased costs as they gain mastery of their tasks.

10.          Short term commitment

11.          Cost can be renegotiated at the end of term.

For the employer it is a really great deal.

For the employee it is a really sucky deal.

Here is what the fungible employee gets out of the deal, and what a deal it is.

1.              No employment stability in your life (The company has no plans to bring you on full time no matter how good of job you do).

2.              Your earnings can be highly variable, depending on employment situation (You will work only when you are needed and not a moment longer).

3.              You could or will be responsible for all of your employment taxes.

4.              You could or will be responsible for all of your retirement contributions and or programs.

5.              You could or will be responsible for all of health insurance cost.

6.              You are responsible for your own training.

7.              Your ability to borrow from financial institutions is questionable. (Your employment history is pretty shaky).

8.              Get sick at your own peril.

9.              Take a vacation at your own peril.

10.          Slack off just a little at your own peril.

11.          Get injured at your own peril.

12.          If you do not like the deal, do not take it, we will find someone else.

13.          You are a commodity get use to it. (Welcome to the Brave New World).