Saturday, September 20, 2003

When a Hard-Working H.R. Dept.
Devastates Your Organization  

H.R. departments in big organizations are a lot like Bud Selig, MLB's worstwhile Commissioner and owner of its least successful franchise over the last decade. Under pressure, they jump on to an apparently logical idea and ride it into the ground, past any useful purpose.

Selig, if you can believe columnist Ken Rosenthal of The Sporting News, has been jawboning teams not to offer players arbitration (if you don't know what that process is, send me e-mail and I'll post an explanation here). These instructions come from the authority figure, so many teams reduce the number of their players to whom they offer arbitration.

But what's the result? The "good for owners" result is apparently lowered labor costs, and more players end up in the free agent pool. Higher supply of free agent talent relative to pre-existing demand. But what happens to the team that didn't offer arbitration? They are short an experienced player. They can replace the player with someone inexperienced (promote from the minors or a bench role), trade prospects away in favor of an experienced player, or dip into the free agent market. Ergo, higher demand for free agent talent, partially negating the "good for owners" effects.

Baseball ownership is a very primitive, so it'd not surprising they're taking something sort of like a cargo cult approach, Management By Wishful Thinking (MBWT). By not offering arbitration, they effectively release a guy they then need to replace. The guy they release is less likely to sign with the team, meaning they're going to have a new employee who needs to be trained in the ways of a new organization, his teammates need to get to know him and his playing patterns. The dollars saved are mostly or completely neutralized by the cost of integration.

This kind of overhead creation enervates many big organizations with hard-working human relations departments. In the private sector especially, as businesses, non-profits and the increasing pool of underemployed and unemployed struggle to eke out a marginal existence in The Permafrost Economy, they have to look for sources of income outside their normal sale of products or services or development acitivities.One source of income still available is suing a "deep pocket" (although Congress is trying to lop off this opportunity, too). This puts pressure on H.R. groups because the odds of a big organization being sued go up.

So big organization H.R. groups start focusing on overhead activities, things like litigation-prevention, rather than their rightful rĂ´le as a group that optimizes the hiring process and makes existing staff more effective. This, of course, keeps the Permafrost Economy frostier, employment more shaky, employee-consumers less aggressive, purchasing managers more cautious. The more pressure there is on margins, the more money they spend on fear-evasion overhead.

H.R. leaders go to seminars hosted by organizations that benefit from this fear-setting, outfits like consultants and law firms and insurance companies. So H.R. groups accelerate the overhead, spending money on how to spend money that's guaranteed to not make money. They come back from the seminars, and justify the time and effort spent at them by deploying the fear right in their own organizations.

This off-season, watch to see which players your favored teams don't offer arbitration to. In general, there'll be high-paid failures, and that makes sense. But you'll see a lot of quality mid-priced talent getting purged and then replaced with other mid-priced talent.

It won't make a team better or lower labor costs, except by random chance, but it makes ownership feel like they're coping with a crisis.

Do you have one of these H.R cargo cult things going on in your organization? If you do, tell me about it...I'm collecting great cargo cult examples.

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