Author: ken

A Hiring Paralysis?

There is an interesting story hidden within the news about the rise in employment. The big news, trumpeted on the front page of The New York Times, is that “the United States economy gained 236,000 jobs in February, well above what had been expected, while the unemployment rate fell to 7.7 percent.” And this despite the loss of jobs in the public sector, due largely to declining tax income in cities and states.

At the same time, that story noted what has become a familiar disturbing theme: As the number of employed rose, “the size of the labor force contracted by 130,000. Some of that was due to retirements, but some was also a result of discouraged workers giving up the search for jobs entirely.” So while employment is up, the ranks of the permanently unemployed are also increasing. (See “Unemployment at 4-Year-Low as U.S. Hiring Gains Steam.”)

But the hidden story, reported the day before, is that “despite a slowly improving economy, many companies remain reluctant to actually hire, stringing job applicants along for weeks or months before they make a decision.”

The lack of proper skills on the part of those seeking jobs is part of the answer, but “the bigger problem seems to be a sort of hiring paralysis.” As a management professor who consults to HR departments put it: “There’s a fear that the economy is going to go down again, so the message you get from C.F.O.’s is to be careful about hiring someone.” Being “careful” means extended interviews, delays, additional tests and more delays.

According to The Times, a recent internal review at Google, showed that the optimal number of interviews for any given candidate was four. But many individual accounts in the story report seven, eight or nine interviews and a process that can drag on for months. Even Google expanded the interview process from an average to 21 to 30 days in the past two years. So it is reluctance, resistance and ambivalence that rules the process.

“They’re chasing after that purple squirrel,” noted one HR professional, using an industry term for an impossibly qualified job applicant. (See, “With Positions to Fill, Employers Wait for Perfection.”)

That is the hidden story: this negative attitude towards hiring new workers. As employees carry with them not only the cost of their own salaries but also the additional expenses of benefits and insurance, as well as the problems of absenteeism, potential interpersonal conflict, etc., it is not surprising that companies put off as long as possible to risks of hiring, especially if they can rely on the willingness of existing employees to take on extra loads. In the process they accumulate profits for that rainy day.

If these were simply individuals faced with a task they are reluctant to perform, we’d call it “procrastination.” The difference here is that it these delays are strongly motivated and highly rewarded. This tells a different story, but one that is rarely emphasized in the news.

A New Privileged Class?

It often looks as if banks are being punished for their infractions and crimes, but appearances can be deceptive. Huge fines are levied and “settlements” announced for manipulating rates, misleading customers, misrepresenting risk, conflicts of interests and “creative” bookkeeping, etc. But no one goes on trial or ends up in jail.

To be sure, there are occasional efforts to cut salaries, limit bonuses and even “claw back” bonuses when it turns out the bank suffered from incompetent or deceptive practices. But as Daniel Gross, reporting for The Daily Beast, put it recently: “A pretty clear rule of thumb has emerged: if you work at a well-known, large, systematically important financial institution, you may lose your bonus—but not your freedom.”

Gross went on to detail scandals involving the manipulation of the LIBOR and mortgage backed securities, noting that “Essentially, executives and traders at the world’s elite banks, over a period of years, blatantly, willfully, and persistently agreed to fix benchmark interbank lending rates.” RBS paid $600 million in fines. Barclays agreed to pay $453 million. More recently several US banks agreed to a “$8.5 billion settlement with federal authorities over the improper handling of foreclosures.” But those responsible for the misdeeds are seldom punished. (See “Why Do Banks Get Away With Murder?”)

The ones who end up losing are the shareholders, and that may be one reason banks are increasingly viewed as poor investments. Their fines end up being absorbed into the even-increasing cost of doing business.

Why is this tolerated? Gross suggests: “Prosecutors fear that indicting a highly leveraged, highly indebted institution would trigger a cascade of unwanted outcomes—capital flight, bank runs, disruptions in vital markets.” He cites Barry Ritholtz, author of Bailout Nation: “The greatest triumph of the banking industry wasn’t ATMs or even depositing a check via the camera of your mobile phone. It was convincing Treasury and Justice Department officials that prosecuting bankers for their crimes would destabilize the global economy.”

So just as banks deemed “too big to fail” are supported to keep the economy robust, now, the argument goes, all but the most inconsequential financial institutions have to be supported because prosecuting those who violated the guidelines and laws would send the wrong message. This is not only an extraordinary vulnerability in our jerry-built financial system, but also “moral hazard” on an astonishing scale.

Can Gross be correct? Do the people who regulate our financial system really believe this – or is it yet another rationale for a system that perpetuates our growing inequality? Perhaps the greatest sign of privilege is not needing to struggle oneself to be successful or safe because others are already worrying about your motivation and guarding your security.

If so, this might be the best indicator yet that we truly have established a new caste system. If those who now make up our financial elite feel entitled to do what they want with impunity, if there is no risk for them, where are the benefits of free markets? It looks increasingly like a game rigged by the players.

Is There a Problem?

“Levels of narcissism are increasing among college students, says Professor Jeffrey Pfeffer at Stanford’s business school.” Worse, “business school students are more narcissistic than others.” But, surprisingly, he adds that may not be so bad. (See Businessweek, “Does It Matter If B-Schools Produce Narcissists?”)

He refers to a study published two years ago in the very same magazine that makes it clear narcissism is a serious disorder: “As students, narcissists exploit others, are arrogant and haughty, and unable to empathize with others. They are poor team players, at a time when employers are demanding enhanced team skills. Narcissists blame others for failures, take undeserved credit for success, are hypersensitive to negative feedback, and show an exaggerated sense of entitlement.” (See “The Rising Tide of Narcissism: What B-Schools Can Do.”)

To counter this damning list of negatives, the Stanford professor notes, “narcissistic leaders remained in their positions longer and earned more, particularly compared with other executives in their companies. . . . Narcissists tend to be more willing to ask for and expect help, and this behavior will help make them more successful.” Moreover, having “higher expectations for one’s salary almost certainly will help produce higher incomes.”

These are not powerful arguments, certainly not for the actual added value that narcissists offer their organizations. Moreover, the benefits can be explained by the fact that, as he went on to say, “People want to associate with winners: people who are going places and therefore can help them.” If narcissists “have higher levels of self-esteem, display more confidence and do more things that will cause them to stand out,” this does not mean they actually have better ideas, achieve more, or make better leaders. It just makes them more attractive. Their focus is on image and impression, not values and skill.

So why is narcissism now getting a better press? Over 30 years ago, Christopher Lasch proposed that ours is a Culture of Narcissism. As Professor Pfeffer claims, that is even more true now. But as we get more narcissistic, is narcissism losing its negative implication. Are we getting so used to it that we no longer see it as the problem it is?

One possibility: narcissists now are working assiduously to change their image and reputation. Professor Pfeffer suggests something like this when he notes that while narcissistic leaders “thrive individually,” they “often behave in ways that exact a price on their subordinates and maybe even their organizations.” As a result, it may be “completely sensible for B-schools to worry more about individual than organizational outcomes” because that way they are setting themselves up to get endowed chairs, new buildings, new programs and higher rankings from their narcissistic graduates. The organizations their graduates work for will not reward them but the graduates themselves are thriving and grateful, and they are gaining recognition.

Another possibility: the shift in attitude towards narcissists may make it harder to see the forest for the trees. Overwhelmed with the many specific problems our narcissists have given rise to – such as corruption, cheating, child abuse, governmental dysfunction, income disparity, materialism and heightened competition – we no longer pay attention to the underlying problem. Why complain about the unpleasant interpersonal qualities of “narcissism” when we are burdened and oppressed with the particular forms of virulent behavior it gives rise to? Those are by far the bigger problems we face.

Why They Happen? Why They’re Tolerated?

A recent report of the Federal Trade Commission called attention to disturbing practices in the credit rating business. Among the findings: “nearly 26 percent of consumers . . . found at least one potentially material mistake on at least one of the three credit reports, and 20.6 percent had changes made after attention was drawn to the errors. ‘One out of five Americans has an error on their credit report,’ FTC Chairman Jon Leibowitz told 60 Minutes in a report that aired Sunday night.”

Daniel Gross, in The Daily Beast, explained how this has come about: “Lending has evolved from an intensely personal business—one in which the lender would personally assess the creditworthiness of a borrower—into an automated, purely data-driven industry.” The computer generated score that banks now rely on “is created by thousands of data providers furnishing information electronically to the computer systems maintained by the credit bureaus. Of course, these systems are compiled and maintained by humans, which means errors can easily be introduced. A wrong keystroke, an incorrect Social Security number, or simply a poorly designed software system can alter an individual’s rating.”

The process has been automated and dehumanized. But the real problem is that the person whose score is calculated is not actually a customer. As Gross points out, the credit bureaus do “sell credit reports and credit monitoring systems to individuals. But the bread and butter of the business is selling the data to banks, credit-card companies, and mortgage firms. In other words, they sell the information on a wholesale basis to other businesses. And as a result, they are not really set up to deal with consumers as individuals.”

In other words, the normal pressures of competition and accountability that motivate businesses to serve their customers are lacking when it comes to the subjects of their reports. Indeed, since the customers are banks, the faster and cheaper the credit rating service provided the greater the profitability. And the errors don’t materially affect the banks. In most cases they will never get to know about them. (See, “Why Consumers’ Credit Reports Contain Errors.”)

We tend to take it for granted that greater care is taken in such matters because, at one point, greater care was actually taken. Bankers used to be embarrassed and upset when their customers found mistakes in their accounts. But who really cares when attention to banking customers has been relegated to “relationship managers,” whose main job is to sell more “products”? And when the aggrieved subject of an inaccurate report eventually gets someone on the phone who replies “I do apologize for that” in a crisp and efficient tone, you know they are reading from a script.

Perhaps if the Consumer Protection Agency gets off the ground there will be more motivation to attend to accuracy. To be sure, the motivation will not be to serve and protect customers so much as to avoid punishment. But that may be enough – and as much as we can expect in the age of investor capitalism.

The Elusive Pursuit

Studies have shown that money does not make you happier — beyond a certain point. The economist Richard Easterlin concluded in 1974 that people do get happier as they make enough money to cover their basic expenses, but beyond that there is no correlation. Among economists this is known as the “Easterlin paradox.”

Hard nosed economists are generally resistant to soft data like subjective self-reports, but the felt quality of the lives we lead is hardly irrelevant to society, even if hard to capture. More importantly, in a society organized as much around consumerism as ours, it is useful to have data to support our intuition that more and more goods do not lead to greater joy and contentment, despite what advertisements promise.

The British and French governments now regularly try to measure the happiness of their citizens along with the GDP, though they frame it more as a matter of emotional well-being: being healthy, secure, clean, decently housed, and so on. And economists who study this are finding that the original “Easterlin paradox” is turning out to be more complex than originally framed. There is no simple and direct correlation between money and happiness, but, as Adam Davidson, a financial reporter for The New York Times put it recently: “most rich countries have reported increases in happiness as they become richer.”

But, he adds, there is “one strange exception. The U.S. is nearly three times as rich today as it was in 1973, when Easterlin was collecting his data. According to nearly every survey, though, Americans are not at all happier than we were back then.” Davidson suggests that this may be because “many Americans have not shared in the increased wealth. With the disappearance of pensions and the increased volatility of labor markets, many workers face more uncertainty than ever before.” (See, “Money Changes Everything.”)

That is a good point, but growing income inequality afflicts Britain and France as well as the rest of the West. What might be distinctive about us?

A new study by the American Psychological Association suggests that “almost half of Americans are one emergency away from financial ruin.” As reported in The Los Angeles Times, “Slightly more than 50% said that overwhelming worries disrupted their sleep in the past month. A dour economy is top of mind for young people, with work and job stability sending their stress levels soaring.” (See “Millennials Feel More Stress.”)

So income inequality has increasingly come to mean insecurity, stress and sleeplessness. Americans have tended to believe that if you worked hard you would succeed. We have seen ourselves as the land of opportunity. But now the dismal job market not only undermines that faith, it also confronts us all — and especially younger generations — with the specter of failure and poverty.
The dream, it turns out, has an undercurrent of dread. Living with those fears not only makes it harder to maintain our faith but harder to feel content. Life on the edge is tense, short-tempered, sleepless, self-centered, ungenerous – and, need it be said, unhappy.