[NA] The corporate hiring fallacy

[ArrowFlyer86]

Not aviation related at all just a rant...

My grievances with hiring in the corporate world can largely be boiled down to a bullet list, a chart and a question below. I'm interested in hearing counter arguments. The genesis of this is having holiday catch-up calls with former colleagues and hearing about their woes at the job(s) I left behind to pursue start-up life. It brought me back to some of the frustrations I've had over the last ~15y.

It seems an innumerable number of companies, corporate departments and teams are run with this mindset:
Step 1) Hire and build the team!
Step 2) ?????????
Step 3) Profit

Often there's only the most vague understanding of what step 2 entails, but the business plan for it usually contains phrases like: "process improvements", "strategic projects", "innovation" and "collaboration". There's precious little extra thought that goes into it, just empty corporate platitudes about the promise of increased output in both quantity and quality. Once recruiters start making calls managers talk about how they're "pumped and excited about really accelerating the team!".

*Narrator voice*: but the acceleration never arrives.

Graphically my argument is that corporate hiring looks something like this:


My question to business owners and managers out there is -- why on earth do people run their companies like this? Why is it that people in the corporate environment feel like "hiring" is the magical solution to fix problems? How many times has success really scaled with size, because so far as I can tell -- not only does it not scale with size, to me it's the total inverse. You end up with bloated headcount that is awash in mediocrity; employees feeling compelled to take on projects that don't provide value to literally anyone. This experience has been acquired working in finance/tech, but I'm confident it exists elsewhere as well.

 

[luvflyin]

Step 1) Hire and build the team! Team can be analogous to 'committee.' The IQ of a committee is the IQ of the least intelligent member divided by the number of members.

 

[StraightnLevel]

Not aviation related at all just a rant...

My grievances with hiring in the corporate world can largely be boiled down to a bullet list, a chart and a question below. I'm interested in hearing counter arguments. The genesis of this is having holiday catch-up calls with former colleagues and hearing about their woes at the job(s) I left behind to pursue start-up life. It brought me back to some of the frustrations I've had over the last ~15y.

It seems an innumerable number of companies, corporate departments and teams are run with this mindset:
Step 1) Hire and build the team!
Step 2) ?????????
Step 3) Profit

Often there's only the most vague understanding of what step 2 entails, but the business plan for it usually contains phrases like: "process improvements", "strategic projects", "innovation" and "collaboration". There's precious little extra thought that goes into it,

Not in my group.

We have development projects lined up, defined and ready to go. We also have a defined hiring timeline to add the staff to execute the projects.

In my business, we don't approve the new position until AFTER the goals for the position have been defined.

Other companies may operate differently.

 

[Dana]

It's the Iron Law of Bureaucracy, from science fiction writer Jerry Pournelle. Usually applied to government agencies, it applies equally to corporations, social clubs, churches, any group of people that gets large enough.

"Pournelle's Iron Law of Bureaucracy states that in any bureaucratic organization there will be two kinds of people:

"First, there will be those who are devoted to the goals of the organization. Examples are dedicated classroom teachers in an educational bureaucracy, many of the engineers and launch technicians and scientists at NASA, even some agricultural scientists and advisors in the former Soviet Union collective farming administration.

"Secondly, there will be those dedicated to the organization itself. Examples are many of the administrators in the education system, many professors of education, many teachers union officials, much of the NASA headquarters staff, etc.

"The Iron Law states that in every case the second group will gain and keep control of the organization. It will write the rules, and control promotions within the organization."

 

[ArrowFlyer86]

It's the Iron Law of Bureaucracy. Usually applied to government agencies, it applies equally to corporations, social clubs, churches, any group of people that gets large enough.

"Pournelle's Iron Law of Bureaucracy states that in any bureaucratic organization there will be two kinds of people:

"First, there will be those who are devoted to the goals of the organization. Examples are dedicated classroom teachers in an educational bureaucracy, many of the engineers and launch technicians and scientists at NASA, even some agricultural scientists and advisors in the former Soviet Union collective farming administration.

"Secondly, there will be those dedicated to the organization itself. Examples are many of the administrators in the education system, many professors of education, many teachers union officials, much of the NASA headquarters staff, etc.

"The Iron Law states that in every case the second group will gain and keep control of the organization. It will write the rules, and control promotions within the organization."

This is maybe the best working theory of a bureaucracy that I have ever heard. Thank you!

 

[455 Bravo Uniform]

30-40 years ago, the concept was that if you fired someone, not only would you save their salary and benefits, but also would prevent spending time and money on problems that they identified. I guess the opposite is true too.

I think this applies to businesses that are only growing revenue but nothing else - margin or profit are flat (peaked) and any further overhead erodes margin.

 

[SoonerAviator]

Not that I disagree with the overall sentiment, but each case will be unique. Sometimes you need headcount hired (regardless of them being the best/brightest) in order to get stuff out the door. If you have orders to fulfill and not enough bodies to create it, you go on a hiring binge. If you don't have adequate supervision and controls in place, the efficiency suffers and you get lots of overhead costs incurred. There are also a lot of regulatory hurdles that can come into play depending on the size of the company and their industry. Sometimes you have upper management who wants a bunch of reporting/analysis done, and that requires more and more people to do the data mining/consolidation, so more headcount. Sometimes those reports go on for years without any serious focus or importance being placed on them, but people keep generating them because no one told them not to. Academia is filled with case studies on those inefficiencies and headcount bloat. Not a lot of cost-benefit is done (in my experience) to the amount of unnecessary work/reports/forms/etc. that get compounded over the years primarily because of "that's the way we've always done it". You end up with lots of busy work without it generating any insight or real value.

 

[ArrowFlyer86]

Sometimes you have upper management who wants a bunch of reporting/analysis done, and that requires more and more people to do the data mining/consolidation, so more headcount. Sometimes those reports go on for years without any serious focus or importance being placed on them, but people keep generating them because no one told them not to. Academia is filled with case studies on those inefficiencies and headcount bloat. Not a lot of cost-benefit is done (in my experience) to the amount of unnecessary work/reports/forms/etc. that get compounded over the years primarily because of "that's the way we've always done it". You end up with lots of busy work without it generating any insight or real value.

What you highlight here is a big part of what I've experienced.

But leading up to this is where the problem is. When management is told "we can generate this stuff for you but we need to hire someone (or multiple people)", somewhere along that chain someone says "yes this is a good idea to hire people for this stuff". That's the part that baffles me.

Sometimes those reports go on for years without any serious focus or importance being placed on them, but people keep generating them because no one told them not to.

Amen. In my line of work the number of reports, tools, dashboards, analytics that have been generated that go into a blackhole of waste (never having even a single pair of end-user eyes on them) is absolutely staggering. At the time of generation a lot of people thought "hey this would be cool", but in reality usage metrics show not a single soul in the company ever opened or used these reports. They just kept getting generated b/c no one said no, sometimes for several years.

But to me the part that's really astonishing is the contrast of big/small companies. In a tiny company everyone has to pull their weight and generate a product that is useful; there's just not enough to go around for people to work on crap. Yet somehow in a large firm there's entire groups that churn out 80% garbage. Everyone's busy but nothing valuable is getting done. It's just waste.

Note: my rant here does not pertain to roles where output scales linearly with employees in the role. Many, if not most corporate functions absolutely do not scale their output anywhere close to linearly based on headcount in my experience.

 

[dbahn]

This has been part of the reason for the decline in quality of health care. As a practicing physician who was also on the Board of Directors for our hospital for nine years I watched the process unfold as administrative costs rose and were passed on to patients and insurers, along with a decrease in the quality and accessibility of care. Speaking against some of these initiatives and advocating for patients got routinely outvoted by a Board made up primarily of local businessmen selected by the hospital administrator.

 

[midwestpa24]

It often amazes me as you look at bigger companies and the number of job titles and positions that they have, many of which have nothing to do with the actual service or product being offered. Especially when you have layer upon layer of management who's sole purpose is managing all of the addition roles added to the process, that produce impact on the bottom line.

I have a good friend that works in the corporate world. For the life of me, I have no idea what it is she actually does. She seems to move from big company to big company, and always has these grand titles such as Customer Success Manager, Corporate Training Officer, Process Management Advisor, etc. Whatever it is she does, she must do well, as she is always being targeted by corporate recruiters. I'm sure she will be CEO of some Fortune 500 company one day.

 

[SoonerAviator]

I also think a lot of that bloat comes from not having any measurables that are defined or even easily tabulated. Say you add an analyst or product specialist (those are generic-sounding enough) . . . how do you measure their value or productivity? Evaluating their value-add to an organization can be difficult depending on what their role is and the output they generate. I would place money on the fact that larger organizations are generally terrible at defining what things are necessary (perpetually) for product realization and what are temporary needs (maybe specialized financial analysis) that would be better outsourced or done on contract-basis. The primary instances where large businesses (and small) take a hard look at that kind of bloat is during an economic downturn/RIF where they are forced to cut out excess.

 

[Bob Noel]

too often 'crats measure things that *can* be easily measured rather than trying to figure out what should be measured...

 

[StraightnLevel]

too often 'crats measure things that *can* be easily measured rather than trying to figure out what should be measured...

Yes, and this is why government is best kept to as limited a role as possible. The people in government making the decisions are unelected bureaucrats.

 

[CaptainRobertRiter]

Not aviation related at all just a rant...

My grievances with hiring in the corporate world can largely be boiled down to a bullet list, a chart and a question below. I'm interested in hearing counter arguments. The genesis of this is having holiday catch-up calls with former colleagues and hearing about their woes at the job(s) I left behind to pursue start-up life. It brought me back to some of the frustrations I've had over the last ~15y.

It seems an innumerable number of companies, corporate departments and teams are run with this mindset:
Step 1) Hire and build the team!
Step 2) ?????????
Step 3) Profit

Often there's only the most vague understanding of what step 2 entails, but the business plan for it usually contains phrases like: "process improvements", "strategic projects", "innovation" and "collaboration". There's precious little extra thought that goes into it, just empty corporate platitudes about the promise of increased output in both quantity and quality. Once recruiters start making calls managers talk about how they're "pumped and excited about really accelerating the team!".

*Narrator voice*: but the acceleration never arrives.

Graphically my argument is that corporate hiring looks something like this:
View attachment 123469

My question to business owners and managers out there is -- why on earth do people run their companies like this? Why is it that people in the corporate environment feel like "hiring" is the magical solution to fix problems? How many times has success really scaled with size, because so far as I can tell -- not only does it not scale with size, to me it's the total inverse. You end up with bloated headcount that is awash in mediocrity; employees feeling compelled to take on projects that don't provide value to literally anyone. This experience has been acquired working in finance/tech, but I'm confident it exists elsewhere as well.

I just retired from a corporate job being the Chief Pilot. The owners of the company know their own business inside and out. When it comes to the plane they have no clue! It takes years and many thousands of dollars letting them do dumb stuff before they start to listen. If they ever listen at all. I think being a corporate pilot is much harder than airlines because there is little to no structure. If you can not work on your own with little to no instruction, validation, and an occasional tongue lashing stay away from corporate flying! However, the freedom and autonomy I found to be well worth these downsides. The graph you made is pretty spot on! Great job!