Life beyond pay
A A new magazine was published in America this month. Success is the resurrection of a title first published in 1897 by Orison Swett Marden, an entrepreneur and author of a series of self-help books, including “Getting the Most Out of Life”. The magazine's publisher, Joseph Guerriero, wants today's Success to reflect the contemporary workplace, where, he says, success is measured less by money and titles, and more by what is sweepingly referred to as “work-life balance”. The first issue contains an article about men leaving work to become full-time fathers.
B Improving the balance between the working part of the day and the rest of it is a goal of a growing number of workers in rich Western countries. Some are turning away from the ideals of their parents, for whom work always came first; others with scarce skills are demanding more because they know they can get it. Employers, caught between a falling population of workers and tight controls on immigration, are eager to identify extra perks that will lure more “talent” their way. Just now they are focusing on benefits (especially flexible working) that offer employees more than just pay.
C Some companies saw the change of mood some time ago. IBM has more than 50 different programmes promoting work-life balance and Bank of America over 30. But plenty of other firms remain unconvinced and many lack the capacity to cater to such ideas even if they wanted to. Helen Murlis, with Hay Group, a human-resources consultancy, sees a widening gap between firms “at the creative end of employment” and those that are not.
D The chief component of almost all schemes to promote work-life balance is flexible working. This allows people to escape rigid nine-to-five schedules and work away from a formal office. IBM says that 40% of its employees today work off the company premises. For many businesses, flexible working is a necessity. Globalisation has spread the hours in which workers need to communicate with each other and increased the call for flexible shifts. Nella Barkley, an American who advises companies on work-life balance, says that large firms are beginning to understand the value of such schemes, “but only slowly”. For most of them, they still mean little more than child care, health care and flexible working.
E Yet some schemes go well beyond these first steps. American Century Investments, an investment manager in Kansas City, pays adoption expenses and the cost of home-fitness equipment for its employees. Rob Marcolina, a gay consultant with Bain & Company based in Los Angeles, was allowed time off to marry his partner in Canada, and another break to look after their daughter when she was born to a surrogate mother. Mr Marcolina, who has an MBA from the high-ranked Kellogg business school, says his employer's understanding makes him want to be “part of Bain for some time”.
F Businesses have other good reasons for improving employees' work-life balance. Wegmans Food Markets, a grocery chain based in Rochester, New York, frequently appears near the top of lists of the best employers in America. It has a broad range of flexible-work programmes, which gives it one of the lowest rates of employment turnover in its industry—8% a year for full-time workers, compared with 19% across the industry.
G Simple programmes can be surprisingly cost-effective. IBM, for instance, is spending $50m over five years on “dependant-care” facilities for its employees. Although that sounds generous, it is the equivalent of little more than $30 for each IBM employee every year. That is far cheaper than a pay rise and probably a better way to retain talented mothers and fathers. Ernst & Young, a global accounting firm, has a low-cost range of initiatives called “People First”. It provides breaks for people to provide care and has over 2,300 flexi-time employees in the United States. James Freer, a senior executive, says he is “absolutely convinced” the initiatives help produce better financial results.
H DeAnne Aguirre, a mother of four and a senior partner in San Francisco with Booz Allen Hamilton (BAH), says “it is easy to make the business case” for work-life balance programmes at the consultancy by looking at attrition rates. BAH calculated that it was investing more than $2m in turning a raw recruit into a partner, an investment it should be reluctant to write off. Corning, an American glass company, reckons that it costs 1.5 times a worker's salary and benefits to replace him. If it can retain just 20 workers a year who would otherwise have left, Corning reckons it would produce annual savings of $2.6m.
I Business schools are now climbing on the bandwagon, too. In October Tuck School at Dartmouth, New Hampshire, will start a course on returning to corporate life after an extended absence. Called “Back in Business”, the 16-day, $12,000 re-entry programme is open only to students with “work experience in a high-potential career”. The majority will inevitably be mothers wanting to rejoin the workforce. But fathers are also asking for sabbaticals. Work-life balance “is not just a women's issue” any more, says Ted Childs, who is in charge of workforce diversity at IBM. “Men, too, are very concerned about it.”
J The demand is being stoked by the “Generation Y”, the under-28s. They look sceptically at the idea of lifetime employment within a single organisation and they are wary of the commitment they believe too often drove their parents to the divorce courts. Hay's Ms Murlis says that today's business-school graduates are “looking for a workstyle to go with their lifestyle”, not the other way round. They are happy to binge-work for a while, but in return want extended sabbaticals in which to chill out.
Men and machines
A As industries advance, manufacturers manage the growing complexity of their products by outsourcing: they share the work of making them with others. This enables each company in the production chain to specialise in part of the complicated task. The car industry, for instance, relies on parts companies that make nothing but electrical systems, brakes or transmissions. These parts companies, in turn, depend on the work of other suppliers to make individual components. At each level of production, outsourcing divides up growing complexity into more manageable pieces.
B In the office, the tool used to mechanise work is the computer. Computers automate paperwork and hence the flow of information. Companies that sell information products, such as banks and insurance firms, employ computers to automate production. And all companies use computers to automate the administrative work needed to maintain their organisations: keeping their books in good order, complying with rules and regulations, recruiting, training and looking after their employees, managing offices, dealing with company travel and so on.
C Like assembly-line machinery, computers save labour, bring down costs and raise profits. Banks and insurance companies have used some of these profits to add bells and whistles to their products, making them more complex. Banks that used to provide basic mortgages now sell fixed loans and floaters, caps, collars, locks and other financial exotica to befuddled home-buyers. Credit-card companies offer loyalty programmes, membership rewards and cash-back deals. Insurance firms tailor car and life insurance to fit their customers' appetite for risk. Corporate administrative work has also become more complicated. The demands of securities regulators and investors for financial information have expanded with the capacity of firms to supply it. IBM's annual report for 1964 contains a scant half-dozen pages of financial information; its most recent one includes 40 pages of financial statements and accounting notes.
D The spread of computers through companies has added a third layer of complexity: the task of managing the information systems themselves. The work company IT departments is particularly complicated at older and larger firms that have bought different sorts of computer systems at different times. The core processing systems of insurance companies, airlines and banks, for instance, are built on a mainframe-computer technology that celebrated its 40th anniversary this year. Companies have added extra systems as they have sold new products, grown abroad or acquired competitors. Most IT departments at most large companies spend most of their time simply fighting to keep this tangle of systems going.
E In all three areas of white-collar work, companies are struggling to manage growing complexity. The chief reason for the recent recession in corporate IT spending is that the IT industry's customers are no longer able to absorb new technologies, thinks IBM's Mr Harreld. Entangled in new products and the computer systems that support them, banks cannot even do something as basic as ensuring that customers who asked one department not to send junk mail do not receive it from another. “If a bank was making cars, every tenth car would come out without a steering wheel,” says Myles Wright of Booz Allen Hamilton, a consultancy.
F Just as in manufacturing, the solution to the growing complexity of white-collar work is to do less of it in-house. Some companies have outsourced the work of their IT departments, from managing the physical hardware to maintaining and developing business software and managing corporate computer networks. Up to half the world's biggest companies have outsourced some IT work, reckons IBM.
G As well as outsourcing their business systems, some companies are doing the same with the workers who operate them. This is called business-process outsourcing (BPO). First Data Corporation (FDC), for instance, will handle some or all of the administrative work involved in running a credit-card business, from dealing with applications to authorising credit limits, processing transactions, issuing cards and providing customer service. Few bank customers will have heard of the company, yet FDC employs nearly 30,000 people, who administer 417m credit-card accounts for 1,400 card issuers.
H Likewise, companies are outsourcing chunks of administrative work and their supporting systems. Accounting departments are farming out tasks such as processing invoices and collecting payments from debtors. HR departments have shed payroll work. ADP, a payroll-outsourcing company, pays one in six private-sector workers in America. Increasingly, big companies are handing over entire HR departments and the systems that support them to outside specialists such as Hewitt, Accenture and Convergys, says Duncan Harwood of PricewaterhouseCoopers.
I One way for manufacturers to manage growing complexity is to adopt common standards. Carmakers, for instance, have reworked their manufacturing processes so they can assemble different car models from the same production “platform”, with several cars sharing a number of parts. This allows parts companies to specialise more and produce fewer parts in larger numbers.
J Eventually the organisation of car manufacturing may begin to resemble production in the consumer-electronics industry, where the adoption of industry-wide standards (along with de facto standards, such as the Intel microprocessor) has enabled suppliers to become highly specialised. Companies such as Flextronics and Selectron now offer outsourced manufacturing platforms for whole categories of consumer electronics. All the branded makers have to do is handle the logistics, badge the goods and send them off to the shops.
Questions 27 - 40
Explaining the curse of work
It is 1944, and there is a war on. In a joint army and air force headquarters somewhere in England, Major Parkinson must oil the administrative wheels of the fight against Nazi Germany. The stream of vital paperwork from on high is more like a flood, perpetually threatening to engulf him. Then disaster strikes. The chief of the base, the air vice-marshal, goes on leave. His deputy, an army colonel, falls sick. The colonel's deputy, an air force wing commander, is called away on urgent business. Major Parkinson is left to soldier on alone. At that point, an odd thing happens - nothing at all. The paper flood ceases; the war goes on regardless. As Major Parkinson later mused: "There had never been anything to do. We'd just been making work for each other."
That feeling might be familiar to many working in large organisations, where decisions can seem to be bounced between layers of management in a whirl of consultation, circulation, deliberation and delegation. It led Major Parkinson - in civilian dress, C. Northcote Parkinson, naval historian, theorist of bureaucracy and humorist- to a seminal insight. This is "Parkinson's law", first published in an article of 1955, which states: work expands to fill the time available for its completion.
Is there anything more to that "law" than just a cynical slogan? Physicists Peter Klimek, Rudolf Hanel and Stefan Thurner of the Medical University of Vienna in Austria think so. They have recreated mathematically just the kind of bureaucratic dynamics that Parkinson described anecdotally 50 years ago. Their findings put Parkinson's observations on a scientific footing, but also make productive reading for anyone in charge of organising, well, anything.
Parkinson based his ideas not just on his war experience, but also his historical research. Between 1914 and 1928, he noted, the number of administrators in the British Admiralty increased by almost 80 per cent, while the number of sailors they had to administer fell by a third, and the number of ships by two-thirds. Parkinson suggested a reason: in any hierarchical management structure, people in positions of authority need subordinates, and those extra bodies have to be occupied- regardless of how much there actually is to do.
Parkinson was crystallising, with tongue half in cheek, classic work done by the German sociologist Max Weber in the early 20th century. Weber described the attributes of an ideal bureaucracy and possible "degenerating" influences - such as any system of promotion not based wholly on merit. Parkinson's own analysis spawned other, more po-faced and politically charged critiques of public bureaucracies from economists such as William Niskanen, who served on US President Ronald Reagan's Council of Economic Advisers. Niskanen theorised that bureaucracies grow because officials seek to increase the budgets they control and so boost their own salary, power and standing. He and other conservatives used such arguments to push for smaller government - but they could not give any supporting quantitative insight into the growth of bureaucracies.
The new work aims to do just that. "Parkinson's essays weren't quantitative," says Klimek, "but they're so clear that it's easy to cast them into specific mathematical models." From a simple system of equations using quantities such as the promotion and drop-out rates within a hierarchical body, a "phase diagram" can be computed to show what conditions breed ever greater bureaucracy. A high probability of promotion coupled with the hiring of more subordinates - the scenario Parkinson described- is unsurprisingly a recipe for particularly fast growth.
Parkinson was also interested in other aspects of management dynamics, in particular the workings of committees. How many members can a committee have and still be effective? Parkinson's own guess was based on the 700-year history of England's highest council of state- in its modern incarnation, the UK cabinet. Five times in succession between 1257 and 1955, this council grew from small beginnings to a membership of just over 20. Each time it reached that point, it was replaced by a new, smaller body, which began growing again. This was no coincidence, Parkinson argued: beyond about 20 members, groups become structurally unable to come to consensus.
A look around the globe today, courtesy of data collected by the US Central Intelligence Agency, indicates that Parkinson might have been onto something. The highest executive bodies of most countries have between 13 and 20 members. "Cabinets are commonly constituted with memberships close to Parkinson's limit," says Thurner, "but not above it." And that is not all, says Klimek: the size of the executive is also inversely correlated to measures of life expectancy, adult literacy, economic purchasing power and political stability. "The more members there are, the more likely a country is to be less stable politically, and less developed," he says.
Why should this be? To find out, the researchers constructed a simple network model of a committee. They grouped the nodes of the network - the committee members- in tightly knit clusters with a few further links between clusters tying the overall network together, reflecting the clumping tendencies of like-minded people known to exist in human interactions. To start off, each person in the network had one of two opposing opinions, represented as a 0 or a 1. At each time step in the model, each member would adopt the opinion held by the majority of their immediate neighbours.
Such a process can have two outcomes: either the network will reach a consensus, with Os or Is throughout, or it will get stuck at an entrenched disagreement between two factions. A striking transition between these two possibilities emerged as the number of participants grew - around Parkinson's magic number of 20. Groups with fewer than 20 members tend to reach agreement, whereas those larger than 20 generally splinter into subgroups that agree within themselves, but become frozen in permanent disagreement with each other. "With larger groups, there's a combinatorial explosion in the number of ways to form factions," says Thurner.
Santo Fortunato, a physicist who works on complex networks at the Institute for Scientific Interchange in Turin, Italy, thinks the result is convincing evidence for Parkinson's conjecture. But he would like to see further testing. "The outcome might well change significantly if you change the shape of the social network, or the way people's opinions influence one another," he says.
So might this kind of work offer a rational way to optimise our decision-making bodies? One curious detail provides an intriguing slant on this question. In the computer simulations, there is a particular number of decision-makers that stands out from the trend as being truly, spectacularly bad, tending with alarmingly high probability to lead to deadlock: eight.
Where this effect comes from is unclear. But once again, Parkinson had anticipated it, noting in 1955 that no nation had a cabinet of eight members. Intriguingly, the same is true today, and other committees charged with making momentous decisions tend to fall either side of the bedevilled number: the Bank of England's monetary policy committee, for example, has nine; the US National Security Council has just six.