Employee Monitoring: Antithetical To Productivity

Just finished reading an article on today’s Globe and Mail website about how “big brother” technology—e.g. technology-based monitoring devices, in this case, biometric scanners—are winding there way into the workplace. In a nutshell, the article is largely about how a handful of employers—the article cites a McDonald’s on the Manitoba tundra, and a fish processing plant (an industry known for its cutting-edge labor practices) in British Columbia—are utilizing biometric scanners to determine a form of souped-up time clock. The rationale for utilizing such high-tech methods to ensure employees are checking in and out on time is succinctly explained by the owner of the fish-processing plant, Montgomery Burns…er, John Nordmann: “
“If you want to control a whole bunch of people, it's the only way to go," he says. His 50 employees would often "buddy-punch," meaning that they would punch the time clock for people who had not shown up. "They're typical workers," Mr. Nordmann said. "It's not nice work. You have a lot of turnover. You have them one week, and the next week they're gone. You can't tell the faces any more."
What we found interesting about the Globe and Mail article is how explicit it is on the reasons why firms adopt monitoring tools (profit maximization), in addition to inadvertently revealing the limitations of such strategies. In this case, the fish-processing firm is trying to ensure that their employees produce a full 8 hours worth of fish guts, and isn’t taking a longer lunch than necessary, a strategy that the firm believes will ultimately raise its profits by maximizing the amount of fish processed per employee. Although the fish processing co happens to be in a more lurid industry, its goals are no different than say, a larger Fortune 500 firm who installs, say, Internet or email monitoring software to ensure that employees aren’t browsing the web idly during down-time.

Here’s the catch, however: while we’d agree that some type of monitoring system is usually required in a large workplace (to clarify: we don’t have a problem with timesheets, but we think the idea of biometric scanners is pretty wack), ultimately, we’d argue that the results of the more big-brotherish monitoring will largely be counterproductive to the firm’s stated goals of increasing profits.

First, such intrusive devices will probably have the opposite effect of what the fish-processor, or the Fortune 500 company wants, and may actually lower productivity by fostering resentment among employees. (Who really wants to work for an employer that spies on you?) Secondly, and perhaps more importantly: such devices tend to address the symptoms of a problem--lower productivity and profits—rather than the root cause of that problem. Note that the fishmonger quoted above talks about the fact that the work in his plant isn’t nice, and has “lots of turnover.” Turnover, of course, has significant costs associated with it: hiring costs (want ads in the case of a fish plant, recruiting trips to top-tier schools in the case of a Fortune 500, etc), training costs, and in addition to the cost of losing an experienced employee (who we’d guess would be able to gut a fish more quickly than a newer employee). In other words, one possible strategy might be to improve the culture, training and processes at the fish plant to boost productivity and profits, rather than subjecting the workers to Orwellian scrutiny.

Of course, the obvious counter-argument to improving the culture or work environment and lowering turnover at, say a fish plant or a McDonald’s is that the work will always suck and you’ll always have a high turnover. There’s a degree of truth to this argument, but that doesn’t mean that at the very least, a fish plant or other firm can’t at least lower their turnover—and therefore, their costs—by thinking a little bit more creatively about the shape of their firm’s culture, motivational tools, and structure. To draw an analogy to another industry that features high-turnover, and is about as sexy as fish-processing—welding—a welding firm by the name of Lincoln Electric was able to boast tremendous profits (at the firm and the employee level) by designing a piece-labor based performance scheme, and deliver consistently high quality products. By recruiting the right type of people (e.g. people who were highly competitive, and would fit in with the culture at the firm), and maintaining a clear and transparent organization (management and workers had access to one another’s salaries, and the companies books, which ensured a level of fairness throughout the organization, and also functioned to motivate employees by showing them how much they could receive if they performed at the level of a highly-compensated employees), Lincoln Electric—and crucially, its employees—were able to thrive for a good thirty years. Until it embarked on a misguided acquisition strategy outside the US in the early 1990s, several Lincoln Electric welders were compensated almost as well as consultants and lawyers (upwards of $150K in 1980 dollars).

In conclusion, we’d have to say that far from ameliorating low productivity at a firm, such creepy surveillance tools like biometric scanners hinder it. In short, the problem at firms like the fish processor discussed above isn’t so much employees underworking—it’s human nature to slack off now and then. Rather, it’s a shortage of managers with creative approaches to motivating people, and designing the culture and processes that motivates people to over-perform, even in a decidedly unsexy industry.

P.S. Full disclosure about reading the Globe and Mail: it turns out I'm an expatriate Canadian, and despite the fact that I've managed to escape the barren socialist wastes of my homeland for the barren midwestern wastes of Chicago, I still harbor a secret affection for the Globe and Mail's earnest brand of journalism.

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Of Changing Airline Business Models & Urban Economics

As the economy is finally emerging what looks to be a period of sustainable growth, it’s interesting to take stock of the last few years, and see how the recession and upheaval of the last few years has affected a variety of industries, and the consequences that these changes have for society as a whole. The airline industry is one that’s particularly fascinating to think about in this regard, since it seems to have been permanently changed in a way that other industries haven’t. We’re curious to think about how some of these changes will affect the economic growth in larger and smaller cities throughout North America.

Broadly speaking, there are two dominant business models within the airline industry: 1) the hub-and-spoke model, utilized by American Airlines, United, and most of the flagship carriers of foreign countries; and 2) the “low-cost-carrier” or point-to-point model, favored by Southwest, RyanAir and others. The hub-and-spoke model requires aggregating passengers from smaller second-tier “spoke” airpports (say, Philadelphia, St. Louis, etc) at a larger hub airport (e.g. Chicago’s O’Hare, Heathrow) and in order to fly passengers to a similarly large hub. In general, hub-and-spokes usually break-even or take a small loss on at least some of the spoke-to-hub flights in order to maximize the the profits they can create on the lucrative hub-to-hub flights. Airlines can charge a premium—especially on business class and above—on some hub-to-hub cross-continent routes, and especially on some transatlantic or transpacific routes: hence, these routes are disproportionately important to a hub-and-spoke. Furthermore, since the fixed costs associated with building a hub-and-spoke are so high—aircraft, gates, landing rights—they create a powerful barrier to entry for potential competitors, thereby limiting further limiting supply, and raising the premium an airline can charge on these routes. Contrastingly, point-to-point low cost carriers (LCCs) try to fly shorter distances between secondary airports (Chicago’s Midway, Love Field in Dallas) where landing rights are less expensive. Crucially, these airports are less congested, enabling LCCs to turnaround aircraft much more quickly than competitors, thereby allowing for more frequent flights, more efficient aircraft usage, and most importantly, increase the amount of revenue they can generate per each aircraft seat by getting x many more flights per year out of each plane. LCCs generate barriers to entry by locking up gate rights at the airports they operate in, thereby keeping particular carriers out. (We’d guess this is ultimately the challenge JetBlue will face vs. Southwest, since the latter has a dominant position at the lion’s share of good secondary airports in the US.)

The consequences of the recession within the airline industry has been to validate one type of business model in the airline industry—the point-to-point low-cost carrier business model—while largely invalidating the previously dominant hub-and-spoke model . While the hub-and-spoke model can create huge profits during boom years—and we agree that it eventually will, as soon as corporate travel spending picks up again—the aforementioned high fixed costs of the model mean that it racks up huge losses during a bust period. This means that the hub-and-spoke model bears greater risk for investors, and therefore has substantially higher capital costs than a well-run LCC, further cutting into profits. (Moreover, in a post 9/11 and post-SARS world, the international destinations served by a hub-and-spoke have a greater risk associated with them, translating into added security and insurance costs for hub-and-spoke carriers.) In contrast, while the LCC point-to-point model offers slightly lower margins (since these carriers offer lower prices than hub-and-spokes), the flexibility of this model, and the lower prices, mean that it thrives in boom years as well as bust years, making it a safer investment over the long-run.

As hub-and-spoke airlines climb out of recession, they’re trying to trim their high fixed costs by offering a “leaner” version of themselves. In a nutshell, what this generally means is that smaller regional cities—the feeders of the hub in the hub-and-spokes, e.g. places like Pittsburgh (Brad’s hometown), Edmonton (my hometown), or Clevelands of the world now have many less flights connecting them to hubs than they did previously. Since these hub airports tend to be located in larger cities, and offer gateways to other larger cities either domestically or abroad, one potential consequence of changes in the airline industry is to reduce the connectedness of smaller regional cities to major hubs in the overall world economy. In short, it makes them less cosmopolitan and less global.

Being less connected to the world and national economy, and being less cosmopolitan and less global has significant competitive ramifications for smaller cities. Economically, this means that cities have less access to capital , since most capital tends to be clustered in what University of Chicago sociologist and urban studies guru Saskia Sassen has termed the “global cities,” e.g. larger first or second tier cities—London, New York, Chicago, Tokyo, Hong Kong. Less capital means less fuel for growth, and a less dynamic economy overall.

There are also economic disadvantages stemming from the cultural consequences to being less cosmopolitan and “worldly.” One result of removing some of the connections between a city like, say, Cleveland to that of New York, London, Paris or Tokyo is that smaller regional cities offer slightly less variation than their big city counterparts, making them less interesting on the whole. This lowered access to culture is far from trivial, if you subscribe to the Creative Class argument (which we do) proposed by Carnegie-Mellon economist Robert Florida, there’s a strong desire on the part of “knowledge workers” to locate in cities that offer greater cultural amenities and a dynamic environment. Knowledge workers—the computer programmers, consultants, analysts, venture capitalists and so forth—create and attract disproportionate amounts of wealth and capital, and therefore growth, and are therefore of pivotal importance to any city’s long-term future. For a small regional city, having less access to these workers only dims growth prospects.

So given that shifts in the airline industry seem likely to result in a new set of challenges for the economies of smaller regional cities, what should they do? While this is definitely a topic for another blog, we do have some high-level thoughts on the subject. One potential option would be for smaller regional cities to make the world come to them, either by playing up their unique resources (be they economic or cultural resources), to ensure that the world comes to them. For example, smaller cities like Austin, Portland or Vancouver have ensured that they’ve remained connected to the larger world either through adopting policies to develop or stress their cultural amenities (physical beauty and a vibrant downtown core in the case of Vancouver and Portland). An even more effective strategy for these smaller cities is to use the cultural amenities as a platform from which to drive future economic growth—coupling cultural policy that attracts knowledge workers with economic policy that encourages firms and workers to locate in a particular region. Austin, Texas is a case study in this regard, since it combines an eclectic local culture (South by Southwest) with a dynamic technology industry (Dell et al). In short, despite the fact that smaller cities will probably face a growing array of economic challenges, smart strategic planning can provide some templates for sustainable future growth.

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The Manifold Failures Of The N-Gage, Part the Third

As every avid BuzzSponge reader knows, we're no stranger to taking pot-shots at the strategic and design shortcomings of Nokia's hapless GameBoy/cell phone, the N-Gage. This will probably are last N-Gage-related potshot. Not only is making fun of the N-Gage's shortcomings like shooting fish in a barrel, we're sure after failing to understand its target market (see our article on the subject here), launching the N-Gage to, uh, less than impressive sales (selling 5000 units worldwide, despite Nokia's insistent claims that it would sell in the "millions and millions"), and then having their N-Gage hacked (yesterday, hackers devised a way to not only copy the N-Gage's games, but to play them on other--much cheaper, and better--phones), the team behind the N-Gage is well-aware at this point that they're probably about to become a case study in how not to launch a product. But before we invoke the mercy rule, we couldn't resist but post a link to the following site devoted to making fun of the N-Gage's ridiculously stupid (and not stoopid fresh) design, SideTalkin. (With only 5000 users worldwide, most people won't have seen an N-Gage in use, so we'll take a second to explain the joke behind the site: in order to make the N-Gage more cool, avant-garde, or possibly just more obtuse, Nokia's product designers decided to make users hold the phone like a pizza slice to their head in order to make calls. To explain this, take your cell phone, and hold it sideways to your head, rather than simply so that the speaker/mike face in front or behind you. Looks cool, doesn't it? The N-Gage's designers also thought so!). Anyways, you know you've got a problem when hundreds of people in your target demographic start up a website devoted to making fun of your product's ridiculous design, as is the case here. Enjoy.

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Online Gaming For Fun And For Profit

There’s a thought-provoking article in this week’s Economist about the spectacular growth of online video games. The highlights:

[In 2002], Americans spent over $6.9 billion on games for a personal computer (PC) or a console (ie, a television-based unit such as Microsoft’s Xbox, Sony’s Playstation, or Nintendo’s Gamecube). Polls show that more than half of all Americans above the age of six play video games. Nor are the players all spotty teenagers: in 2002, 42% of console-game buyers and nearly two-thirds of PC-game buyers were over 36. A poll for the Entertainment Software Association said that 26% of all gamers are women: video gaming, it seems, is a more heavily female pastime than subscribing to The Economist print edition (just 8% of its subscribers are women). Young men dominate professional gaming, but that is bound to change, just as women broke into the previously male world of professional poker as the game became more popular and respectable.

We’re thrilled that the Economist is effectively validating a guilty pleasure of ours—we defy any of our readers to match our mad Halo skillz on a PC/mouse set-up, and we’ll gladly challenge some of you to some Rainbow Six action as soon as we pick up our copy—but (wearing our business hats for a moment), we were more intrigued by the Economist’s description of gaming for fun and for profit. Specifically, the Economist described something called “the World Cyber Games” that was held in Seoul, South Korea this summer, where video gamers competed for cash prizes and rewards:

On October 18th the fourth annual World Cyber Games (WCG) in Seoul ended with Germany victorious over 600 competitors from 55 countries. The German team will split a $350,000 purse stumped up by the South Korean government and by several corporations; Samsung alone spent $12m to back the tournament. The team had to beat a field of about 300,000 to qualify; Britain’s qualifying tournament saw about 10,000 people vying for 15 spots on the national team.

Reading about the popularity—and the size of the purse—of online gaming got us to thinking: how long will it be before Microsoft, Sony or Electronic Arts start holding online tournaments with significant prize money as a way to generate interest in their games? Imagine playing in a Madden online where the winner could garner cash (or other) prizes. Similarly, what about a basketball game that culminates every spring in an online tournament that parallels the NCAA’s march madness. Not only would such events further accelerate the growth of online gaming, they might provide marketers with another way to reach customers: e.g. Anheuser-Busch or Miller could sponsor the NCAA tourney as a way of reaching ever-so-hard to contact 21-34 year-old males. There’s already a huge number of individuals who attend LAN parties (events where sometimes as many as 128 users lug their computer gear to a rented space to play games in close proximity with one another over a lag-free LAN) where cash prizes—usually in the range of $500-$1500 are awarded, and it would seem to make sense for corporations to start sponsoring such activities. At the very least, it would certainly generate some buzz, if only because it would be so unusual (at first).


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Changing The Game

A close friend a Leo Burnett (thanks Sara) sent us two fascinating links today that have us buzzing around the office this morning. In today's business climate the timeline between innovation and commoditization is shorter everyday. The fruit of reverse engineering, globalization and the democratization of information, this trend has forced many a company/product to fail.

The name of the game is no longer purely "differentiation" within the category. To succeed today, companies must be flexible and willing to adapt BEYOND its category. Good companies may originate within an established category, but truly GREAT companies look for opportunities to CREATE THEIR OWN CATEGORY.

One company doing just that is PUMA. An established player in the athletic shoe market, PUMA has leveraged the 1970's nostalgia of its brand and morphed into the new hip hybrid in fashion apparrel. PUMA has moved from the number four player in a highly competitive category to the leader in a new category much of its own making, "athletic chic". No longer is Puma exclusively forced to compete head-to-head with the likes of Nike, Reebok and New Balance for the callused feet of sports fanatics. Puma has taken the time to understand its "meaning" (via customer segmentation) and has leveraged this knowledge into the dominant position in an equally lucrative (if not more lucrative) market populated by the likes of smaller, less well-financed players such as Vans and, most recently, Adidas.

And for a residual benefit to the dawning of the "athletic chic" trend/market, it will be increasingly difficult to pick out Americans on the Champs Elyses with their jeans and "white trainers".

Another company that has done a phenomenal job at crafting a niche category for itself is Mini Cooper. At the $16,000 to $20,000 price point, Mini could have found itself vying in the brutally competitive American automobile market witht the likes of the Ford Escort. However, Mini has zigged while everyone else zagged with "out-of -the-box" innovations like zero percent financing. Again, due to a bit of customer segmentation and an intuitive understanding of the various reasons that people "drive", Mini has laid claim to a niche previously owned by the likes of Mini's parent, BMW. The niche? The "ultimate drivers". Whereas, it was once believed only that "real" driving enthusiasts could appreciate the corinthian leather and fine craftmanship of the elite vehicles from Mercedes and BMW, Mini understands that there is huge opportunity with the under 20K "ultimate wanna-bes". The result has been that Mini no longer competes for customers who need to get from A-to-B for under twenty-thousand dollars. Mini competes alone for the subset of those individuals who drive not because they have to get somewhere, but because they want to enjoy the thrill of the road. Individuals who want to "motor". The residue of Mini's dogged pursuit of this previously untapped market, is that it has created a movement that has garnered micro-categories for "motoring gear".
One could argue that the recent success of PUMA and Mini are due to their obvious commonalities such as design innovation and co-branding. However, the true secret to their success is that both of these companies took the time to understand their market, their potential customer base and their respective places on these two planes. By understanding their unique "tapastries of meaning" relative to the competition, both Mini and PUMA were able to create wholly new categories that they alone could dominate.

Posted by Bradley Peacock | Permalink | Comments (0)

Subterranean Homesick Blues in Neo-Tokyo

Due to a lack of space to facilitate future growth, urban planners in Tokyo are creating plans to move Tokyo underground. A recent Newsweek article reveals (in almost slack-jawed copy, no less) that:

Forget concrete jungles. Think glass-and-steel icebergs – huge, complex, structures hidden largely beneath the surface. That, say urban planners in Tokyo, is the future of the city.

WITH 27 MILLION residents, Tokyo is both the world’s most populous metropolis and, in many places, one of its most densely packed. That leaves little room for further expansion; already the average commute time is 56 minutes, with some salarymen traveling like sardines on local trains for as long as two hours. The solution? Build down instead of up. “To me it’s obvious that, in Tokyo, we have no choice but to go underground,” says Nobuyuki Takahashi, an engineering professor at Waseda University. “We have been studying the possibilities of deep-underground space for nearly 20 years.”

An underground Tokyo certainly appeals to the inner-14 year old comic/science fiction geek that lurks deep inside our collective subconscious’—how could we read this and not be reminded of the Morlock storyline in The X-Men, or think of the cool BladeRunner-esque possibilities of a subterranean city? However, it should be noted that the possibility of subterranean cities is a little less prosaic than Newsweek would initially like us to imagine. Most of the rationale behind an underground city is less about moving living/work space underground (so much for the Matrix: Reloaded-esque Zion that we’d hoped to live in) than moving the “guts” of the city (e.g. freeways, roads, etc.) beneath the surface so as to create more green space for city residents. In short, the underground city will probably consist of “Big Dig”-esque projects designed to free urban denizens from smog and congestion, rather than to provide goth kids a dystopian world in which to hang out and be misunderstood in.

Perhaps the whole plan to move Tokyo underground is just another massive Japanese public works project run amok, but from an urban planning perspective, the prospect of seeing freeways and infrastructure move underground sounds pretty cool. Alternatively, maybe we’re just interested in this article thanks to movies like Lost in Translation which highlight how bizarre Westerners find Japanese culture. Or maybe it was this great series by Seth Stevenson in this week’s Slate about Japanese culture that spurred our sudden interest in Tokyo. Or maybe it was our friend Sam’s obsession with all things Japanese that has Tokyo engrained on the brain. Either way, we can’t help but think about the thrilling prospects of having plenty of green space in a city, while who knows what lurks beneath.

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The Language Gap: Keeping Up With The Sizzle Nizzle

To truly understand what is going on in Amercian culture, you have to keep abreast of the language of the times. The big question today is how one keeps up with the "language of the times" in our increasingly verbal, multicultural, multimedia/multimedium, global society?
After all, one of the things that differentiates homosapians from the other animals is our ability to communicate through langauge. Language is not only powerful (ex. "war of words") it is constantly changing (the Oxford English Dictionary shows us that). In fact, it was the changing nature of language that led Samuel Johnson to try to "standardize it" via the first dictionary. Sharing Johnson's point of view, American writer/humorist and author of The Devil's Dictionary Ambrose Bierce defined a "dictionary" as "A malevolent literary device for cramping the growth of a language and making it hard and inelastic."
Codifying the English language is proving to be more and more difficult in a world where recording artist Snoop Doggy Dog and the multi-player videogame Counter-Strike have a greater global reach and more influence on the global evolution of the English language than do The Beatles and The New York Times. Add to this dynamic the rise of text messaging (LOL) and one begins to realize that today we are caught up in a veritable maelstrom of word-smithing. Words are the building blocks of language. Language contextualizes and defines culture and events. And if one is to truly understand what is "going on" today, she has to find an effective means of keeping up with the rapid linguistic changes taking place.
The evolution of the English language and our struggle to keep up with it, has been a topic of conversation among us for the last few weeks. The conversation was instigated by Snoop & Adam Sandler's "Sizzle" at MTV's Video Music Awards (Click the video clip under "Highlights" to see what we mean). However, the topic came up again today when we read about the new female underwear brand VPL that is to be launched in the US in the coming weeks. What was going on? What were people saying exactly? Were we that "un-hip? Were we being left in the dust of cultural evolution? How could we keep up?
Fortunately, we found that we were not the only ones struggling to keep up with the increasingly rapid evolution of the English language, even the "bible" of the English language was struggling valiently to keep up. After much searching we found two sources that have helped us better decipher what is "going on". One is the Urban Dictionary. This group-blog come dictionary is expanding every day via internet submissions and can provide great insight into terms such as "l337", "joo", "sizzle" and other components of today's vernacular. In addition, Netlingo can help any "noob" decipher the acronym maze that is text messaging today. :)
Simply, if you don't know today-speak, you can neither contextualize what is "going on" nor make meaningful connections. And in this increasingly connected world, success on both a personal and professional level relies on meaningful connections---for they are the pillars of trust and relationship.

Posted by Bradley Peacock | Permalink | Comments (0)

School Dazed: The micro-memoir of a summer school teacher

Today the San Francisco Chronicle published this interesting and entertaining first person account of what it is like to be a teacher today. If only all teachers could have a similar sense of humor about the current plight of American educators. (Thanks Metafilter)

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