by Dimitri Orlov
This piece started out as a solicited submission to Harvard Business
Review for their "List of Breakthrough Ideas." After careful review,
it was decided that the senior executives that are the target
audience of this publication would find my breakthrough
idea "counterintuitive," and I was asked to look for evidence of my
breakthrough idea's effectiveness. So, if you are a senior executive
and would like to try a novel approach to running your business,
please give this a try, and let me know how you make out.

The combination of skyrocketing food and energy costs, rising medical
costs, falling real estate values and stagnant wages is putting
increasing numbers of workers in financial distress. A distressed
workforce can hardly be a productive workforce, and companies must do
whatever it takes to make it physically possible for their employees
to function. What can companies do to remedy this situation? The
obvious step of increasing wages not only puts additional pressure on
the bottom line, but can also fuel wage inflation. Also, It may not
be the most effective approach.

A better approach is to treat the company and its employees as an
economic unit: a single household, with a common set of costs. These
costs can be cut very effectively by trading off slightly higher
company costs against significantly lower employee costs. Each
additional dollar paid out in wages is taxed as income, trimming it
by about a third. It is then spent in the retail chain, generating
profits for retailers and service providers, trimming it by another
half or more. This same dollar can be stretched much further if the
company uses it to buy products wholesale and makes them available to
its employees either free of charge or for a nominal fee.

Many families are struggling with rising food costs. To help them,
the company commissary can provide not just breakfast and lunch, but
take-home dinners for the entire family. Periodically, it can provide
other take-home items such as frozen chickens purchased in bulk,
fresh organic vegetables from local CSA (Community-Supported
Agriculture) farms, or a basket of popular foodstuffs purchased
wholesale and assembled in-house.

Many employees are finding that their daily commute is eating ever
deeper into their budgets because of the increasing price of fuel. In
many cases, their ability to relocate closer to work is complicated
by the stagnant real estate market and the higher price of housing
closer to population centers. Telecommuting can help, but is only
feasible for certain types of work. Here, the company can help by
providing dormitories close by, which would allow employees to
commute every other day, or even just once a week. For the younger,
single employees, this may allow them to avoid spending money on
housing altogether.

There are numerous other ways that a company can use its vastly
greater negotiating power to effect significant savings for its
employees while incurring a comparatively small additional cost.
Examples run from directly providing family medical care through a
company clinic to providing vacation packages at cost by renting out
an entire vacation resort at a lower, negotiated group rate.

But perhaps the greatest opportunities for cost reduction lie in
areas where employees' own efforts can replace services or products
they would otherwise be forced to purchase, be it taking care of
their elderly relatives instead of putting them in assisted living,
or spending time with their children instead of paying for day care,
or growing their own food in a community garden instead of shopping
at a supermarket. Here, the company has to be willing to accommodate
shorter working hours, trading off the slightly lower efficiency of
having more part-time employees against the resulting vastly greater
efficiency of the company community when it is viewed as a single
household.

There is no need to couch such initiatives in purely negative terms
of cost containment. Here is how Eric Schmidt, CEO of Google, sees
it: "The goal is to strip away everything that gets in our employees'
way. We provide a standard package of fringe benefits, but on top of
that are first-class dining facilities, gyms, laundry rooms, massage
rooms, haircuts, car washes, dry cleaning, commuting buses - just
about anything a hardworking employee engineer might want."

If you feel that such special treatment may be required for the
pampered software artists at prosperous Google, but not for your own
employees, then take a look at the long list of benefits enjoyed by
the enlisted men and women of the US Air Force, which includes 30
days a year of paid vacation and unlimited free air travel. This is a
fine example of making the best use of what you have to make a
difference for your employees: if what you have is plenty of jets,
then why not let your employees travel as much as they want?

Although the results of such efforts may at first be difficult to
quantify, should they succeed, the resulting competitive advantage is
likely to become obvious. Let your hard-nosed competitors try to run
their businesses with distressed, disgruntled, overworked employees,
while you reap the benefits of loyalty, solidarity and ésprit de
corps. In due course, this should make your competitors attractive as
acquisition targets.

One ready objection that this proposal normally encounters runs along
the lines of "If everybody did this, the economy would collapse." If
it were implemented across the board, this would cut retailers and
the government out of their share of your earnings, reduce both
corporate profits and government expenditures, shrink the overall
size of the economy, making it unable to sustain a large and growing
national debt, and hasten economic collapse and national bankruptcy.

But it is clearly a mistake to consider it likely that this proposal
would be implemented by more than a handful of companies.
Overwhelming numbers of corporate executives would regard it as
professional suicide, because financial markets punish companies that
put the interests of their employees ahead of those of their
investors. And it seems equally outlandish to think that the actions
of a few mavericks could significantly hasten economic collapse and
national bankruptcy. In short, the macroeconomic effects of this
proposal are not interesting. It is far more interesting to consider
the notion that it is possible to safeguard a company and its
employees against a continuously worsening economic environment, even
onto complete economic and political collapse. The steps proposed in
this article can be regarded as baby steps in that direction. The
remaining steps are varied and far more difficult, and are beyond the
scope of this article.

http://cluborlov.blogspot.com/2008/08/when-all-your-best-employees-
are-going.html