2013-08-20

Caplan On "De-Hiring" And Why I Disagree

I suppose this post goes in the "Economics" bin, but it is more about practical advice for the business world.

This morning Bryan Caplan writes about the practice of "de-hiring" employees:
Econ professors' knee-jerk answer is, "Fire him." But people with real jobs often notice a rather different reaction: Instead of firing the mediocre employee, his boss tells him, "You need to find other opportunities." The worker then has 1-3 months to search for another job, free of the stigma of current unemployment. In HR jargon, the firm "dehires" him.
Caplan goes on to point out that "de-hiring" is both "legally safer," meaning the firm escapes the risk of being sued for wrongful termination, and "psychologically easier," meaning employers put their conscience at ease by finding a way to part ways with an employee amicably. Then he writes,
On reflection, though, dehiring is only "win-win" for the firm and the worker. What about the problem worker's next firm? Dehiring is a nefarious plot between the worker and his current firm: "If you help me find another job, I'll become their problem instead of yours." From the standpoint of the next employer, calling dehiring "win-win" is a sick joke. The proper description is "win-win-lose" - the worker wins, the old firm wins, the new firm loses.
Only an academic economist would conceive of a pool of employees in the workforce, some of whom are great everywhere, some of whom are mediocre everywhere, and some of whom are poor workers everywhere. Perhaps this is because the skill set required of academic economists is particularly well-suited to constructing generalized theoretical models in which Resource R has a marginal product of labor corresponding to a particular value L and so forth. This may also be why Tyler Cowen cooked-up that unfortunate idea about "ZMP workers."

Reality is much different. Give a man a job he dislikes, and he will be a poor worker; give a man a job he loves, and he will be highly productive. In other words, a worker's marginal product is not governed solely by exogenous personality traits, but is at least partially impacted by the particular job in question.

We've all observed this in ourselves over the years. When you were flipping burgers at McMeaty King in your teens, you were a bit of a slacker; when you were an intern at Excellent Consulting in your early 20s, you slaved and slaved because you were certain it was the most important thing in the world; when you settled into middle-management at Spiffy Enterprises in your 40s you did your work effectively but made a point to go home to your family at a decent hour; and so on. You worked one job as if your life depended on it, but when you changed to the job down the street, your boss turned out to be a real jerk, and you couldn't motivate yourself to put in much more than a couple of extra hours per week.

What this means is that a seemingly inferior employee has, in many cases, simply yet to find the right fit. Under this scenario, a firm that helps a low-productivity worker find a more satisfying job wins twice: first for the benefits Caplan outlines, and second for the goodwill won by helping the employee rather than hindering him or her. That worker will always remember that, in the final analysis, the old employer helped him or her progress to a better place in life. Meanwhile, the new firm that acquires the new worker doesn't necessarily get a low-productivity worker at all. If the new job is the right fit, then both the employee and the new employer benefit greatly from having a positive working relationship.

This is one of the many situations that highlight that, in the workplace, it is always better to make your colleagues look good than it is to truth-bomb them into submission. Dog-feed-dog makes everyone better off than dog-eat-dog. The next time you want to get a leg-up on your rival professional colleague, consider doing everything in your power to make him or her look awesome. The best-case scenario is that the colleague gets promoted out of the competition and you become the start employee. The worst-case scenario is that you diffuse an antagonistic working situation with kindness.