By Ed Frauenheim
Mar. 13, 2014
Asking workers to do more with less has helped push many companies to record profits in recent years. But long-term, negative consequences of extra workloads are surfacing — in the form of burned-out, high-potential employees and the flight of top performers to greener, less-taxing pastures.
It appears the “work-more economy” — a term Workforce coined in 2012 to capture the way companies were ratcheting up expectations on employees in the wake of the Great Recession — is still in effect and could be worsening.
Workforce introduced the phrase 'work-more economy' two years ago in a package of articles about heightened burdens on employees. Our stories pointed to evidence that higher workloads, in many cases double the duties, were taking a toll on employees’ well-being and threatened to backfire for companies.
Research last year from consulting firm Towers Watson & Co. and the National Business Group on Health shows that inadequate staffing is the top source of workplace stress as reported by employees. A separate Towers Watson study shows that stress is now one of the top reasons high-performing employees leave organizations. What’s more, advisory firm The Corporate Executive Board Co., or CEB, has found that about 20 percent of employees identified as high-potentials are choosing to drop out of leadership development programs — denting the future prospects of their organizations.
Some companies recognize the problem. They are taking steps such as acknowledging yeoman efforts, restructuring to ease burdens and providing greater flexibility in exchange for employee sacrifices. Some also are opening their wallets wider. But overall, pay levels have stagnated even as hours and workloads have continued to rise.
Alyssa Gran’s Grind
Alyssa Gran personifies the “work-more economy” — and the risk companies face if they push employees too far.
When Gran graduated from Arizona State University in 2010, she continued to work as a customer-care business analyst for a direct sales organization in the Phoenix area, a position she had held since 2008. While her position was full time and she worked more than 40 hours a week, she was only compensated for 29. The other 11 hours were considered an unpaid internship.
“When I first started, the economy was getting to its worst in Phoenix and I didn’t have a degree,” she said. “That situation I understood. But when I graduated, things didn’t change. I worked and worked and worked and worked, and there wasn’t a light at the end of the tunnel. Times were hard, and I was willing to work hard, but I was at capacity and there was no benefit for it.”
Gran, 26, said she approached her manager about the issue several times, and she was told she wasn’t alone. Numerous employees had expressed concern about being overworked and underpaid, but managers said they couldn’t help, and even as the economy improved, nothing changed.
“By spring 2011 I had to leave,” Gran said. “It came to the point where it became really hard to pay rent and I had to move back in with my parents for a couple of months. That was a hard pill to swallow. I felt I had put all of this effort toward a degree and worked my ass off, but I was struggling to get by just like everyone else.”
She quit in March 2011.
She found a job at a biotechnology company where she’s happy. She works hard and raves about the company’s wellness benefits and attention to employees’ engagement. In her view, companies everywhere ought to offer workers a fair deal if they want a devoted workforce.
“It’s showing employees you care,” she said. “It’s giving back for everything that they give to you.”
John Bremen, a managing director at Towers Watson, said the squeeze put on employees has led to a U.S. workforce that is “maxed out.” And he said the wisest organizations are finding ways to give back to overburdened employees, especially before the best of those workers leave. “Recognition and reciprocity are the name of the game,” he said.
The origins of this “game” date back to the recession, which started in December 2007. Amid a near panic, companies laid off millions of workers to slash costs. Citigroup Inc.’s 2008 announcement of 52,000 job cuts — 14 percent of its workforce — symbolized the scale of the downsizing. The economy has gradually recovered since 2009, but economic growth has been tepid, and organizations have been slow to hire back employees in the United States. A 2013 study by the Pew Research Center found that it is taking longer to regain U.S. jobs lost in the downturn — some 8.7 million positions — than it did in the previous two recoveries combined.
Picking up on the “jobless recovery” theme, Workforce introduced the phrase “work-more economy” two years ago in a package of articles about heightened burdens on employees. Our stories pointed to evidence that higher workloads, in many cases double the duties, were taking a toll on employees’ well-being and threatened to backfire for companies.
Overall, employee burdens seem to have increased in the past two years since our report came out in January 2012. A 2013 survey of 800 employees by Florida State University management professor Wayne Hochwarter found that 24 percent experienced increased work hours in the past two years. Twenty-one percent said their hours had decreased, and 55 percent said they had remained the same. Hochwarter found other evidence that the do-more-with-less mindset at companies has intensified. More than 1 in 5 (22 percent) of respondents said the level of resources they have to do their jobs had decreased in the past two years.
And in a sign that telework has a dark side, 29 percent reported that the amount of work that they are expected to complete “off the clock” had increased.
Managers often face the greatest burdens. Consider beer-maker New Belgium Brewing Co. Until this year, all 30 individuals in the company’s Fort Collins, Colorado-basedbrewing department reported to one manager. Without adding new employees, the department restructured at the end of 2013 and added a new supervisory layer; groups of nine to 10 employees now report to a manager.
“We’re easing the stress burden for managers and letting employees create relationships with them,” said Greg Churchman, “talent sage” for New Belgium, which makes Fat Tire Amber Ale. “People told us they were dissatisfied with how little time they spent with their supervisor, and this new structure fixes that and allows for more collaboration.”
Collaboration, though, can add to the problems of overtaxed employees. Research from the CEB has found that today’s workplaces full of “matrixed” reporting structures and more team projects can make it harder for individual employees to complete their tasks. And the slower pace of collective projects may help explain the way work hours globally have risen. Worldwide, people with full-time salaried jobs are now working 44 hours a week on average, up from 42 hours three years ago, according to the CEB. Workweeks have grown even more for employees identified as high potentials to 49 hours from 44.
So far, putting more onto workers’ plates has helped companies reap some sweet results. The level of after-tax corporate profits as a share of the economy rose in 2011 and 2012, when it reached 9.8 percent. That was the highest figure since 2006, before the recession hit.
Overall, employee burdens seem to have increased in the past two years since our report came out in January 2012. A 2013 survey of 800 employees by Florida State University management professor Wayne Hochwarter found that 24 percent experienced increased work hours in the past two years.
But businesses haven’t achieved such hefty bottom lines on the backs of workers alone. Many organizations have invested in software and equipment to boost the productivity of existing employees. It also isn’t easy for some companies that compete globally to justify hiring more U.S. workers to spell their American brethren. Foreign workers in many countries remain cheaper. In addition, greater workplace duties can inspire employees to improve their performance and earn more through overtime.
Tipping Point Reached?
As Workforcewrote in 2012, there’s a tipping point. And there are signs that organizations have hit that point and are starting to jeopardize their future success. Brian Kropp, managing director at the CEB, warned in 2012 that heavy workloads combined with little support risked repelling high-potential workers. That scenario is now playing out, he said. Kropp said companies generally expect 65 to 70 percent of the high-potential employees enrolled in leadership development programs to graduate from them. But the actual figure is closer to 40 percent, according to a 2013 CEB study.
One in five employees who started in high-potential programs left for jobs elsewhere. Another large chunk calculated that the potential benefits didn’t add up to the pain of so much additional responsibility, Kropp said. “About 20 percent of the people gave up,” he said. “They opted out, deciding that the trade-off just isn’t worth it.”
Among the things weighing on high-potentials these days, Kropp said, are increased requests to move within organizations to new locations and new roles. What’s more, they’re being asked to manage more people. Managers overall have seen the number of people they supervise jump from four in 2007 to seven today, according to CEB research. For high-potential managers, the number is closer to nine.
Companies that pay back workers for long hours in some fashion can see positive results, said John Bremen, a managing director of consulting firm Towers Watson & Co.
One of his clients experienced high turnover among its employees, who generally are expected to put in extensive hours during busy seasons in the spring and fall.
The company decided to offset that hardship by promising to give employees a break during the summer. In particular, employees would get Fridays off during the summer months when business demand is lower.
The move worked, Bremen said.
“People stayed,” he said. “They wanted that benefit.”
These findings dovetail with research from Towers Watson on the highest-performing workers at organizations. Towers Watson’s Bremen said top performers are more likely to leave over stress than most managers believe they are. “There’s this perception that high-performing employees are immune to stress,” he said.
Some companies are aware of the “work-more” dangers, and are taking action. In spite of the economic downturn, Dunkin’ Donuts opened 1,842 franchises in the U.S. from 2008 to 2010. But while business was booming, Ginger Gregory, who recently left her position as chief human resources officer of Dunkin’ Brands Group Inc., worried employees weren’t sharing in the excitement.
“We knew during the recession and after that people could be dissatisfied and yet not leave,” she said. “People are still in the sense of feeling stuck. From an employer point of view, we want to make sure we talk to people and make sure they’re engaged, having the best experiences and doing their best where they are.”
The company conducts a biennial engagement survey, and the last one, conducted in 2012, indicated that employees in corporate offices wanted to work from home and work with other departments. Because of that, Gregory’s team worked on breaking down silos and created guidelines for flexible work arrangements, gave managers tools and encouraged teams to have discussions on the subject.
Massages, Haircuts and Laundry, Oh My!
Software company Intuit Inc. has made similar changes in the past few years. Chris Galy, the company’s vice president of talent acquisition, said making sure employees are engaged at work and making it easy for people to manage and simplify their lives is what has led the company to be on the Fortune Best Companies to Work For list year after year.
“We offer on-site massages, haircuts, laundry, gyms, wellness programs and time off to simply invest in the community,” he said. “But on top of that, we have a culture where it’s OK to say, ‘Hey, I need a break.’ ”
A willingness to allow unconventional work hours can pay big dividends in winning over weary workers, Kropp said. His research finds that giving ground on scheduling tends to improve engagement in high potentials much more than perks such as free meals or dry cleaning. “Give them the gift of time and the gift of flexibility,” Kropp said.
Some companies are aware of the 'work-more' dangers, and are taking action. In spite of the economic downturn, Dunkin’ Donuts opened 1,842 franchises in the U.S. from 2008 to 2010. But while business was booming, Ginger Gregory, who recently left her position as chief human resources officer of Dunkin’ Brands Group Inc., worried employees weren’t sharing in the excitement.
Other companies are showing employees that their hard work is appreciated through recognition programs, which can range from top-down employee of the month honors to software systems that enable peer-to-peer kudos.
Then there’s the old standby: more compensation. Dunkin’ Brands Group, for example, changed its incentive program to include stock options after surveying high-potential employees about what made them want to stay or leave the organization.
Overall, U.S. companies have been reticent to increase compensation. In 2013, wages and salary income amounted to 42.5 percent of the gross domestic product, the lowest level on record. By comparison, wages and salary income as a percentage of the economy averaged 46.7 percent from 1960 to 2012. Taken together with heftier corporate profits, the parsimonious approach to pay rubs many working Americans the wrong way.
Kropp said concern about inequality is partly fueled by the way workers are being asked to do more without much to show for it. Employees “are seeing their companies be successful — measured by stock prices — but they are not seeing that success translate into their paychecks,” he said.
A refusal to pay more also factors into significant financial anxiety in the workforce. Fully a quarter of employees in Hochwarter’s research say their financial situation is as precarious as it ever has been. That insecurity, in turn, can undermine productivity.
Another solution to lean workplaces is more hiring. Indeed, the job creation numbers from the U.S. Labor Department indicate companies are selectively adding employees. Towers Watson’s Bremen also notices more and more companies paying attention to the strains on the workforce.
“Stress was a topic that many corporate leaders rolled their eyes at 10 years ago,” he said. Now, “it’s a very real thing for a lot of companies.”
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