One thing my father
always told me to do
was take accounting
in college. Of course,
I never did, which
was probably too bad
because, as we all know, we only manage what
gets measured, and accounting drives what gets
I was reminded of this again in a radio
conversation with my colleague Ann Harrison,
who studies offshoring and has just edited a
book about the future of manufacturing jobs.
She noted that increasing productivity has been
the big driver of the decline in manufacturing
employment in the U.S., and that we really
should be trying to create incentives for
manufacturing businesses to make use of
That brings us to accounting. We all know
investors call the tune in the private sector, and
they look to the financial accounting of the firms
in which they invest to decide whether to buy
or sell them. As a result, executives of those
companies do everything they can to make their
financial numbers look good. What constitutes
good? Profit, of course, which is revenue minus
costs. But how we calculate revenue is tricky,
and how we calculate costs is even harder.
Consider, for example, the difference
between buying a robot and hiring a worker.
Both are costs, but they are treated very
differently by accounting, with big implications
for investors. A dollar spent on a robot counts as
an asset, with assets sitting across the balance
sheet from costs and helping to cancel them
out. A dollar spent on employees, in contrast,
counts as an expense. That’s true even if the
spending is on training, which an untutored
person would think sounds like an investment.
It gets worse for employees because there is
no place in accounting to recognize investments
in them. That spending is parked along with
“administrative expenses,” which includes such
things as office furniture, pencils and paper.
Investors want to see administrative expenses
be as small as possible because it seems to
indicate that the business is efficient. Of all the
expenses that aren’t “assets,” investors hate
employee costs the most. The reason is they
count them as “fixed” costs that can’t easily be
cut if business declines.
(I always thought that idea of labor being a
fixed cost was a bit strange, given how quickly
most companies get rid of excess workers
when business declines. It’s far harder to get
rid of a capital investment such as a robot when
business turns downward.)
For all those reasons, businesses have a big
financial incentive to spend on capital rather
than labor and to invest in capital. When you
run those incentives out over company after
company, we see one big reason why capital
spending is up and employment is down.
Accounting throws one more wrench into
hiring decisions. Most accounting systems
create incentives to engage contractors and
temp workers, even for long periods of time,
rather than hire regular employees. The reason
is that contract work, spending on temps
and other ways of utilizing workers without
hiring them don’t appear on balance sheets
as “employment” expenses. They show up
elsewhere, typically as “services.” That doesn’t
look as bad to investors as does hiring the
equivalent number of employees, even when
contractors stay just as long and cost even more
than equivalent full-timers would.
All this is worth bearing in mind when we
think about where the good jobs have gone and
what we can do to bring them back.
Peter Cappelli is the George W. Taylor
Professor of Management and director of the
Center for Human Resources at The Wharton
School of the University of Pennsylvania. Send
questions or comments to firstname.lastname@example.org.
HR Leadershıp By Eva Sage-Gavin/HR Leadership Columnist
By Peter Cappelli/Talent Management Columnist
A New Era for HR
Can We Talk about Mentoring?
Be caring. Curious.
As I reflect on these parting
words of advice from my wise
friend Sue Meisinger in her
final HR Leadership column,
it strikes me that we, as HR
leaders, must not only embody
these qualities, but must also
arm our employees with them
so they can navigate the coming
sweeping tides of disruption.
In a world in which digital is
radically reinventing work, all
of us—regardless of level or
title—need to be courageous
in the face of change, curious
enough to continually learn
to stay competent and caring
enough to navigate the ethical
and social dilemmas we face
as smart machines join the
As someone who’s
witnessed the seismic changes
in Fortune 500 companies over
the past three decades, my aim
with this column is to lend you
my experience in dealing with
the constantly shifting waves
without getting pulled under.
So, what do I think is ahead?
A tidal wave of disruption as
the marketplace deals with
unparalleled velocity and
the effect of nimbler, more
digitally savvy companies that
are unencumbered by legacy
processes quickly dominating
What does this mean for
leaders like you and me? For
starters, we need to harness
the power of new digital
technologies, such as artificial
intelligence, to amplify and
extend our human abilities,
both for us as individuals and as
leaders seeking to get the best
out of our employees.
Finding the right skills to
meet future needs is getting
harder by the day. It is projected
that nearly half of the top skills
we’re in pursuit of today will
change drastically by as soon as
2020 thanks to automation. We’ll
need to tap into innovations
emerging from HR tech
start-ups, which could mean
leveraging AI-based algorithms
to predict the skills we’ll need
and screen for them, or digital
“coaches” to give our employees
real-time, data-based feedback.
Another trend reshaping
work is the ability of digital
technologies to finally deliver
more flexible and personalized
employment experiences. The
Is there anything in
the workplace that
has more positive
doesn’t want to be “mentored,” and who doesn’t
like the idea of being looked up to as a mentor?
A new study of the mentoring experience by
Heidrick & Struggles provides an opportunity
for HR leaders to stop and think about what we
actually want mentoring programs to do.
Sixty percent of the mentees in the survey
said their mentor was their supervisor, which
I find puzzling. The whole basis of mentoring
is that the relationship is not with the person
in charge of your day-to-day performance, that
the mentor has some distance and objectivity.
Only 9 percent of respondents had a formal
mentorship program, meaning relationships
were informal and unstructured—making it
easy to run into problems. Here’s one of them:
Many of us have probably been approached
by someone more junior in their careers for
mentorship—and what they seem to want is
spo sorship: Will you open doors for me?
Mentoring as sponsorship implies
obligations and creates reciprocity norms,
a tricky issue, especially now, as concerns
about what appropriate behavior means are
heightened. Mentoring that has as its goal
improving advancement opportunities for
specific demographic groups, including younger
employees, also raises legal concerns that many
organizations don’t seem to have appreciated.
What may be most revealing from this
survey is the No.1 benefit respondents said
they got from their mentor: feedback on their
own strengths. This is something we should
be getting from our supervisors. All the other
benefits mentees said they received concerned
company and job advice, virtually all of which
used to be addressed by career-development
rise of digital-talent exchanges
has given highly skilled
freelance workers the ability
to create “portfolio” careers
across multiple companies.
Interestingly, a growing
number of companies are using
similar platforms to meet the
demand of gig-like experiences
for their own employees.
Digital technologies are
reaching the point where
organizations will soon be
able to decode the “employee
genome.” By codifying “the
algorithm of you,” organizations
will be far better positioned to
tailor everything from learning
to rewards to job activities.
Getting back to those
digitally savvy disruptors,
traditional players can learn
a lot from their flexibility and
willingness to embrace risk
(and failure) by experimenting,
iterating and always learning.
We are on the brink of a
brave new world. Digital, AI and
other advanced technologies
have already impacted the
outer layers of business. Now
they’re penetrating its very
core. I am excited to explore
my insights with you in future
columns to help our community
of HR leaders reshape work,
our workforces and our
Eva Sage-Gavin is a former
CHRO with more than three
decades of experience in Fortune
500 corporations. She currently
serves as the senior managing
director for Accenture’s global
talent and organization
consulting practice and as
a technology board director.
Send questions or comments to
programs and management training, making
me wonder if mentoring is being used as a
substitute for programs that no longer exist.
That takes me to the other side of the
mentoring equation, and that is the demand on
mentors. Those demands are considerable: You
have direct reports to supervise, and if you are
doing that right, it takes a lot of time. Then you
also have someone—or more than one person—
who comes to you for the same kind of attention
and help that direct reports want but who is
seeking it in a different, informal relationship
and will probably want some sponsorship help.
Boy, is that tricky. I worry we are burning out
mentors and using them to backstop the lack of
training, career development and supervision.
Here is what I would do as an employer: If
I’m encouraging mentorship, I would create an
official program that lays out responsibilities
and requirements. I would be explicit that
these are not sponsorship arrangements, and
I might even prohibit mentors from acting to
advance the interests of mentees. I would focus
the relationship on information exchanges that
mentees cannot get from their supervisors,
or at a minimum, “second opinions” about
information they received from supervisors.
Finally, I would assign mentors, as, on their
own, mentees would likely find people like
themselves, and one of the goals of mentoring
should be to get different information than you
would other wise hear. We also don’t want the
most important leaders to be over whelmed
with requests to be mentored.
If it is important enough to do mentoring,
then it is important enough to do it right.
Peter Cappelli is the George W. Taylor Professor
of Management and director of the Center for
Human Resources at The Wharton School of the
University of Pennsylvania in Philadelphia. Send
questions or comments to email@example.com.