Idea in Brief
The Problem
Many HR practices in the United States are bad for companies, employees, and investors. They include the lack of investment in training, the increasing reliance on leased workers, and the shift from pensions to 401(k) retirement plans.
The Root Cause
U.S. financial reporting standards treat employees and investments in them as expenses or liabilities, which makes companies appear less valuable to investors.
The Solution
Institute some small additions to what companies report, including expenditures on labor other than employees and on training; the employee turnover rate; and the percentage of vacancies filled from within. Businesses should voluntarily do this, and investors should continue to pressure the Securities and Exchange Commission for reforms.
Many common practices for managing employees are hard to explain. Why do companies obsess over cost per hire but spend so little time trying to see if they make good hires? Why do they provide so little training when we know it improves performance and many candidates say they’d take a pay cut to get it? Why do firms delay filling vacancies and let work go undone? Why do they spend so much money leasing personnel from vendors rather than hiring their own?
