The Real Value of Labor

Truth be told, workers are often viewed as a cost by many institutions. In fact, that’s where they appear on financial statements – they’re a major expense item on the income statement. That view of workers naturally sets up an “us vs. them” and “win/lose” mindset. The institution wins when it can eliminate workers, make them work longer hours for the same pay or pay them less, but the workers lose. That adversarial mentality, in fact, was the genesis of the US labor movement.

Workers as human capital

Ah, but all is not lost, we now have come to view workers as “human capital.” Let’s ignore for the moment that they still appear on the income statement and not on the balance sheet where all other capital resides. Let’s also leave aside the notion of capital as inherently dehumanizing as well as the implication that we “own” human capital, like we own all other forms of capital. What does “human capital” mean?

Well, think about it for a moment. Most “capital” is in the form of physical assets and those assets depreciate, or lose value, over time. Perhaps it’s our implicit recognition that workers age over time and, consistent with our prevalent “ageist” bias, lose value as they age. So, does human capital depreciate over time?

But, wait a minute, some assets don’t depreciate, they are fixed in value – think about many financial assets like cash in the bank (yes, there’s some modest interest that accrues) or accounts receivable. OK, should we think about human capital as having fixed value – a given set of skills and credentials that can deliver fixed value over time?

Workers as learners I would suggest these views of labor miss the real opportunity for institutions and for workers themselves. We humans have limitless potential that can be cultivated and drawn out over time. Workers have the ability to learn – and we can evolve institutions that can help them learn faster and faster over time, together.

I can hear many executives now saying: but we’re focused on learning, we already have training programs. And, by the way, those training programs cost money and who knows whether the workers will stay with us long enough for us to earn a return on our investment? (Can you see the pattern? There’s a strong tendency to reduce everything, including humans, to financial matters).

Sure, training programs have a role to play in learning. But that’s not the kind of learning I’m talking about. Training programs are about sharing existing knowledge. The most powerful and valuable form of learning in a rapidly changing economy and society is learning in the form of creating new knowledge – seeing problems and opportunities that have never been seen before and coming up with new approaches to address those problems and opportunities in ways that create growing value and impact. That kind of learning occurs day to day on the job, not in some training room.

And there’s another powerful dimension to this form of learning. This form of learning occurs through action that delivers impact, not by sitting in a room reading books. Now, we’ve flipped the conventional economic model of learning. Rather than spending money upfront to train workers and hoping some day to earn a return on that investment, this form of learning requires an immediate return in terms of added value. The learning comes afterward from seeing what actions can actually generate the greatest impact. New value comes first and the learning follows. If we adopt this mindset, labor is now about learning, everywhere and all the time.

Institutional implications

What if we systematically attempted to redesign all of our work environments to foster this kind of learning? But to really reap the benefits of this work environment redesign, we would also need to dig in and fundamentally redefine what we mean by work. Today, most work is defined as tightly specified and highly standardized routine tasks – there’s no room to learn there. That’s why we have training rooms.

As technology takes over more and more of these routine tasks (thank the Lord!), we have an opportunity to redefine work as addressing unseen problems and opportunities that can unleash much more value. That kind of work requires a very different set of practices that need to be cultivated within small workgroups throughout the organization.

But to redefine work, we need to challenge some of the basic mindsets that drive the operation of most of our large institutions around the world. Most of our institutions today are governed by the scalable efficiency mindset – the best way to create value is to become more and more efficient at scale. It’s all about doing things faster and cheaper at scale.

As I’ve written elsewhere, we need to engage in a form of innovation that is not yet on the management agenda, but needs to be. That’s institutional innovation – starting by shifting our mindset from one of scalable efficiency to one of scalable learning. In the scalable learning mindset, the focus shifts to creating more and more value by finding ways to help all workers learn faster together on the job, in their day to day work environment. If we take that seriously, it requires us to rethink all aspects of our existing institutions and find innovative ways of organizing, leading and operating our institutions.

So, this quickly becomes complicated and challenging. It won’t be easy, but the rewards will be significant. In fact, as we’ve shown before, scalable efficiency is producing diminishing returns, as confirmed by the long and sustained erosion of return on assets for all US public companies. This isn’t just an opportunity. It’s an imperative in a world of mounting performance pressure. Those who don’t figure this out and embark on the journey are going to find themselves marginalized.

The opportunity for both workers and institutions

And what’s one of the most awesome aspects of this journey? Instead of holding on to the “win/lose” dynamic that has governed our scalable efficiency institutions, we now have an opportunity to shift to a “win/win” dynamic where workers can achieve more and more of their potential while creating more and more value for the institution. As we begin to see that there is an expanding pie for everyone, we will find greater willingness to share the growth of that pie with all who have contributed to its growth. We will finally have tapped into the true Power of Pull – in our book, we described three levels of pull and the highest form of pull is to achieve, to pull out more and more of the potential that we individually and collectively have within us.

I’ve framed this opportunity in economic terms because that’s the way to engage leaders of most institutions that are still driven by the scalable efficiency mindset. But the real rewards here are not just economic – they are deeply personal and social. We will find ways to connect with each other in much deeper and more meaningful ways that build trust and inspire us to accomplish so much more together. We as humans all have an innate desire to develop more of our potential and to make a bigger difference in whatever environment we find ourselves in. We all have a desire to build deeper relationships with those around us that can help us all to accomplish more together. It’s so much more than dollars and cents.

The bottom line Perhaps our future Labor Days will focus on celebrating the fact that we’ve come together to achieve something that none of us could have accomplished on our own and that we’ve all been increasingly rewarded for that effort. And perhaps we’ll celebrate that every day, and not just Labor Day!


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