Danger:Toxic Company

Toxic flextime: "Work any 18 hours you want."

Another sign that a company is toxic: It requires people to choose between having a life and having a career. A toxic company says to people, "We want to own you." There's an old joke that they used to tell about working at Microsoft: "We offer flexible time -- you can work any 18 hours you want."

A toxic company says, "We're going to put you in a situation where you have to work in a style and on a pace that is not sustainable. We want you to come in here and burn yourself out -- and then you can leave." That's one thing that SAS manages brilliantly: When you take a job there, you don't have to ask yourself, "Am I going to be a successful and effective SAS employee, or am I going to know the names of my children?"

What's the difference between a factor of production and a human being?

Another sign of a toxic workplace is that the company treats its people as if they were a factor of production. At a toxic workplace, the managers can reel off all of the various economic factors: "We've got capital that we invest, we've got raw material that we use, we've got the waste from the manufacturing process that we recycle -- and, in the same category, we've got our people." It's a workplace that doesn't see people as people, but rather sees them as factors of production. And that's ironic, because what we celebrate as a competitive, capitalistic practice actually reflects a Marxist orientation: People are seen as a factor of production, from which a company has to extract an economic "surplus."

There is a huge difference between that perspective and the way AES, for example, looks at its people. Dennis Bakke even objects to the term "human resources." Dennis says that fuel is a resource -- but that people aren't. Underlying this difference in language is a difference in philosophy that guides much of what a company does. If a company looks at you merely as a factor of production, then every day it must calculate whether your marginal revenue exceeds your marginal cost. That's how it decides whether or not to keep you.

If your company is so great, why doesn't anyone want to work there?

You hear a lot about the shortage of talent. The thing to remember is that, for great workplaces, there is no shortage of talent. Companies that are short on talent probably deserve to be! Anyone who is smart enough to work in a high-tech company is too smart to work in a toxic workplace. And if they do work in one, as soon as they have a choice, they choose to leave.

For example, according to David Russo, SAS Institute had a 3% voluntary-turnover rate in 1997. SAS almost never loses one of its people to a competitor, he says. When it does lose people, it's usually because of a lifestyle change or because someone at the company has to move to a place where there is no SAS facility.

That kind of things is happening across the economy. Hewlett-Packard has lower turnover than many of its competitors. The Men's Wearhouse has lower turnover than many other companies in the retail industry. Starbucks has comparatively lower turnover than other companies in the fast-food business. Of course, none of these companies is perfect. But a company that says, "We want to create a place that attracts people, that makes them want to stay," will have lower turnover than places that say, "We don't care about our people's well-being or about whether they stay." And then, when these toxic companies conduct themselves in this way, they wonder why people leave.

Which is better business -- paying signing bonuses or treating people right?

High turnover costs big money. First of all, it costs money to go out and replace all of the people you've lost. If the companies in Silicon Valley that are losing people would stop paying $50,000 signing bonuses, and instead do what's necessary to keep the people they've got, they would be much better off economically. Along with incurring replacement costs, when you lose people, you lose knowledge, you lose experience, and you lose customer relationships. Every time a customer interacts with your company, he or she sees a different person. I like to go to my branch bank because I know that I'll always make a new friend there: The turnover is so high, I'm always meeting new people!

There is nothing soft and sentimental about this part of the argument. This is simple economics. David Russo did a calculation in my class one day: A student asked him why SAS does so much family-friendly stuff. He said, "We have something like 5,000 employees. Our turnover rate last year was 3%. What's the industry average?" Somebody said 20%. Russo replied, "Actually, 20% is low, but I don't care. We'll use 20%. The difference between 20% and 3% is 17%. Multiply 17% by 5,000 people, and that's 850 people. What does turnover cost per person? Calculate it in terms of salary." The students estimated that the cost is one year's salary and that the average salary is $60,000. Russo said, "Both of those figures are low, but that doesn't matter. I'll use them. Multiply $60,000 by 850 people, and that's more than $50 million in savings."

That's how Russo pays for the SAS gymnasium, for on-site medical care, for all of the company's other family-friendly items. "Plus," he said, "I've got tons of money left over." If you can save $50 million a year in reduced turnover, you're talking about real financial savings. This is not tree-huggery. This is money in the bank.