Training has largely disappeared: the best evidence that a typical employee gets only the equivalent of one day of training per year, which includes safety training, learning how to use vendor equipment, and compliance rules. Promotion has dropped as well: ADP data suggests that only a little of 2% of employees are promoted each year, 29% of those who are promoted quit within one month, no doubt because budgets to pay employees promoted have fallen to 1% of payroll per year. Outside hiring drives everything, with average tenure now at four years compared to Denmark’s 7.8, which is the lowest in Europe.
The reality of human resources in the US in recent decades is one of the stripping costs out of the system and relying almost completely on layoffs and outside hiring to manage changing talent needs. This is despite the fact that talent issues routinely top the list of CEO concerns for the future. There is not much to copy here, but there are lessons as to how to avoid replicating the US experience.
Why are we managing so poorly in the US? Planning-based practices like succession planning failed when companies found themselves unable to plan what their future will look like. But the more general answer begins with the fact that investors have ramped up the pressure on companies to cut costs. What investors see is cost data from financial accounting, which does not capture costs of poor management, such as turnover costs, lower productivity from stressed-out employees, and so forth. Cutting any and all employment costs seems therefore to make sense as these are the costs investors hate the most, somehow still seeing them as “fixed” costs that cannot be cut despite ubiquitous layoffs. It explains why, despite a booming stock market, strong economic growth, and the continuation of the tightest labor market since the 1960s, we had widespread layoffs in 2023 and 2024.
This problem arose because business leaders do not see the costs of poor management. My colleagues and I are continually stunned that they have no idea what turnover costs are, let alone the other costs from poor management. The main lesson from the US experience, for colleagues elsewhere, is to get those cost figures in front of leaders as often and as soon as we can. Otherwise, they will surely look to the US experience as if it is a new “best practice.” Telling CEOs something they may not want to hear is risky, but there is no alternative except to go down the slide.
To the extent that there are other lessons from the US experience, they are also about what to avoid. It is difficult to miss the fact that management fads travel from the US around the world. Many of those fads begin with statements of problems that are not real but are pushed forward by the industry of vendors who business of selling solutions begins with creating a sense of problems. We calculate that the size of this industry is an astonishing $1.6 trillion in revenue per year, the size of Italy’s GNP, and 10% of that or $160 billion is spent on marketing.
Among these recent fads was the perception of a work-force wide “skill shortage” after The Great Recession in 2009. In fact, it was nothing but an inevitable tightening of the job market such that employers could no longer hire at the depressed wages they had during the recession and not the claim that skill requirements suddenly jumped up; the notion that there are “generational differences,” which the National Academy Sciences documented is simply a confusion of age effects (people act differently and predictably at different ages) and not evidence that the heads of people born at different periods are somehow wired differently; the AI hype, beginning with the claims that driverless trucks would take over by 2019, that machine learning would transform human resources at roughly the same time, and now the ubiquitous claims that generative AI and Large Language Models will eliminate huge numbers of jobs.
It remains to be seen what generative AI will ultimately do to jobs, but the track record on the prognostications, virtually all from vendors who have an interest in you believing them, is terrible. It has gotten so much attention in part because so much money is at stake for the consultants and vendors and because business leaders believe it is a good way to cut a lot of jobs, making their financial accounting scores better.
The simple advice, therefore, is just to wait for evidence and not more claims about what AI will do. Being on the “bleeding edge” of unproven and rapidly evolving tools is never a good idea unless you have money to burn.
It is fair to note that the human resource vendor marketplace is certainly the place to shop for vendors. It is vast and contains virtually anything one could imagine, unfortunately including tools that will not work as promised. Before going shopping, though, it is crucial to figure out what we actually need rather than grab a solution in search of a problem.
