Recent presentations on sustainability by SKF Group got me thinking again about the key performance indicators (KPIs) that companies use to measure and track the progress of their initiatives.
Corporate sustainability metrics have become extensive. Along with paring down their own greenhouse gas footprints, waste, and energy, water and materials intensities, many are extending their measurements up and down the supply chain. For example, SKF’s “BeyondZero” initiative calls for the company “to reduce the negative impact within SKF and to increase the external positive effects of energy savings for customers using SKF products, solutions and services so the net effect is positive,” says SKF Group CEO Tom Johnstone.
Johnstone also offered the most succinct definition of sustainability I’ve heard: “A decent profit in a decent way.”[pullquote]
In addition to energy, emissions and materials, many companies are setting targets and tracking accomplishments in corporate social responsibility and employee health, job satisfaction and turnover. They support and encourage employee participation in charities, community and education programs, disaster response and many activities from local to global that help make the world a better place. Employees who work for such companies are measurably more loyal and productive. All of the above find their way into annual sustainability reports that often run to hundreds of pages.
Maybe I haven’t read enough reports or dug deep enough into the fine print, but I’ve never yet seen a company be proud about how many people it can keep gainfully employed. Quite the opposite: companies are rewarded for reducing employment.
In times of growth and prosperity, it’s easy to rationalize reducing jobs as the right thing to do, both for the balance sheet and for sustainability. Every employee adds not only the expenses of their paycheck and benefits, but also the space, energy, water — even the emissions from their commute — associated with supporting their employment. If the product can be produced with one less employee, then it’s best to do it that way. If a position can be eliminated, that ex-employee can better benefit the world by getting a job elsewhere.
Unfortunately, the past few years haven’t been times of growth and prosperity. Millions of would-be workers are under- or unemployed, which has decimated markets, economies and tax revenues. If you see the same headlines and hear the same speeches that I do, you’d have the impression that the single most effective thing that could be done to improve the world is to “create jobs.”
Or at least to not reduce them. I’ve previously written about no-layoff policies and how they are validated at least as much by the advantages of retaining skilled personnel and being ready for quick response when prosperity returns as by any sense of social responsibility or corporate largesse.
But despite the documented value of retention, I’ve never seen a stock price rise because production employees weren’t laid off, or read a bar chart or a sustainability KPI with the label, “Avoided Layoffs.”
Maybe it’s a moot point at this stage of the recovery. Manufacturing output is up to pre-recession levels, but many companies are doing it by investing in machines and automation, not by hiring people. Laid-off employees without today’s skills aren’t being called back, while highly skilled workers apparently have their pick of thousands of openings that are going unfilled.
Like most manufacturers, SKF sales dropped precipitously in 2009. Towards the end of 2008, it saw this happening and began implementing a program negotiated with its unions to close some facilities, reduce hours and shorten workweeks. “These down times were used in a number of ways, but a most effective one was for training,” says Ingalill Ostman, senior vice president, Group communications. “Instead of our workforce spreading out to new job opportunities, we were training them to be more skilled in our own company, so they were ready to step up when the recalls came.”
At SKF, Ostman says, “The good news is that we have not only returned to our previous levels, but have considerably surpassed the head count before the economic downturn.” Unfortunately, most companies are not as advanced.
A hundred years ago, Henry Ford understood that his car company would not only have to build Model Ts that people could afford, it would have to hire people and pay them enough to afford them. Many of today’s companies behave as though they exist in a vacuum — that it’s not their responsibility or concern to support their customer base through their own employment.
That doesn’t sound very sustainable to me.