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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsThere's a surprising culprit behind mass layoffs, says a prominent management professor at Wharton
Most bosses blame layoffs on economic downturns, a decline in demand for services, or even overhiring. But one Wharton professor has a different view: It's how U.S. accounting rules force companies to classify human capital that makes them seem like an expense to be cut, rather than an asset to be protected.
Peter Cappelli, the George W. Taylor professor of management at the Wharton School, is the author of the new piece, "How financial accounting screws up HR," published in Harvard Business Review. Cappelli argues that employers have gotten bad at managing employees and U.S. financial reporting standards are in part to blame.
If employees had asset value, one would think twice about just cutting them, says Cappelli, also the director of Whartons Center for Human Resources.
For decades, public companies have been required to use generally accepted accounting principles to report their financials. But the standards for these accounting rules set by the Financial Accounting Standards Board need a reboot, according to Cappelli. Though they may be your biggest competitive advantage, "Employees are not considered assetseven though the tenure of a valuable employee is often far longer than the life of any piece of capital equipment, he writes.
https://www.msn.com/en-us/money/companies/there-s-a-surprising-culprit-behind-mass-layoffs-says-a-prominent-management-professor-at-wharton/ar-AA17fpCW
dutch777
(3,019 posts)And most Americans don't use enough of either making the books go more negative than they need to. Take ALL your vacation America and stay home when your are sick!
fescuerescue
(4,448 posts)It's actually a pay cut since now the company doesn't have to accrue vacation and sick time anymore.
Where they used to set aside about 56 weeks of pay per employee and then pay them out when they leave, they now set aside 52 weeks and pay them nothing when they leave.
FrankTC
(210 posts)It would be interesting to see if a change in accounting rules led to a change in corporate behavior. Probably a lot needs to be worked out re: how to implement the idea that employees are assets too. Republicans will never agree, so be prepared to get it done over their (metaphorically) dead bodies.
Midnight Writer
(21,767 posts)Money uber alles shall be the law of the land.
gratuitous
(82,849 posts)Because of the stellar earnings report from last quarter, the big bosses all got a big windfall. Sure, the big shots are headed out the door this quarter because there's nobody around to do the work, but that's not their concern.
A HERETIC I AM
(24,368 posts)"HR"
Human Resources
Like iron ore and standing lumber and copper and all the rest? We are "resources", as the article points out, instead of assets.
Hermit-The-Prog
(33,346 posts)Until then, unionize! (Pro football players were just disposable pieces until they formed a union).
msfiddlestix
(7,282 posts)which safeguards the status quo analysis.
Johnny2X2X
(19,066 posts)Right now, there is more competition for workers than I have ever witnessed. Companies that can't attract and retain talent are not going to be competitive.
Meadowoak
(5,546 posts)Administration leads us into a recession, layoffs, unemployment will be imminent. This is done to keep labor costs down, businesses fold, and are bought up by their competition for pennies on the dollar. That is when millionaires are made.
uponit7771
(90,339 posts)... retiring boom = companies are not in the best spot to be picky
Johnny2X2X
(19,066 posts)12 million new jobs created in under 2 years. We simply don't have enough people to fill those positions.
Another aspect of it has been close to zero immigration for years now too.
uponit7771
(90,339 posts)Hortensis
(58,785 posts)just because they aren't owned. Often most of a business's value is in its employees, some even effectively irreplaceable within a feasible time. We've most of us probably been part of a business that was sold and well aware that we in very real effect were being transferredwith the sale, at least short term...
Phoenix61
(17,006 posts)to offset their profits and reduce their tax liability. That is how things worked when corporations paid taxes. Now their tax rates are so low that Im entice isnt there and they might as well layoff then rehire when they need the workers.