Why the Relentless Focus on Finance and Accounting is Bad for Business and Employees
Starred review from May 8, 2023
Misguided bean counting leads businesses to mistreat their workers to the detriment of profits, according to this incisive treatise. Wharton professor Cappelli (Why Good People Can’t Get Jobs) pillories financial accounting rules set by the nonprofit Financial Accounting Standards Board that regard wages, benefits, and training as costs to be minimized, resulting in the undervaluation of employees. These perverse incentives, he explains, lead to outcomes that are bad for business, as when the costs of increased turnover outweigh nominal savings from layoffs and pay cuts, and when the outsourcing of labor to “reduce costs in the ‘employment’ accounting category” ends up costing the same as employee wages would have. Cappelli also critiques the regime of managerial “optimization,” noting that attempts to increase efficiency by monitoring employees’ keystrokes, bathroom breaks, and communications require the expensive services of the data scientists who implement and oversee these systems. The shrewd analysis of how contradictory financial pressures stymie efforts to cut costs is buoyed by lucid, plainspoken prose (“This is why we keep hearing persistent complaints about skill shortages: it’s because we stopped training”). The result is a timely study that connects present-day labor shortages to the dehumanizing irrationality of the modern workplace.
June 16, 2023
Director of Wharton's Center for Human Resources, Cappelli (management, the Wharton Sch., Univ. of Pennsylvania; The Future of the Office) here demonstrates that many jobs have become worse, but not for reasons readers may think. He blames financial accounting practices, which he defines as viewing employee costs as fixed ones; the problem, the author says, is that this perspective does not account for the price of poor management and employees. Cappelli maintains that financial accounting limits the workplace and its employees by setting a quirky set of standards. The book demonstrates that these practices can typically push managers into squeezing employee expenses. For example, some may opt to shift work from staffers to contractual workers. Not only does that often lead to employees feeling undermined, but it also typically results in an increase of other costs. This book describes and analyzes how this approach links to common and poor hiring practices, work allocations between vendors and employees, workplace structures, and performance management. Readers wanting to learn more about these practices will benefit from this title's extensive bibliographical references for further reading. VERDICT A thought-provoking and important study for managers or faculty and students in business and management programs.--Lucy Heckman
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