C H A P T E R 10
All Work, No Play?
Maybe Long Hours Don’t Pay
VISITING EUROPE IS FREQUENTLY not only pleasant but instructive. In Denmark, by about 5:15 on weeknights, the roads and sidewalks are crowded with people going home from work; and few people work on the weekends. In Spain, I visited San Sebastian to give a talk on ethics and had lunch with a group of executives from some of the region’s top companies. In a dining room at the University of Navarra, we chatted through three courses and some bottles of excellent wine—the proverbial Spanish lunch. Visiting IESE, the business school headquartered in Barcelona, I learned that Spain takes its vacations seriously. The whole country essentially shuts down in August. In fact, during that month even the courts are closed except for emergency matters. Meanwhile, in France, there has been labor unrest over attempts to lengthen the 35-hour workweek; there is similar resistance to expanding working hours in Germany, as well. And in the United States? About one-quarter of all U. S. private-sector employees don’t get any vacation at all, a 2006 Conference Board survey found that 40 percent of consumers had no plans to take a vacation in the next six months, and a Gallup survey revealed that 43 percent had no summer vacation plans.1
Ah, you must be thinking. Just what one might expect out of a continent, Europe, where people “work to live” rather than “live to work,” where quality of life is important and leisure and family are central, and where, of course, as a consequence of this lifestyle, business isn’t very productive and soon change will be thrust upon those self-indulgent Europeans.
But of course, this conventional wisdom is mostly wrong, as it is about many things. As an article in the Economist noted, by most measures European companies and economies are equal or approximately equal to the United States in terms of productivity and productivity growth. For instance, GDP per person grew 2.1 percent in America and 1.8 percent in Europe in the ten years prior to 2003, with the entire amount of even that small difference attributable to the underperformance of one country, Germany.2 Leave out Germany, and job growth has been the same in the United States and Europe. Meanwhile, Europeans have chosen to take some of their wealth in leisure, while the United States has made a different choice. According to the Economist, “by one estimate the average American worker clocks up to 40 percent more hours during his life time than the average person in Germany, France, or Italy.”3
There is little doubt that in working hours, as in many other aspects of work arrangements, the United States is different. According to a 2003 study published by the International Labour Office, the annual average duration of work in hours is higher in the United States than in any other of 18 industrialized countries except Japan.4 Companies often make long hours sort of a loyalty test. In 2001, Neal Patterson, the CEO of Cerner, a software company headquartered in Kansas City, sent an e-mail to employees warning that their cars were too seldom in the parking lot before 8 a.m. or after 5 p.m.5 Employees are expected to put their work and their employer first, and one way of demonstrating their commitment is by forgoing leisure and family. With cell phones and pagers and e-mail at home, work even intrudes on supposedly free time. The United States has, indeed, become a nation of workaholics. But is this sensible, even taking the relatively narrow perspective of what’s best for companies and the economy and forgetting about the plight of the workers?
The simple equation of hours worked = work output may have made sense in the past when work was mostly agricultural labor and factory work. It is hard to plow more of a field without spending more time doing it, labor-saving machinery aside; and similarly, the longer a production line runs, the more it produces. Of course, the equation of working hours with output is less sensible when the content of work has shifted to innovation and creative content to a greater degree, but old habits and old ways of thinking die hard.
Furthermore, the long hours people work can have many costs that need to be taken into account when a company considers if working more hours really pays off. First of all, there is evidence that long work hours can have negative effects on mental health, can produce stress, and are associated with increased incidence of cardiovascular disease.6 The stress caused by excessive work can, in turn, produce other behavioral problems with negative consequences, including smoking, alcoholism, and poor diet. Causality is obviously too complex and multifaceted to be easily and unambiguously assessed, but it is interesting that the United States, for all its great technology and spending on health care, does not have particularly good comparative health outcomes in terms of life expectancy. Although the United States ranks first in per capita health expenditures, according to a 2000 report by the World Health Organization, the country ranked only 24th in terms of life expectancy.7 Maybe the long hours and curtailed time with family and friends is one of the reasons U. S. health care costs, including employer health care costs, are soaring.
Second, working long hours invariably leads to diminished concentration and focus and, as a consequence, to mistakes and accidents. That’s why airline pilots, truck drivers, and—after a tragedy in a New York City hospital—medical interns have regulated working hours. As the quality movement teaches us, mistakes are much less costly to prevent than to discover and correct. This is particularly true for complex products such as software. SAS Institute is justly famous for its 35-hour workweek. But it is also famous for its high quality of customer service and programs that actually run as they are supposed to. CEO Jim Goodnight told me that because the company does not have people doing programming while they are exhausted, its programs have fewer bugs and therefore need less time and fewer people to find and correct programming mistakes. In fact, he claimed that the company had about one-third the number of “checkers” as Microsoft on a per-employee basis, even though the SAS system relies on an enormously complex and large body of code.
Third, companies face a coming demographic crunch. A Deloitte study noted that by 2008, skills and experience will begin to disappear from the job market. “Four industries in particular will suffer a mass exodus of employees: health care, manufacturing, energy, and the public sector.”8 And even as the baby boomers retire in droves, the people now entering the labor force come with a different set of priorities and preferences than their parents and grandparents. In part because they have seen companies lay off people who have devoted their lives to those same companies—in other words, loyalty has not been repaid—and in part because of different values, there really are generational differences in attitudes toward work and the working environment. Younger workers want different things and aren’t willing to make the same trade-offs between work and outside interests and pursuits. As one senior executive in a large financial services firm commented, “It’s almost like insubordination.”
Contrary to myth and much conventional wisdom, European companies can and do compete successfully in global product and service markets, even with vacation and workweek policies that put their U. S. competitors to shame. At $23 billion Airbus, which over the past several years has outsold its bigger U. S. rival Boeing in commercial aircraft sales, almost everyone takes their allotted five weeks of vacation, including three or four weeks during July or August. Airbus’s most critical knowledge workers—junior engineers—get and often take as much as nine weeks off a year. And almost no one in the company regularly works weekends. Although Airbus has recently had production difficulties with its latest generation of planes, many of the operational problems stem from its politically determined organizational structure, not from the productivity of its employees. Moreover, even with its current sales difficulties, the company remains a formidable competitor.
Similarly, Banco Bilbao, headquartered in Spain, is one of the largest banks in the world, having bought operations literally around the globe. It, too, has kept its vacation and workweek policies in spite of operating in a globally competitive industry. And don’t forget Nokia, the Finnish company that has successfully trumped the competition in the cell phone and personal digital assistant market. It, too, apparently has been successful in spite of the “misfortune” of being headquartered in a country where leisure and family time are priorities and where summer vacations are both long and utilized.
In fact, as a former doctoral student once commented to me, it is quite possible that these European companies and countries are not successful, as many think, in spite of their short workweeks and long vacations, but instead because of these very practices. The logic is simple. First, just as high wages cause companies to substitute capital for labor and use labor as efficiently as possible, thereby driving labor productivity up, so long vacations and shorter workweeks almost force organizations to be more disciplined in their management practices and processes. Endless, useless meetings? Less likely where work hours are a scarce resource. Inefficient work practices? Same story—limited labor hours put a premium on organizing work to be as productive as possible. And instead of just competing on the basis of brute force—of spending lots of time trying to get things done—companies are forced to be smarter about what they choose to do as well as how they go about doing it.
Second, being relaxed and refreshed can make people more productive and creative. The accounting firm PricewaterhouseCoopers has taken to shutting down for ten days over Christmas and five days over the Fourth of July, and sending notices to employees who haven’t been taking their vacations—all in an effort to get people to take some time off. Company leaders said they “started their nationwide shutdown because people were not getting their batteries recharged.”9
So, perhaps it is not so surprising that many of the Scandinavian countries rank the highest on Richard Florida’s index of creative work.10 Their very labor practices force them to compete on design, innovation, and creativity, instead of just throwing human resources at their competitive problems.
The moral for U. S. companies is clear. SAS Institute, with its 35-hour workweek, may not be some quaint anomaly, but instead a model for the future. It’s time for the U. S. companies that have made late nights and short weekends a test of loyalty to come to terms with the myth that long hours and no vacations are good for the bottom line. In a business world ever more reliant on creative work and intellectual capital, taking care of the people whom you expect to be the source of your success seems like a better strategy. And with the changing work values of the generations entering the labor force and the coming demographic crunch, companies may soon have no choice but to adapt. Those places that do so first and most successfully will almost certainly be in the best competitive position.