TIME The Drucker Difference

$3 Billion Silicon Valley Suit Shows How Not to Manage

A Google logo is seen at the garage where the company was founded on Google's 15th anniversary in Menlo Park, California
Stephen Lam—Reuters

In 2006, Google’s Eric Schmidt suggested that his company had the perfect road map to “manage the new breed of ‘knowledge workers’” who now propel so much of the world economy, and especially the digital economy: follow Peter Drucker.

“After all,” Schmidt said, “Drucker invented the term in 1959. He says knowledge workers believe they are paid to be effective, not to work 9 to 5, and that smart businesses will ‘strip away everything that gets in their knowledge workers’ way.’ Those that succeed will attract the best performers, securing ‘the single biggest factor for competitive advantage in the next 25 years.’”

Unless, that is, you and your rivals agree that you won’t try to attract those high-performing folks in the first place, at least not actively.

In a case set for trial next month, Google, Apple, Intel and Adobe Systems have been accused in a class-action lawsuit of colluding to suppress wages between 2005 and 2009 by, among other things, agreeing not to woo each other’s employees. More than 64,000 people are seeking $3 billion in damages.

It will be up to a federal court jury in San Jose, Calif., to decide whether the tech giants violated antitrust law—though the current betting is that a pre-trial settlement is likely. What is already clear is that they violated Drucker.

In documents that surfaced this week, Schmidt and executives from other companies openly discussed their no-poaching agreement. In a March 2007 email, for example, Schmidt assured Apple’s Steve Jobs that a Google recruiter who’d called into Apple had gone against company policy and was being fired for her actions. “Should this ever happen again please let me know immediately and we will handle,” Schmidt wrote. Jobs replied with a smiley face.

Drucker would have found nothing to smile about in any of this. One of the hallmarks of the knowledge age, he pointed out, was the ability of software engineers and other specialists to shift fluidly among different employers.

“Employees who do manual work do not own the means of production,” Drucker wrote in Management Challenges for the 21st Century. “They may, and often do, have a lot of valuable experience. But that experience is valuable only at the place where they work. It is not portable.

“But knowledge workers own the means of production,” Drucker continued. “It is the knowledge between their ears.” The upshot of this reality: “Knowledge workers have mobility. They can leave.”

Among tech companies, one of the principal ways in which employees wind up leaving Corporation A for Corporation B is when they’re directly solicited in a process referred to as “cold calling.” “This form of competition, when unrestrained, results in better career opportunities,” the U.S. Justice Department noted in 2010 when it settled a civil suit with the same companies now embroiled in the class-action case.

It is in restricting cold calling that Schmidt, Jobs and their cohorts revealed something rather remarkable about themselves: They’re just as intent on exercising power over their workers as the old-line corporate dinosaurs that Silicon Valley tends to look down upon.

Drucker would have been the first to tell them that they’d never get away with it. “The center of gravity in employment is moving fast from manual and clerical workers to knowledge workers who resist the command-and-control model that businesses took from the military years ago,” he wrote in 1988 essay for Harvard Business Review.

Perhaps even more on point are Drucker’s words from Landmarks of Tomorrow—the 1959 book that Schmidt cited as an inspiration.

The organization “must never be permitted the dangerous delusion that it has a claim to the loyalty or allegiance of the individual—other than what it can earn by enabling him to be productive and responsible,” Drucker wrote. A company “must never be allowed to consider its relationship to the individual member as an indissoluble union; it must treat it as existing only for a specific purpose and therefore revocable.”

In a new introduction to Landmarks of Tomorrow, written in 1996, Drucker took credit for foreseeing “the shift to knowledge as the new major resource.” But he also acknowledged missing a huge development: “the information revolution.” Drucker said that this oversight was all the more inexcusable given that, at the time, he was consulting for IBM and lecturing to many an audience that the computer was about to upend “the way we were going to do work, be organized, think, and that, indeed, the computer was but a symptom of a basic change—the change from experience to information.”

In the end, Drucker concluded, “if the book were to be given a score as an ‘early diagnosis’” of some of the most significant trends emerging in society, “it would thus not get an ‘A+.’ But it probably deserves an ‘A-.’”

Schmidt and his pals didn’t miss the information revolution, of course. And I’ve praised Google in the past for some of its employee practices. But they whiffed so badly on understanding how to treat knowledge workers in regard to their employment prospects, I’d bet Drucker would give them an ‘F.’

TIME White House

Obama Aims to Close Wage Gap for Women With Executive Orders

The President will sign two executive actions that seek to close the gender wage gap. The aim of the orders is to make it easier for underpaid women to discover unfair differences in pay, but they'll apply only to federal contractors

President Obama is set to announce two executive actions Tuesday to increase wage transparency for federal contractors as part of a wider effort to close the wage gap for women.

The President will sign an Executive Order that prohibits federal contractors from retaliating against employees who discuss their compensation, with the aim of providing workers a way of discovering violations of equal-pay laws. A second order will require the Secretary of Labor to collect data on federal contractors’ worker compensation, organized by race and sex.

The aim of the Executive Orders is to make it easier for underpaid women to discover unfair differences in pay. But the measures would only apply to federal contractors, not to women in the broader workforce.

The President has timed the Executive Orders ahead of this week’s Senate debate on the Paycheck Fairness Act, which would allow women in the general workforce to seek remedies similar to those brought for racial discrimination. The bill is part of a broad push on equal pay by the Democratic Party, in a bid to shore up support from female and liberal voters ahead of this fall’s midterm elections.

“This is a huge victory for the 1 in 5 American workers employed by federal contractors,” said Deborah J. Vagins, ACLU senior legislative counsel. “Congress still needs to do its part and pass the Paycheck Fairness Act, but we’re one step closer to achieving pay equity thanks to this White House.”

TIME wall street

Wall Street Bonuses Soared 15% Last Year

Bonuses on Wall Street in 2013 reached their highest levels since the financial crisis, rising 15% to an average of nearly $165,000, even after firms saw lower profits and paid out pricey legal settlements

Wall Street bonuses catapulted upward in 2013, rising 15% to an average of nearly $165,000 even though firms like JPMorgan Chase and Morgan Stanley paid billions of dollars in legal and regulatory settlements.

New York securities firms will pass out $26.7 billion in cash bonuses and deferred compensation for 2013 performance, bringing the average bonus to $164,530. The increased estimate by New York State Comptroller Thomas DiNapoli does not include stock options or deferred compensation for which taxes haven’t been withheld.

Wall Street bonuses increased in 2013 despite lower profits than the year before and expensive legal settlements.

“Wall Street navigated through some rough patches last year and had a profitable year in 2013. Securities industry employees took home significantly higher bonuses on average,” Mr. DiNapoli said. “Although profits were lower than the prior year, the industry still had a good year in 2013 despite costly legal settlements and higher interest rates.”

Meanwhile, the average American worker’s compensation fell to 42.6 percent of the economy in 2012, the New York Times reports, its lowest level since World War II.

The bonus cash pool reached its highest levels since the 2008 financial crisis. As of December 2013, the securities industry employed 165,200, 12.6 percent fewer workers than before the financial crisis.

MONEY career

Ace Your Annual Review

No two words inspire more dread in managers and employees alike than these: performance reviews. Rather than letting your annual checkup get you down, though, consider the upside. This is one of the few times of the year you get to chat with your boss about your career. And with a bit of strategizing, you can set the stage for a big raise or promotion in the year to come.

Show you’re a top performer

Your supervisor probably doesn’t recall your every accomplishment over the past 12 months, so jog his or her memory. Richard Klimoski, a management professor at George Mason University, suggests submitting a one-page self-evaluation before the review. That way you draw the baseline from which your performance is measured. Sum up the year in three to five major contributions — with evidence. Highlight, for example, that you increased sales by 20% and share a testimonial from a new client. You’ll seem more genuine if you also identify skills or knowledge you must gain to take your performance to the next level.

Request a real critique

“Even when you don’t agree with it, feedback is useful,” Steve Miranda of Cornell University’s Center for Advanced Human Resource Studies says. “It provides insight as to how you’re being perceived.” You’ll need this information to clear hurdles standing between you and your career goals.

Related: Baby on the Way? Time to Make a Budget

Unfortunately, managers are often as uncomfortable giving negative feedback as subordinates are at receiving it. So you may have to drill down to get real advice. You might say, “I understand my presentations could be better. Perhaps I should work with a public-speaking coach?” Respond positively to criticism, owning up to problems and offering solutions; if you really disagree, ask for examples, so you can separate fact from perception.

Plan your compensation

Even if your review is tied to a pay increase, this generally isn’t the time to fight for more money — budgets are typically set by the time of the review, says Lori Holsinger, a principal at New York HR consulting firm Mercer.

Related: From Real Estate Exec to Laundromat Owner

What you can get: details on the salary review process to help you prep for next year. Find out how and when your raise was decided and who was consulted. Did you get a big bump? Ask what actions you can take to repeat the result. Vice versa if you got pennies.

Get on board with the boss

End the conversation by asking for measurable short- and long-term goals, advises Dallas career coach Jean Casey. Align at least a few of these objectives with your supervisor’s. You might say, “I know our department is dealing with a budget deficit. What can I do to help?” Your efforts to get on the same page will most likely make your manager happy, which will in turn keep your career moving forward. As Casey puts it, “You want to work with the boss — not for the boss.”

TIME Bangladesh

In Bangladesh, Charging of Garment Factory Owner Spurs Hope of New Era of Accountability

The owner of Tazreen Fashions, Delwar Hossain (C) is escorted to court in Dhaka on Feb. 9, 2014. STR / AFP / Getty Images

The Tazreen factory fire claimed at least 112 lives in November 2012, and thanks to international pressure the building's owner is finally behind bars awaiting trial

A Bangladeshi judge made history Sunday. For the first time, formal charges have been brought against the owner of a garment factory where workers have died. At least 112 people perished in November 2012 when the Tazreen Factory on the outskirts of the capital Dhaka burned to the ground. Western brands such as Walmart and Disney were amongst those sourcing clothes there.

That Tazreen’s owner, Delwar Hossain, is now behind bars awaiting trial is being treated as a milestone for the Bangladeshi export industry. “The name of the owner is on the charge sheet for the first time as a criminal, the state has managed to recognize that this is not oversight, but this is as an issue of criminal actions,” said Saydia Gulrukh, an academic who has fought tirelessly to see Hossain face his accusers in court.

Memories of that fateful day remain seared into the minds of survivors, most of who have yet to receive any compensation. “We ran from one stair to another stairwell to get out but authorities had already closed those two exit points,” says Mahfuza, an operator working in the factory when the fire broke out. The 20-year-old says she was filling an order for Walmart on the day of the blaze, and was forced to jump from the fourth floor because of the lack of exits.

Local police initially brought charges against Hossain in the immediate aftermath of the blaze, but these were mysteriously dropped. “He was getting some kind of support, so formally nothing came out against him,” said Humayun Kabir a former Bangladeshi ambassador to the U.S. This was despite a Home Ministry report soon after the fire acknowledging Hossain had acted with “criminal negligence.”

However, changing international attitudes to the global garments industry mean that once-powerful figures like Hossain can no long act with impunity. The Tazreen tragedy and the even deadlier Rana Plaza collapse spurred the U.S. to suspend the limited Generalized System of Preferences (GSP) duty free access Bangladesh enjoyed in response to the lax safety standards.

“International pressure definitely influenced [the case],” says Gulrukh. The E.U. had also threatened to revoke its equivalent allowance, deemed a vital boon to the $22 billion industry.

Bangladesh and the U.S. are scheduled to hold a meeting on restoring the GSP in May, which was postponed from December. “The government now wants to show that it is taking some action for the simple reason that by December the hearing for the GSP was supposed to take place,” notes Kabir.

Hossain surrendered to a court on Sunday to face charges of causing death by negligence after a warrant for his arrest had been produced on Dec. 31. His bail plea was rejected and 14 months after the fire he has finally been remanded in custody.

Hossain, “had managed to sidestep the legal process for 14 months, there was always someone helping from the inside, that’s how things happen,” says Gulrukh, who says many victims doubted this day would ever come. “Now workers believe its possible to hold owners to account, this restores some faith in the system.”

When Hossain’s bail plea was heard, he and his colleagues brought along the t-shirts that one of the company’s remaining factories are making, for the 2014 FIFA world cup, to emphasize the importance of the industry to the country. For the first time, however, it seems the lives of those lost have been placed above the profits their toil yields.

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