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Sunday, December 26, 2010

Undercover Boss GSI Commerce Michael Rubin inadvertently exposes why the economy is in the tank and may never get better.

I was watching the Sixty Minutes story on the diminishing water supply in Kenya that could mean the end of the annual wildebeast run. Right after Sixty Minutes came Undercover Boss, and suddenly I saw why there are so many out of work people and why they may never find work. 

The hour long Undercover Boss episode featured Michael Rubin, (who runs GSI Commerce) and his interaction with several of his own workers while "undercover" as a new hiree.

Her name is Shannon and it rhymes with Cannon, and if you watched her pack GSI Commerce boxes one after another, you might just say, All Star softball pitcher potential. Shannon was packing boxes so fast that it indeed looked like the videotape was speeded up. 

Shannon, in my opinion worked twice as fast as what one would consider acceptable speed. Shannon's job for the day was to teach the new employee, Undercover Boss and owner of the company, Michael Rubin - who was masquerading as a new hire, how to pack boxes, quickly.

At one point, Michael Rubin asked Shannon how many boxes she could box and ship per hour. Shannon responded thatthe minimum requirement is 90 packed boxes per hour, but she normally averaged 110-130 per hour. I don't recall what she exactly said, but it was a 110 on the low end, and many more on the high end.

I noticed something else about the segment with Shannon, there seemed to be boxing work stations that were empty. This got me to thinking, if Shannon is the fastest boxer at 110 to 130 per hour, and the minimum boxes packed per hour to keep ones job was 90, it was clear to me that 90 is too high of an "average".

Shannon to me looked like she was twice as fast as a normal boxer. Ergo, one half of 120 would be 60 boxes per hour. The average boxer should be boxing 60 boxes per hour, 75 boxes per hour would solid, 90 boxes would be super fast, and 100 and over would be super human speed.

Michael Rubin got fired from his own company after just one day because he was expected to box 90 boxes per hour and he probably never did more than 45 to 60 in an hour. It seems to me that someone who works as fast as Shannon should make more money than someone who works at Michaels pace. Instead of one speed fits all, why not have pay scale categories?
Assuming Shannon is making at least 15-17 dollars an hour, pay Michael 8.50 an hour for boxing 50 boxes, and offer a pay scale for more boxes averaged per hour. 60 boxes would equal 10 bucks an hour, 70 boxes would equal 12.00 bucks an hour, 80 boxes would equal 14.00 bucks an hour, 90 boxes would equal 16.00 bucks an hour, 100 boxes would equal 18.00 bucks an hour, 110 boxes would equal 20 bucks an hour, 120 boxes would equal 23 bucks an hour.
I bet the minimum boxing requirement per hour was not always 90 boxes an hour. I bet it has slowly gone up over the years so that the executives could get bigger and bigger year end bonuses. The result is the company gets more and more selective in whom they hire, putting more pressure on fewer workers until those fewer workers burn out. Shannon may average over 100 boxes per hour, but the moment she cuts her finger and her finger bleeds, then what?

Does it take two workers to replace Shannon? Where do those workers come from if all they do is hire Shannon's only?

After the company hires only "Shannon's", they eventually discover that riding someone in fifth gear all the time wears them out PREMATURELY. Suddenly a few Shannon's quit, and there is a huge dip in production and profits drop. An executive is fired as a result, and another one is hired.

The new executive decides to drop the minimum productivity rate from 90 boxes an hour to 60 boxes an hour (where it probably was a few years ago). After a while, the new executive starts to play the same "raise the minimum boxes per hour game" that the prior executive played. 

The company now has a big enough pool of reliable employees who  can handle 60 boxes per hour, plus a few who work a lot faster, so the executive slowly starts to raise the per hour box quota rate. The executive now gets rewarded for turning the boxing division around, and the previous process of ramping up the hourly quota keeps repeating itself.

It is silly to expect a person to do any job as fast on the first day as they would do it after one week's worth of experience, one month, the sixth month, and after the first year.

If GSI commerce expects a new worker to produce at a B+ A- level by the end of day one, the U.S. economy will never recover because not every worker out there is a B+ A- level producer, especially from day one.

One more thing about Shannon, if she can box 120 boxes in an hour, and the company charges 6 bucks for shipping and handling. Shannon is generating 720 dollars worth of value per hour. Yet there are several hidden costs than enable Shannon to be hired so she can work and have benefits.

Isn't it interesting that a worker possibly generating 720 dollars of wealth per hour, even after we subtract 320 dollars per hour for her work station, power, boxes tape, space, electricity, storage space, shipping costs and handling of her boxes, and so on, might Shannon still be generating 400 dollars of wealth per hour minus the cost of her pay and benefits?

If so, profits can still be made hiring workers who aren't as fast. A mix of Shannons and those who are slower is the perfect blend, and one that fits economic landscape as well.

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