At a time of intense economic uncertainty for millions, workforce management decisions can create new challenges.
On Monday, President Trump took the highly unusual steps of firing the chairman and a board member of the Tennessee Valley Authority, and signing an executive order designed to prevent companies with federal contracts from outsourcing work to non-U.S. citizens. Trump was incensed about the $8 million annual salary commanded by the federally owned corporation’s CEO Jeff Lyash and the fact that TVA had reportedly outsourced some jobs to foreign tech workers.
Whether the firings were appropriate or Lyash’s salary is reasonable are issues for others. But the executive order raises real questions and offers valuable insight into battles likely to emerge as the U.S. economy recovers from the devastation of the COVID-19 pandemic.
The context for the president’s actions is important. The federal utility, which receives no taxpayer funding, had determined that it did not have within its workforce the requisite capabilities to move the company to the next level. As such, TVA decided to outsource its technology work with a plan to evaluate the effectiveness of the outsourcing before taking it beyond the initial phases.
On the surface, this is an entirely logical management decision. TVA’s plan was to take the outsourcing in stages, starting with only 20% of the work. Any expansion was to be based on performance. Further, TVA’s workforce dilemma is not uncommon or new, and it is often very pronounced in public sector, or quasi-public sector organizations. The combination of aging workforces and fierce competition for skilled technology workers has been well documented for many years. The federal government is an excellent example of this. Among the federal IT workforce, for every professional under age thirty there are 10 or more over fifty. That ratio is not improving and the imbalance is unsustainable.
However logical TVA’s process might have been, it generated unusual attention and controversy. To some extent, that attention is the result of the normal tensions and disagreements that arise between agencies and their workforces (and their unions) when potentially significant changes are contemplated. Those are debates that should be had.
But what is different in this case, and could be a sign of things to come, is how the issue of outsourcing has become conflated with offshoring (moving the work overseas) and the new pressures surrounding “Buy American” initiatives, even when the work is not leaving the country or the region.
In the case of TVA, those pressures manifest themselves in allegations about both foreign ownership of the companies involved and the reported use of non-U.S. citizens performing the work under H1-B visas. That’s where things, including the White House reaction, get particularly troubling.
As the nation recovers from the devastation of the pandemic, few would argue with the need to ensure that American jobs are prioritized. And in the case of TVA's outsourcing, that does, in fact, appear to be mostly true. Contrary to what has been reported, only a small percentage of the workforce will be non-US citizens and all of the work will be done domestically. The fact that the three companies contracting with TVA are all foreign owned or foreign based also became a central part of the narrative. Yet anyone who looked beyond the headlines would quickly realize that each of the companies have long standing and robust U.S. operations overwhelmingly staffed by American citizens who pay American taxes.
Yet, despite these facts, the reaction to initial news reports (and an intentional advertising campaign that was, according to its backers, aimed solely at the White House) was almost instant. Whether Trump’s executive order will have any real impact or will be mostly political window dressing remains to be seen. But what this episode has made clear is that during this time of heightened financial and employment insecurity, analytically-based management decisions can be challenged and company reputations unfairly damaged through the political process.
Indeed, while “Buy American” sounds straightforward, there’s significant potential for simplistic applications to have unintended consequences. One such consequence could be gleaned from what we have learned from the pandemic about the viability of remote work. H1-B visas are intended to be utilized when specialized workforce capabilities are not available. While there are undoubtedly some abuses of the system, the concept behind them makes sense. In TVA’s case (and other future cases) a prohibition on hiring H1-B visa holders could, however, pressure companies and agencies to fill workforce gaps with remote workers from other parts of the country who, unlike H1-B holders, pay no local taxes or contribute in any way to the local economy. Is that a better solution?
Finally, the TVA saga offers another lesson often overlooked. Decisions to outsource work may well be entirely justifiable and defensible. But they also have unavoidable consequences for the incumbent workforce. At a time of intense economic insecurity, it is more important than ever that such decisions be accompanied by well thought out plans for ensuring to the maximum extent possible that existing workers are not victimized as a result. Wherever possible employers need to include in their planning and execution a range of initiatives, such as reskilling and retraining workers, providing effective "soft landing" options, and more. The extent to which TVA assessed and addressed the impacts on its workforce are not clear. But such considerations, even if it means savings and efficiencies accrue more slowly, are essential.
As governments and companies continue down the path toward digital transformation, these issues will grow more acute. Whether it be through outsourcing or the digital journey itself, there will be labor implications. For any entity that is serious about optimizing its operations for the benefit of its customers, that journey has become inevitable. But the road taken also matters greatly. That's why as we talk about and pursue new technologies, it is imperative that we also talk, think about and act on behalf of the people who are most impacted.