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.