First, I am aware that the global economy as well as my own retirement finances are likely coming apart as I write this, but perhaps as a diversion, I thought it might be interesting to talk about something that nevertheless matters. That is the further push into Theory X territory by U.S. management: pushing employees harder, more rules, less pay, and so forth. Theory Y was almost the opposite: recognizing that rewards, rules, and punishments were not the best way and certainly not the only way to manage.
Two recent events suggest the change. The first of these is at Google, a company that was long known for providing the best perks and an apparent belief that treating employees well was crucial to innovation and other performance goals. Despite great financial performance through the end of 2024, a tight job market, and a moment where the world is watching the tech world for more breakthroughs, Google (along with Facebook, Microsoft, and Apple) all decided to have layoffs and get tougher on performance.
Even after that, there was a sense that harder work and less security would still yield greater pay. Business Insider reports that this is no longer the case at Google, at least as perceived by employees. Complaints from employees that their pay increases are less than expected came through loudly at a recent open meeting with executives.
At the other end of the job spectrum are the warehouse employees at Amazon. Although it is also a tech giant, Amazon has long been a mammoth employer of lower-wage workers in its ever-growing warehouses. It was never seen as an employer of choice, instead one that pushed those employees hard and monitored them closely. Among the most noticeable and objectionable policies was that employees had to be screened when leaving the building (think TSA security lines and metal detectors) to cut down on them stealing: If we don’t watch them, they will steal, and maybe that was right given everything else about the relationship. As with TSA, employees objected that the lines to get through security were so long that it extended their workday.
Amazon pulled that policy during the pandemic. The need for “social distance” played a role but no doubt, but so did employee complaints and bad press around it. The pandemic has been over for years, but the company is now bringing that screening back.
I am suggesting that these two practices at the polar ends of the “regular,” non-executive job market are driven by something similar. Is this a reaction to the pandemic period and the claim that employers got “soft” during it? Pay did jump up, mainly for workers at the bottom end of the scale, but not because employers were trying to be nice. It was because they couldn’t hire otherwise when the economy slowly reopened.
Many employers recognized that employees were struggling during the pandemic with childcare when schools closed, with fears about their health, with caring for family members who were sick, and they tried to be considerate of them. There is every reason for thinking that these practices made sense and were effective in securing better performance from employees. But there is a belief that employers also tolerated lower performance and that they continued to do so after the pandemic was over. I have not seen evidence that this is the case, but perception does become reality.
So why the pullback? At places like Amazon, it is a return to form. They have long been the embodiment of Frederick Taylor’s vision: We will tell you exactly what to do and how to do it, monitor compliance closely, and pay you well, at least compared to jobs you could get elsewhere. Expect to be worn out at the end of the day. But why now? It is less likely to raise a fuss when everyone else is doing it. Why, even the tech companies are taking attendance now!
At Google and in the tech world, it is much more surprising because they had built their astonishing success on that earlier model of trying to nurture and protect employees into innovation. Why aren’t they willing to continue to be the outlier in the business world and manage differently?
I think the answer is that the more the leaders are drawn into the establishment of the business world — witness their front-row seats at the Trump inaugural — the more susceptible they are to establishment thinking. The investment community is at the center of the establishment as they have almost as much money, and they have long had a “Theory X” view of management. Elon Musk, who is the public face of the Trump administration on management — is a Theory X champion. Taking a chainsaw to employees rather than improving practices and taking out jobs to improve efficiency makes no sense, but it is an approach that the investment community likes. The more we see of it — and we do see it all the time — the more acceptable it becomes.
So, there we have it. The 30-year run of Silicon Valley as representing an exceptional approach to managing is fading.
Peter Cappelli
George W. Taylor Professor of Management
Director – Center for Human Resources for the The Wharton School
