Moonlighting: Why service companies are missing the wood for the trees

Both by sacking employees for moonlighting and insisting they turn up to the office daily, employers disregard both productivity and employee morale

Many Indian IT companies have been getting their knickers in a twist over moonlighting — a stupid term attributing criminality — by their employees. Moonlighting means having a second casual employment after formal office hours.

These companies have also been sacking employees and are now forcing them to come to the office daily. Both these approaches are wrong because employers are thereby disregarding both productivity and employee morale.

They insist on buying their employees’ time, with scant attention to their output levels and the resources consumed to produce it.

I have been arguing for over three decades now that the old model where a service had to be delivered in person was hugely inefficient for the services sector.

This is because higher output should matter to an employer, not the time spent at the workplace. Half of the time spent in an office, if not three-quarters of it, is wasted on gossip or just sitting around — or absolutely the worst thing, aimless meetings because the boss is also in the same boat.

I speak from personal experience. Back in 1996, when a new software called PC Plus became available for transmitting text files over the phone line, I told the editor that I saw no point in hanging about in the office to deliver what could be done in my shorts, t-shirts at home at zero transport and time cost. I told him it made more sense for the paper to buy my output and let my time be mine.
 

He demurred for a while but eventually relented after reducing my salary substantially and calling it a retainer. That meant the paper had the first call on my output, never mind the time part of it.

So in the financial year 1997-98, this new arrangement, a pioneering one, freed up such a huge amount of time that, even after watching cricket all day on TV, I was able to first double and then triple my output and earnings because I was selling more of my output to different buyers instead of both time and output to the same buyer.

The editor was happy because the fixed costs on me came down. My productivity improved, which wouldn’t have had I not been under pressure to make up for the reduced salary.

The formal economics of it, which employers ignore, is quite simple: the buyer saves on fixed costs like PF, office space, and other overheads. The seller gains on time which they can use to earn more without prejudice to anyone or just relax, which enhances his utility. The welfare functions of both are thus maximised.

All you need for this to happen is a non-compete clause in the contract. Mine said I could not write for any other business newspaper. Otherwise, I was free to do what I wanted.

Or, look at it this way. The real issue is how labour and capital should be combined to produce something. Therefore the question for the service sector, except when the service can’t be delivered in a disembodied form, is the kind of capital in use.

Thus, unlike in agriculture, it’s not the land that has to be tilled. It’s not like manufacturing, where machines have to be operated. In the services sector, knowledge is the capital. The brain uses the internet as a medium for service delivery.

It’s the same as delivering coal on trucks. The coal producers don’t insist that the trucks they use be captive to them.

Let me summarise the argument with a Hindi proverb asking, “Do you want to eat the mangoes or do you want to count the kernels?”