So first off take a look at this: https://sites.google.com/site/forgottenemployee/ , I believe its a highly fictionalised account of something that does happen.

In a previous job, over a decade ago, I worked for a large US multinational as an Analyst. Ironically part of my job involved developing systems that route customer calls to the most effective, low cost distributed call centre based on the call type. That type of work will have you seeing inefficiencies everywhere if you do it for too long. I did it for too long.

Close to where my desk was located there was another Guy who worked in a different department to me, he had a different set of responsibilities and a different management structure above him. He did almost nothing for 40 hours per week, he LOOKED busy but his entire week workload could have been completed in 1-2 hours. After a while he would be missing every Tuesday as he "had external tasks to attend to", his job to some extent would require this so it was an adequate cover to fool most people. After about 12 months he was only in the office on Mondays. In fairness to him he played the game well and when he did come in he started at 8 and stayed till after 6 and made sure everyone saw he was there. To my knowledge he was still doing this for years after I left. His salary would have been around €30K which is an average yearly wage. If you consider it as payment for 1 day a week it works out at around €75 an hour...

Now that’s one extreme example where obviously something should have been done to correct it and management oversight is to blame. Another form is when employees have tasks that reoccur on an annual basis, creating lots of work for 2-3 months and then relatively lax periods for the remainder of the year. This is highly typical across lots of different companies including many of the top fortune 500 companies. These companies are extremely successful and that success helps to create the conditions where under-employment can occur. As kleinbl00 mentioned they absorb the cost of having Employees with fluctuating workloads as it is easier to manage for several reasons; Contractors are expensive, Training new hires is expensive and time consuming, a certain level of confidence is provided when you have the workforce available should an opportunity arise (a big customer arrives at a non-busy time for example). So the upper management accept the working arrangement as a pragmatic solution.

Imagine for a second you have a company that makes a billion dollars a year without really needing to try. This does NOT include the likes of Apple or other tech companies that live or die by their power to innovate consistently. No I am talking about the rest of the top 500, the ones that have a brand, an established consumer base; they own a niche of the market. To them the mind-set from the top down is not to innovate so much as to protect the status quo. They don't want to risk their brand or continued consumers’ goodwill by rocking the boat too much. They occasionally have to take on an external threat but that’s for another post. In a nutshell they neither desire nor should desire to make widespread changes to how the company operates, they are on a gravy train so don't mess up.

Now that’s all well and good for the stockholders but what about the young hotshot managers who want to make CEO one day. How do you show your quality? How do you differentiate yourself from all the other managers? You could potentially do it by trying to fix internal department problems, streamlining processes, reducing waste, cutting costs but everyone else is already doing that. You could try innovating but that’s not REALLY a runner as no one is interested in innovation right now. So what are you left with, how do you make sure you are the loudest voice at the table?

Well one way is headcount. The more staff you have the bigger your department is, the more budget you command, the more projects you can take on (which is a double win as it means someone else’s’ department losses out). Headcount matters to the higher ups as it is the biggest cost and the biggest talking point. Remember that annual busy period? Well the guy with the biggest headcount gets the bigger share of the work and by extension the biggest share of rewards afterwards (Where rewards is your department taking up a sizeable chunk of the pie chart in those end of year revenue handling reports). If you want to become a manager, you need to be able to lead a small team effectively, that concept remains as you move up the ladder. "Oh Mr.X must be good, he has 200 people under him".

The outcome from this is that there is a direct incentive for upwardly motivated persons who already have a say in how the company is run to want more employees to be hired and most importantly, to be hired into the team/department/whatever he is responsible for. So essentially the fact that someone is underemployed and not directly contributing to the company does not necessarily mean they are not directly contributing to their managers’ promotion chances.

Companies realise they have a problem eventually, they are not very good at openly acknowledging why the underemployment was created, mostly because the guy identifying the problem is potentially someone who has already benefited from it... So how is it resolved? There is a cull every few years when conditions make it acceptable. You can take it from me that very profitable companies took the downturn a few years ago as an advantageous time to cull off lots of its employees and blame it on external economic problems rather than what it really was. Survival of the fittest, corporate style.

The biggest problem with using a cull as the solution is that somewhere in the company (and every large company has one) is a guy with a spreadsheet. And every now and again he is asked to produce a list and if your names on the list you are culled. It doesn’t matter if you are a slacker or a hard worker, incompetent or a superhero; the spreadsheet doesn’t care. Good men and women go to the wall sometimes which is a real shame.

Thankfully I have moved on from those and haven’t had to deal with any of it for years but I still hear about it from old acquaintances.