Labor Market Failure and Recovery

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After 18 months of hiring freeze, it’s time for all profit-maximizing firms to kick start their recruiting.  At present, we’re hiring too few, we’re too focused on exact hiring matches and we’re unwilling to invest in the future.

 The recession was first sensed by wise businesses in 2Q 2008.  The banking crisis of Fall, 2008 terrified even those whose careers went back to 1974-1982 when the last panic of gas prices, inflation, interest rates and Japanese competition derailed the post WWII expansion.  While the freeze and risk-averse decisions were justified at the time, they are wrong today.

 The all-in cost for a senior professional staff member is roughly $100,000 per year.  A good hire lasts for up to 10 years.  A typical hire is a $1 million investment.  In the current environment with 16M candidates chasing 3M jobs, the odds of finding a great candidate are excellent and the ability to hire at 20% below old market salaries is a given.  Firms with a strategic view of human resources should be first in line to hire these high ROI assets – TODAY.  Every good hire is a $200-300,000 addition to the firm’s net worth.

There is little joy in HR departments these days.  Hiring volume is down so the pressure is on to reduce HR staffing and to NOT use external recruiters.  The volume of applicants per position has quadrupled.  HR’s ability to use on-line application forms and screening tools has improved, but not enough.  To cope with the excess supply, HR and hiring managers have decided to make an exact match of past experience by industry and function to the position the penultimate criteria for hiring.  This allows the greatest percentage of candidates to be eliminated in the first screening. 

 Unfortunately, this means that many qualified candidates are not considered.  Narrowly experienced and over-tenured candidates are favored, even if they have had the same experience for 8 years in a row.  Firms pursuing this approach will soon find that they have hired adequate candidates who have limited upside potential.  They are also likely to find that they have made many “hiring errors” because they have not given equal weight to the questions of personal motivation/drive and teamwork/manageability.  I recommend Martin Yates “Hiring the Best” as a guide.

Firms that continue in “hiring freeze” mode have a bias towards replacement of existing positions versus investment in the staff who deliver future value.  There are thousands of highly skilled project managers, business analysts, scientists, quality specialists, product managers, marketing researchers and other professionals who are unemployed because firms are unwilling to restart the investment cycle.  This recession will end and success will depend upon investing in new products, new customers and better processes.  There may be some areas where NOT replacing a separated employee is the right choice.  Successful firms make decisions one choice at a time rather than relying on simple rules.

 Firms that have their financial house in order need to race to the labor market while supply exceeds demand and hire skilled, motivated team players to pursue the next cycle of business investments that deliver long-term value.

Civic Investment in Monuments

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I’ve noted a pattern in our local government investments.

CIB Conseco Fieldhouse, CIB Lucas Oil Stadium, Carmel Clay Parks Monon Center, Indianapolis Airport Authority Midfield Terminal, Carmel Regional Performing Arts Center and the CIB Convention Center Expansion seem to have the same issues.

They were built with public funds to meet public and private needs.  The bondholders are well secured by public revenue sources and commitments.  The operating revenues are less than what is required.  The users do not want to pay more.  Current political forces are criticizing historical decisions and current operations.  The public thinks that the politicians are incompetent and/or captured by special interests.  The public wants a simple solution that does not include more taxes.

The greatest problem is that these facilities inherently serve BOTH private and public purposes.  The CIB facilities serve customers, but also the nearby local businesses and our collective sense of importance in hosting the undefeated Colts.  The airport serves passengers, but also economic development.   The Monon Center offers an alternative health club, but also provides subsidized recreational programs.  The CRPAC offers ticketed cultural events, but also subsidizes local arts groups and stimulates the hospitality and retail arts industry.

In each case, the public is confused because it is not clear what part of the capital and operating costs are due to private and public uses.  It is not clear what part of the costs are being paid by the users and what is being picked up by the public through current and future taxes.

Political and civic leaders would be well served to clarify these “buckets” of costs, benefits and responsibilities in the future.  It is not easy to do and any well-defined fence will be inherently arbitrary and sub-optimal.  However, the political costs of an ostrich approach are now apparent.  I’m sure that many local leaders decided that this “direct” communications style would be impossible, because well-informed Hoosiers would choose to NOT invest in any ventures where each did not personally receive an ROI.   I point to the overwhelming success of the Wishard Hospital campaign as a counterexample.  I point to the recent consensus that requires schools and other local groups to seek voter approval as a situation of “what’s good for the goose is good for the gander”.

State leaders should review these investments and outline a state review process that meets the public needs.  There is an inherent bias towards overinvestment by civic and political leaders.  Many constituencies benefit greatly in the short-run from major projects.  The operating deficits are often a decade away.  The positive ego benefits of creating 50-300 year monuments is too attractive.

Future capital projects should be required to clearly explain public and private benefits, costs and funding sources.  The projects should protect taxpayers at a level equal to bondholders.  Contingency funds should be included to handle the typical 5 year business cycles.   Even with these constraints, our local leaders will be able to justify investments in viable projects.

Effective Leaders

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 Everyone has their own theory or theories of leadership.In my experience, effective leaders …Are authentic expressions of their unique talents and experiences. They are  
 independent and non-conformist. 
 
 Are shaped by their personality profiles.  They leverage their strengths and minimize their non-talents.  They flex styles for short periods, with effort.
 
 
 Are true to themselves, applying constructive approaches to work, home and community.   This natural style leverages their assets.
 
 
 Are internally driven and project a clear commitment to making progress, overcoming 
 challenges, reaching goals and making a difference. 
 
 Are human with strengths and non-talents.  They are effected by biases and paradigms.  
 Self-awareness and self-control are partial. 
 
 Recognize the strength of organizational and cultural inertia in preventing change, 
 alignment and pursuit of lofty objectives. 
 
 Accept the political nature of organizations and the role of self-interest as part of the natural arena for leadership practice.
 
 
 Understand the value creating role of key leaders in organizations, but do not minimize the value of managers and staff.
 
 
 Appreciate the social psychology of organizations and teams.  They demonstrate their 
 passion, commitment and belonging in real and symbolic ways. 
 
 Use an interactive decision-making process to engage contributors, frame 
 decisions, generate options, evaluate solutions and build commitment. 
 
 Are patient, unstructured decision-makers.  Organization level issues, plans and policies 
 require time to define, analyze, choose and embrace. They change perspectives, urge 
 creativity, challenge traditional answers and encourage contrasting paths to answers. 
 
 Value the contributions of professional specialists, but employ a generalist perspective and 
 healthy skepticism. They employ various facilitation tools to work through ambiguous 
 situations. 
 
 Employ a broad array of skills and experiences, as decisions are increasingly complex, 
 including political, ethical, global and environmental dimensions. 
 
 Embrace a modern approach to diversity, deeply understanding the value of diverse 
 perspectives in contributing their piece of the truth to decisions. 

Value of Public Libraries

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The century old consensus regarding the value of public library services is increasingly
questioned.  Rising costs, anti-government sentiments, accountability demands, on-line
materials delivery, an increasingly individualistic and commercial society, and reduced
public funding combine to challenge libraries to clearly define their services, respond to
public demands and justify their very existence!
 
Libraries need to build upon their historical strengths to clearly define the value they
provide, measure ongoing progress and actively promote their value.
 
Libraries deserve public support because they deliver value:
 
1) Economic ROI of 200%+ compared with 10% returns for private capital.
 
2) Near-zero incremental cost personal growth with positive spillover benefits to the
community, leading to an improved quality of life for all citizens.
 
3) Libraries support the effectiveness of our democratic society, building universal
literacy, access to education, information and interaction opportunities.
 
4) Libraries serve as a physical embodiment of the community’s belief in itself.
 
1) Economic Returns
 
Materials can be used 30 times, rather than once.
Materials in all categories achieve targeted usage rates.
Services ensure that all age, socio-economic status and geographical groups benefit. 
Higher cost materials providing value to many patrons.
Lower demand materials are used by many individuals, schools and libraries.
Librarians maintain specialized knowledge of value to patrons.
Materials are professionally selected to be of highest value to patrons.
Short-term demands and long-term portfolio needs are balanced.
Libraries deliver highest demand services, creating a community asset.
 
2) Personal Growth Gains
 
Access to individual paced personal and career growth materials.
Develop a love of reading and learning in all students.
Facilitate an interest in life-long learning in adults.
Access to life-long professional growth.
Opportunities to explore materials of interest.
Opportunities beyond areas of mastery to explore diverse topics and cultures.
Provide adults with introductions, exploration and mastery level experiences beyond
careers, professions and economic progress.
 
3) Civic Benefits
 
Develop general, economic and political literacy.
Materials represent all sides of public policy issues.
Promote the core views of the American public, educating immigrants.
Offer diverse viewpoints, encouraging the general public to consider their views.
Sophisticated access to all materials and viewpoints.
Historical and contrary viewpoints on current issues to ensure full consideration.
Training and experience to evaluate claims from proponents of all views.
Encourage low income/resource individuals to use the library for personal growth.
 
4) Community Benefits
 
Spaces for community meetings.
Promotion of personal and community growth.
Common learning experiences unite diverse elements of society.
Opportunities for volunteers, donors, advisors, respondents and citizens.
Opportunities for intergenerational interaction.
A positive view of the future through progress.
 
Summary
 
Libraries face threats to their public funding.  By adapting programs, delivering value
and informing the public, libraries can continue to fill their vital value added role for
society.