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    Monday
    Feb062017

    Want a larger piece of the (economic) pie? Look for the most competitive industries

    Caught a really interesting piece over the weekend at The Atlantic looking at one potential reason why (relatively speaking) that worker's or labor's share of GDP is decreasing when compared to 'capital's', i.e. ownership's share. This divergence in share has been thoroughly examined as a primary driver of increasing economic inequality, and was the main subject of Thomas Piketty's influential Capital in the Twenty First Century from 2014.

    Said differently, and much more simply, today in the aggregate is getting a smaller piece of the overall economic pie than in the past. There are tons of data points you can examine on this, but they all more or less show the same thing - on average, workers are no better off today, and might be worse off, than they were 20 or 30 years ago.

    Why The Atlantic piece titled One Reason Workers are Struggling Even When Companies are Doing Well caught my attention is that it shared some insights from a recent NBER research paper on not just that this share divergence is happening, but offered some reasons as to why it is happening.

    And the theory is kind of an interesting one, and if true, can help better inform anyone making career/industry decisions moving forward. Best of all, it is a pretty simple idea that boils down to this - The more concentrated an industry is, (fewer competitors and the ones that dominate are all pretty large), the lower labor's share of the income for that industry will be.

    Here's some color from The Atlantic piece:

    The researchers looked at data from the U.S. Economic Census between 1982 and 2012 for nearly 700 industries in six major sectors, including manufacturing, retail, wholesale, services, finance, and utilities and transportation. Looking at how much the four largest firms in each industry accounted for in terms of total sales in the industry, they found an upward trend in concentration in all of the six sectors, meaning that it was increasingly common that just a few firms accounted for the bulk of sales. Since the U.S. Economic Census reports payroll, input, and employment, the researchers were able to observe a negative correlation between concentration and labor’s share—meaning that this trend of so-called superstar firms tends to mean workers taking home a smaller share of the pie. Moreover, the more concentrated an industry had become, the larger the decline in labor’s share.

    Unpack that a little bit to show a pretty straightforward formula:

    Industries have tended to consolidate over time --> the more dominant the four largest firms in an industry become --> then decreasing shares of the overall industry profits find their way to workers/labor.

    There are a couple of reasons on offer for why more consolidated, big-firm dominated industries are getting worse in terms of share of profits for workers. One is that these companies are simply growing revenues at a faster pace, and labor costs just have not (or do not need to) keep pace. Another is that modern, transparent business practices make it easier for consumers to find and reward the 'best' companies, which drives out competition in the industry faster than before - and reduces the potential number of firms competing for workers.

    The takeaways for the average employee?

    Probably that it might pay, (no pun intended), to keep on eye on the relative levels of competition in your industry, particularly if you are in a role that feels industry-specific. If your industry has seen consolidation with weaker competitors being driven out of business (or being acquired), the trends suggest a shrinking percentage of profits will find their way to you and your colleagues.  

    You might be better off thinking about an industry that seems to have more, and more even competition, where the market share, (and to some extent the demand for labor), is not being controlled by two or three big companies. And one where the threat of competition for your skills can either score you a better offer somewhere else, or give you more leverage and power in your next compensation negotiation with your current shop.

    More options might not be better for the owners of your company, but they might be much, much better for you.

    Have a great week!

    Thursday
    Feb022017

    PODCAST - #HRHappyHour 274 - The Evolving Role of the Recruiter

    HR Happy Hour 274 - The Evolving Role of the Recruiter

    Host: Steve Boese

    Guest: Dan Finnigan, CEO & President, Jobvite

    Listen to the show HERE

    This week on the HR Happy Hour Show, host Steve Boese is joined by guest Dan Finnigan, CEO and President of Jobvite, a leading provider of Recruitment technology to talk about how tech, automation, and marketing are evolving the role of the recruiter and presenting both opportunities and challenges for the modern recruiter.

    Dan shared some perspective of how recruiting technology has grown and evolved as well, and how these changes in technology, capability, and the increased availability of recruiting data are impacting recruiting today and in the future. Marketing and marketing software played a key role in these evolutions, and Dan shared some interesting perspective on the marketing/recruitment relationship.

    We also talked about some Rochester, NY delicacies, the current slate of Oscar contenders, and more.

    You can listen to the show on the show page HERE or using the widget player below, (Email and RSS subscribers click through)

    This was a fun show, thanks to Dan for joining us. And many thanks to show sponsor Virgin Pulse - www.virginpulse.com.

    Remember to subscribe to the show on iTunes, Stitcher Radio, or your favorite podcast app - just search for 'HR Happy Hour' to subscribe and never miss a show.

    Wednesday
    Feb012017

    CHART OF THE DAY: Piles and piles of cash

    Lots of noise and stress lately that comes from a political transition and in this case a transition to a philosophy that is a dramatic departure from at least the last eight years, (if not longer). I did my one and only (I promise) take on the most controversial happenings (so far), on Monday, but I wanted to hit one more quasi-political issue, but also one that impacts work, business, and potentially jobs.

    Namely, the staggering amounts of cash that many of the largest American firms are holding, and in particular, the increasing levels that these firms have 'parked' in overseas accounts (ostensibly to avoid paying US corporation income tax on the funds). 

    Here's a reasonably recent chart (from last September) showing some of the larger companies and overseas cash piles, (courtesy of CNBC), then some comments for me after the data.

     Three quick takes on this stockpile of overseas cash (and large cash reserves by corporations in general)

    1. American companies are holding about $2.5 Trillion (that is with a 'T') in overseas cash, which is more that 10% of the US annual GDP. Tack on the close to $2.0 Trillion, (that is another 'T'), in cash that US companies are holding domestically, you have about $4.5T in cash that is essentially doing nothing to build business, increase investment, hire more people, etc. Lots and lots of arguments for why this is the case, (not all of them political in nature), but I think we all can agree that this tremendous cash hoard represents untapped potential for growth.

    2. The main reason that American companies cite for parking so much cash overseas is the relatively high US corporate tax rate of 35%. It is by most analyses the highest corporate rate among developed economies. So when you combine a high tax rate, an additional surplus of domestic cash for many large companies, and still low by historical standards borrowing costs, many of the largest US companies are content to sit and wait and stare at their cash piles.

    3. Finally, many economists predict that a lowering of tax rates and a surge in repatriation of corporations overseas cash probably would not spur the kind of economic stimulus that many expect. Many of these firms would use substantial portions of this cash on stock buyback programs and increases in their dividend rate. These actions primarily benefit shareholders rather than the broader economy. Besides, some argue, if these companies had better ideas to invest this cash (new facilities, R&D, hiring more people, etc.), they would just do that.

    Sure, I know that most organizations, particularly smaller ones, would love to have the problem of not being able to figure out what to do with all their excess cash laying around. But all this cash is certainly not a great sign for longer term economic growth, increased innovation, and enhanced employment opportunities.

    It is going to be interesting, if a little wonky, to keep an eye on corporate tax rates, repatriation deals, and just what ends up happening to these Trillions in the next few years. I suspect that whatever happens, it will have a pretty significant impact on US GDP, growth, employment, and more.

    Happy February.

    Monday
    Jan302017

    On corporate reactions to current events

    I don't think I need to recap the series of political and policy events here in the USA over the last few days that have seemingly set thousands if not millions of folks (and almost EVERYONE) on Twitter afire.

    In the aftermath of a contested, contentious election, the first days of the administration have been, depending on your point of view, either a colossal and dangerous train wreck, or simply the expected result and consequences from a series of campaign promises/threats that have been acted upon.

    Since it doesn't matter to you what I think about these actions, and no matter what I think I would not change anyone's mind anyway (and I am not really interested in changing your mind. Make up your own mind), I'd rather make a couple of comments on what I have seen from the many 'corporate' responses to the events of the last few days.

    From what I can observe, there have been three major categories of 'corporate' response, (or non-response), to the recent Executive Orders from the new President.

    1. 'We' (meaning the corporation, even though I would suspect that the individual CEOs that are penning these responses are not really able to consult or poll all of their employees in just a day or two), are 100% in opposition to these policies, and we are actively working to see them overturned or ended. We are donating to the ACLU, providing free services to those affected (see Airbnb), and want everyone to know that we are NOT COOL with this. This has been the response from many high-profile companies, many of them from the tech space.

    2 'We' (again the corporation), have a culture of openness, inclusiveness, tolerance and fair treatment towards all. We support all our employees regardless of race, ethnicity, religion, sexual orientation, etc.. We will extend direct services to our employees who may be impacted by these policy changes. This is sort of a toned down version of response 1, focusing more on their internal people and their families. It could be seen (and has been by some), as the more pragmatic CEO/corporate response, particularly for organizations that have business and dealings with the various arms of the Federal government. See Elon Musk/Tesla for a decent example of this approach.

    3. Nothing publicly announced at all. This is actually the majority of organizations I would think. For every big tech company CEO who has issued a statement or a Tweetstorm condemning the recent events and policy changes, there are 100 if not more organizations who are not commenting on it at all, or at least not publicly. There a a million reasons to do/say nothing publicly as a CEO/organization, and saying nothing does not mean necessarily that the CEO/organization does not object or rebuke these new policies.

    Wait, I just thought of a potential 4th response. The one where the CEO comes out openly and aggressively in support of the recent Executive Orders on immigration, placing him or herself in line with the new President an Administration. Note, a quick scan of headlines while drafting this post has resulted in zero examples of this actually happening. Doesn't mean it hasn't, but I have yet to find any CEO/organization, (at least a national brand), coming out in support of these policies.

    I know what you might be saying, that this particular policy change and set of orders are SO egregious, so un-American, so divisive that there is no way, no person, no CEO, no organization could support them. In fact, they are such an affront to what we like to think makes America a great country that it really is not controversial at all to come out strongly against them. And you might be right be that.

    Why think about these 'corporate' responses/stances to current event, particularly as and HR/Talent pro?

    Because once the CEO of the organization takes a public stand on issues as divisive as these, it sets down a kind of organizational culture marker that will be just about impossible to ignore or alter in the future. When the CEO comes down hard in opposition (or support) of these kinds of flash point debates, and if he/she commits organizational resources (time, money, products, services), on one side or another, the message gets pretty clear, pretty fast.

    And no matter what side of this (or the next big issue) that the CEO does come down on, (and one last reminder, I am not telling you what I think about this, or what you or your CEO should think), there is almost certainly going to be a cohort of stakeholders, (employees, customers, candidates), that are not going to see eye to eye with your CEO, and by extension, your organization.

    And that might be fine by you, as and HR/Talent leader, to have this element of the organization's DNA and culture laid bare such that employees and candidates that find themselves in stark opposition to the accepted (or at least stated) views will naturally begin to self-select out. They either will resign, will start looking for another job, or decide not to apply in the first place. Either way, you have maybe saved yourself some time in trying to answer the 'Is he/she a 'fit' for the job here' question.

    But that is not really the point, at least not the main point. The word 'divisive' implies that at least some people are on the other side of that divide from you. And I think we have to be very careful that we don't forget that. Because the next 'divisive' issue might not be so clear cut. It might not be so obvious which side your CEO and your organization should be on, (assuming both of those things matter). The next issue might have very cool-headed, rational, logical people on completely opposite sides. And should both of those kinds of people be welcome in your organization?

    Lastly, and this is I swear the end of this (too long) post, you also as an HR leader should probably ask yourself this question:

    Is a person's opinion on the current political debate of the day a valid, predictive, appropriate screening question for employment at your firm and whether they meet the criteria for the ever tricky idea of organizational 'fit'?

    Have a great week. Be good to each other. 

    Thursday
    Jan262017

    Two years away (from being two years away)

    At the National Basketball Association player draft in 2014, former college basketball coach and now broadcaster and analyst Fran Fraschilla offered this classic observation of then 18 year-old Brazilian prospect Bruno Caboclo and his potential to become a successful NBA player:

    "He's two years away from being two years away, (from being ready to play in the NBA), and then we'll see."

    I thought about this gem of a line from Fraschilla in a recent conversation I was having with a friend about potential career choices. Why did the '2 years away' line come up?

    Because I think that 2 years may be the new 5 years, in terms of the old classic interview "Where do you see yourself in 5 years?" question. Take your pick from fast-changing technology, new business models, disruption coming from all sides, and toss in a side dish of the gig economy and I think most people would have a really hard time seeing out five years into the future and be able to offer up a credible or coherent idea of what they think they will be doing then. Two years seems at least more tangible. The future can't move that fast, right? Don't answer that.

    The really important point isn't just that 2 years might be the new 5 years, but that just like our pal Bruno Caboclo, what you don't want is to find yourself two years from now STILL being two years away from whatever goal/plan you had set out to reach.

    It may be more realistic and reachable to set out career plans and goals in 2 year increments as opposed to 5, (or whatever your dopey interviewer says), but the downside is that 2 years passes really, really fast.

    Just ask Bruno, who in 2 1/2 full seasons in the NBA has played in a grand total of 22 games and scored a whopping 16 total points. 

    The upside? Bruno is still only 21 and has time to get to where he wants to be. 'Losing' two years might not hurt him that much. 

    But I am pretty sure that most of the rest of us don't have that kind of luxury. Or an NBA contract.

    Have a great day!