Five observations from the new Fortune 500

Dug out from my Feedly 'Read later' list was the announcement a couple of weeks ago of the latest iteration of the venerable Fortune 500 - the annual list of the largest 500 US companies (ranked by annual revenues).

The Fortune 500 has become a synonym for 'big business' in America, and taking a look through the list, and especially looking at changes and trends in the list, has become an annual exercise for folks like me who like to think about macro trends in the economy, and to think about how these trends suggest what might be coming next.

Also, it's just fun. If you are a geek like me.

So for an almost-summer Friday, here's my first five quick observations from looking the new Fortune 500"

1. For all the talk about technology that dominates most business news cycles and programs, old-fashioned retailer Walmart remains number one on the list - and it isn't really even close. Walmart has double the revenues of the next closest rival for the top spot, ExxonMobil. And while we know all about the massive businesses in retail and in cloud computing, (an odd combination), that Amazon has built over the years, Walmart still has almost 3x the revenue as their competitor from the Northwest. I know I like to think of Amazon as the most interesting and important company in America, but we can't or shouldn't forget the outsize impact of boring old Walmart. And don't forget their 2.3 million (with an 'm', employees).

2. Lots of 'The future is changing, are you ready' presentations like to talk about how much turnover there is over time in the list of Fortune 500 members. While interesting, I find it even more interesting, given the massive changes in business, technology, society, and more since the list's inception in 1955, that 53 companies (ExxonMobil, GE, Chevron, and GM to name some), have been on the list every year since 1955. That over 10% of the largest companies in American have been there for over 60 years is remarkable to me.

3. Despite point 1 about Walmart's staggering size, it is true that technology or tech-dominated firms make up large portions of the upper end of the Fortune 500. Household tech names like Microsoft, Apple, Amazon, Alphabet, IBM, Intel, Facebook, Oracle, and Intel all crack the top 100. And further down the list we see Netflix, Qualcom, Nvidia, and Adobe - all companies doing incredible things in their respective markets. And while the Fortune 500 ranks by revenue, if you think about company value as expressed by market cap, (subject to stock prices fluctuations), the most valuable list is also dominated by tech - Apple, Facebook, Amazon, Microsoft,  and Alphabet are five of the top six most valuable companies in America.

4. There are 30 'mega-employers' on the list - companies with over 200,000 employees as of the date the list was compiled. The above mentioned Walmart leads the employment table, but some other notable massive employers are Amazon, (566,000); Home Depot, (413,000); Starbucks, (277,000); UnitedHealth Group (260,000); JP MorganChase, (252,000); and Ford Motor (202,000). And coming in just below the 200k employee threshhold are big names like Disney, Marriott, Boeing, Oracle, Microsoft, and Apple - each having more than 100K employees. 

5. There are only 17 new companies on the list this year. The most interesting 'newcomers' to the Fortune 500 are, for me, Molson Coors Brewing, (Coors was my preferred beer once upon a time), Wynn Resorts, (I still need to get to Macau), and Conduent, (I just talked with them this week, look for an HR Happy Hour Show coming soon featuring some folks from Conduent). The last new entrant on the list is corporate supply company Cintas checking in at 500. For perspective, the last company on the list is a giant organization of 42,000 employees and 900,000 customers.

Ok, that's it from my quick walk down the Fortune 500 this year, I find it interesting every year, hope you do too.

Have a great weekend! 

When liberal hipsters turn out to be ruthless capitalists too

It seems to be a pretty widespread and more or less accepted assumption that the next generation of folks entering the workplace are more concerned with an organization's reputation for responsibility, for doing 'good', and for acting as a good community citizen than were prior generations. Where the boomers and Gen X were much more pragmatic (and possibly cynical), the Gen Y and Gen Z and the whatever comes next cohorts are going to evaluate organization's commitments and actions in the community and towards their customers and employees much more closely and critically when they make their decisions about where to work and (probably more importantly), where to spend. Like another nemesis of mine, 'Culture eats strategy for breakfast', (don't get me started...), this notion has been reported on and repeated so many times that I think it is worth considering if, you know, it actually isn't true, or at least isn't completely accurate.

I started thinking about this when reading about of a new play titled World Factory being staged in London at the Young Vic theater. In the play, audience members participate in what is essentially a global business strategy game, placed into teams who have the job of navigating a fictional global clothing manufacturer through a complex set of scenarios and decisions. It is basically like the kind of gamified scenario exercise you'd see in any college business strategy class. But what has been happening at World Factory is kind of interesting.

From a recent review of World Factory in the Guardian:

The audience becomes the cast. Sixteen teams sit around factory desks playing out a carefully constructed game that requires you to run a clothing factory in China. How to deal with a troublemaker? How to dupe the buyers from ethical retail brands? What to do about the ever-present problem of clients that do not pay? Because the choices are binary they are rarely palatable.

The classic problem presented by the game is one all managers face: short-term issues, usually involving cashflow, versus the long-term challenge of nurturing your workforce and your client base. Despite the fact that a public-address system was blaring out, in English and Chinese, that “your workforce is your vital asset” our assembled young professionals repeatedly had to be cajoled not to treat them like dirt.

And because the theatre captures data on every choice by every team, for every performance, I know we were not alone. The aggregated flowchart reveals that every audience, on every night, veers towards money and away from ethics. But what shocked me – and has surprised the theatre – is the capacity of perfectly decent, liberal hipsters on London’s south bank to become ruthless capitalists when seated at the boardroom table.

Fascinating, and possibly kind of revealing as well. It is certainly much, much easier to say that corporate ethics and community responsibility is important in making employment and consumer decisions. But, even in a fictional exercise like World Factory, it is often, (maybe always), much harder to live and take decisions that are 'responsible' when facing incredibly tough business, environmental, and social challenges. 

Business if often messy. Capitalist systems often force tradeoffs to be made, ones that at least according to what we think we know about Gen Y and Gen Z are not in line with those generations world views. But once Gen Y and Gen Z are actually in charge? World Factory is just one small exercise, but what if it hints at what Boomers have known for a while - every generation follows pretty much the same trajectory as they mature, take on more responsibilities, and get more experience in how the world works.

And then in about 10 or 15 years we will have moved on to a new set of young people who will be lamenting the materialistic robber barons formerly known as Gen Z.

Have a great week!

ECON 101: On high, low, and middle-skilled workers

There is a great analysis on how workers holding jobs in different skill levels, (high, middle, and low) over at the Federal Reserve of Atlanta site that if you are as much of a labor market/macro workforce data geek as I am, I highly recommend reading.

The question the researchers set out to answer was based in this: We know that from a combination of the most recent economic recession and augmented by persistently advancing automation technology, that so-called 'middle' skilled workers were the most hard-hit group in the last downturn and recovery. What the researchers wanted to understand is what has or is happening to these displaced middle skill workers. Were they still out of work? Were they forced into lower skilled or service-type jobs? Or did they get the opportunity to move into more highly-skilled (and better paying) jobs?

Note - for the purposes of this analysis, 'middle-skilled' cconsists of office and administrative occupations; sales jobs; operators, fabricators, and laborers; and production, craft, and repair personnel (many of whom work in the manufacturing industry).

So let's take a look at the data - first the aggregate employment levels since 1998 for each skill category:

As of September 2014, the middle-skill employment level was still about 9 percent below the (pre-recession) 2007 level. In contrast, employment in low-skill occupations is 7 percent above pre-recession levels, and employment in high-skill occupations is about 8 percent higher than before the recession took hold. So the first assumption, that middle-skilled workers were hit harder by the recession/recovery than workers in the low and high skilled groups seems to have held up.

But what has been happening to these displaced middle-skilled workers? Surprisingly, many of them are/have moved into the high-skilled classification. About 83% of the displaced middle-skilled workers that are back employed are still in middle-skilled roles. But what about the other 17% of workers?

Let's take a look at the data:

The data shows that about 13% of the group has transitioned from a middle-skilled job into a high-skilled one. Only about 3.5% have been driven into a low-skilled role. This may seem like a small percentage of upward mobility, but it still seems significant to note.

If, as many economists expect, there continues to be further pressure and erosion of middle-skilled workers (which if you take another look at the first chart you will see still make up the largest category), it is important to the overall economy what happens to displaced middle-skilled workers. If they can transition into high-skilled roles, they see on average a 27% increase in compensation, as opposed to a 24% drop if they move into low-skilled roles.

While this data and these figures seem all kind of abstract and distant, then think about them this way: Think about your life and lifestyle with a 27% raise in compensation. Then think about it with a 24% pay cut. Pretty big difference, right?

And then take those scenarios, multiply them by 10 million or so, and now you have some feel for how important this issue is for the US economy.

ECON 101: What do falling oil prices mean for you?

I am a big mark for finance, economics, business news, etc. And one of the most interesting business/markets stories in the last few months has been the pretty dramatic decrease in the price of crude oil, and probably more importantly to you, me, and our workforces, the corresponding fall in consumer prices for gasoline.

Check out the two charts below for some context: first, what has been happening with Crude:

How about the average price of gas? Here you go:

Pretty clear from these two charts what has been happening - crude oil has been on a pretty steep fall, dragging down the average price of gasoline along with it.

What might that mean for the savvy HR/Talent professional? Three quick hits, then I'd love your thoughts.

1. Compensation - the fall in gas prices is sometimes referred to as a 'free tax cut' for consumers. But if we spin that just a little, you can frame the drop in gas prices as 'off-cycle comp increase' for employees. Seriously, you can't actually say that out loud, but the truth is many of your employees have a few more dollars in their pockets each month. Maybe you (or a line manager) can feel a little more emboldened about calling back to the office some of your slacker telecommuters?

2. Operations - If you are in the business of moving any kinds of goods around the country/world, then you are seeing a pretty steep decline in transpiration costs. In the same way that a fall in gas prices puts an unexpected few extra $$ in each individual's kitty, the decline in costs for truck, rail, and eventually even air shipment costs will be a benefit to many organizations. Keep an eye on that line of your shop's P&L, (you do review the P&L each month, right?), and see if you can't time your request for a new HR system/program/technology along with a bump in margin.

3. Oil and Gas industry - Opinions seemed mixed on the overall impact to the US oil and gas industry, which has seen a remarkable renaissance of sorts in the last decade. At some point the price of Crude could fall to a point that jeopardizes domestic production. We are probably not (yet) at that point however. But there certainly could be a slowdown in the rate of growth in capacity and then the jobs that are being created in the US oil and gas sectors. 

It is pretty cool to pull up to the pump and see prices on a continual decline. Heck, you may even now be able to fill up the tank in your monster SUV for less than three bills.

But what is cooler still is to have an idea, an understanding, and an appreciation about what this kind of macro-economic trend means for your business and your employees. 

What do you think, have falling oil/gas prices made any impact in your HR shop?

CHARTS OF THE DAY: On Increasing Job Openings and Scarce Candidates

Today's chart(s) of the day come courtesy of Gluskin Sheff + Associates, and the excellent (and filled with charts) report from David Rosenberg titled 'The US Labor Market in Pictures, Tighter Than It Looks!', which provides a fantastic overview and re-set of the macro trends for employment in America.

Taken from the Gluskin Sheff report, I want to call out two of the report's dozens of charts, the first on the growth in absolute job openings in the USA:

Job openings continue to rise from the post-recession bottom, and with about 4 million current openings, seem on track to eventually climb to eclipse the pre-recession highs. In fact, if suddenly all 4 million openings were filled from currently (officially) unemployed workers, the unemployment rate would fall to about 4%.

But of course things are not so simple or neat, and this next chart illustrates the challenges that many employers are reporting trying to fill jobs in a time of rising openings:

Companies, especially smaller companies, are reporting increases in 'difficult to fill' positions, (a level just off it's five-year highs), and if you dig into the Gluskin Sheff report further, you will see that over 40% of companies are reporting 'few or no qualified applicants' for their openings.

These trends of rising job openings combined with, at least for many types of jobs in many industries, are having a tightening effect on the labor market overall. I am not smart enough to try and tell you exactly why this is happening right now, it is certainly a complex and debatable set of circumstances that includes the aging workforce, the governmental safety net, firm's inability or unwillingness to invest in training candidates, and the 'fake-or-maybe-it-is-not-fake' shortage of candidates with the needed skills for the modern age.

But the data seem to show one thing that is clear - the labor market is starting to show signs of tightening, probably making it more difficult for you in the short and medium term to deliver the candidates you need to sustain your business and talent objectives.

It might be time to start re-thinking all the things that make your shop the place where increasingly scarce candidates want to land.

Happy Wednesday.