Flipping Supply and Demand - Lemonade Version

Interesting story out of Spain, where a marketing company came up with the idea to install lemonade vending machines that actually decrease the price of the lemonade as the outside temperature rises, (and theoretically people will be thirstier and demand more lemonade), and increase the price as temperatures decline.

More details about the 'Let's go crazy and turn the immutable laws of supply and demand on their head' scheme can be found here.  The basic pricing plan goes like this:

Each machine displays both the temperature and the price, with three different price levels depending on just how hot it is. Up to 77 degrees Fahrenheit and the price is 2 euros or about $2.45. From 78 degrees F to slightly above 84, the price lowers to about 1.4 euros or $1.70. Anything over 86 degrees F and the drinks are 1 euro or $1.22. Special software allows the machine to automatically adjust.

Traditional economics and business logic of course suggest the exact opposite pricing strategy - as the temperature rises the merchant should increase prices to meet the anticipated elevated demand and maximize profits. Likewise, on cooler days, a lower price for the cold drinks seems to make more sense, as it should, according to everything we've ever learned in Econ 101 class, stimulate demand. 

So why would the lemonade vendor enact a pricing strategy so seemingly illogical?

Well it's only illogical if you don't consider the point of view of the customers, to them, their value is maximized, or at least greatly enhanced, by paying less for the cold drink on the hottest days when they are at their thirstiest, when they are in need of the product the most. 

Long term, this kind of strategy should engender greater customer loyalty and affinity - the customers should begin to see the lemonade vendor as more of a trusted ally in the fight against thirst, as someone who is there for them when they need it the most, and not as someone trying to take advantage of a situation to extract a few more cents of profit per can.

And forgetting the specifics of the lemonade vending machine, the broader lesson, making it easier and more convenient for your customers to buy, whomever they are, when they need you the most, (and not the other way around), is likely to separate you from just about every other supplier who has ever existed and that is holding fast to the Supply v. Demand chart they studied Freshman year.

Stay thirsty my friends.

More Data for HR Geeks: Wow, it's getting old around here

Last week Kris over at the HR Capitalist ran a cool piece titled Economics for HR Geeks: The Quitter's Index, where he called out the BLS data indicating that more Americans are now quitting their jobs than being fired/laid off/downsized.  There are lots of possible reasons for this shift, but the takeaway for the talent pro is that more people are open to a voluntary move than in the last few, recessionary years. The climate for recruiting and retention is starting to shift.

In the spirit of KD's piece, I thought I'd offer a similar, geeky chart for your perusal, first spotted over at Business Insider last week. Have a look at the below graph, that shows the total US employment level for two age cohorts, those from 25-34, and those 55+, and I'll make some (obvious) observations after the data sinks in. 

 

Yep, really soon, and for the first time since anyone started keeping track, the number of workers 55 and older will exceed those aged 25-34, typically the next generation of talent that so many firms are trying to recruit, develop, and retain.

Many workers north of 55 have seen their retirement plans put on hold, some for a few years, many for longer, as the combination of recession, slowly recovering equity markets, and lots of 20-something kids still living at home as they remain persistently unemployed or underemployed themselves.

Have you walked around the office lately and thought to yourself, 'Wow, when did everyone start to look so old?'. If you haven't noticed, don't worry, you probably will soon. And after you take note, maybe its time to think about the makeup of your specific workforce, in total and in important segments, to see whether or not you are seeing this trend play out for your company, industry, and region.

And then maybe take a few minutes more to think about what that all means for your 3, 5, and 10 year plans for recruiting, retention, benefits, work assignments, facilities, management succession, and more.

Gettind old can be a drag. It can be a real drag when it happens to everyone at once.

FYI - the chart was originally created on the FRED site, which is an absolute gold mine of information. Check it out sometime.

Guess which labor market?

Here's a quick game for a Friday, I'll give you three lines from a recent article titled, 'Workforce shortage a structural problem', that assesses macro labor market conditions and you try and guess which labor market the article is referring to.

1. "A lack of skilled technical workers coexists with the difficulty most students and recent graduates have experienced in finding full-time employment, because few of them possess the technical skills required."

2. "Graduates are finding it difficult to get jobs and many enterprises are facing problems in recruiting workers and technicians, revealing structural problems in the employment market, said (redacted to make it harder for you to guess)".

3. "Even then, it is still not easy to attract experienced, skilled workers. So, we have now signed an agreement with some technical training schools so that we get first choice of the best students to become interns in our company. We hope that cooperation such as this will help to develop a talent pool for us." 

So what's your guess?

Could be most any type of technical or skilled manufacturing type job in the USA, right? It possibly could be some areas of healthcare, as the aging population places more demands on the healthcare industry to supply trained workers at the same time many college nursing programs are straining under budget costs constraints and still have long waiting lists for student admission. Maybe it is the US auto industry, that seemingly has emerged from near-death to post robust sales and profits as this classic American industry continues to rebound and confound (hat tip to Walt Frazier).

All good guesses, and all could be correct in the right context, but the actual correct answer is the Chinese labor market, and all three of the above quotes were take from a piece titled 'Workforce shortage a structural problem', on Chinadaily.com.

You should click over and read the entire piece, but the short summary is that many of the same types of problems that we often read and hear about in the US labor markets - the skills gap, the lack of technical training that matches industry demand, the problems with shifting labor pool demographic composition, etc.,  seem to be just as important and profound in China as they are here in the USA.

I am certainly not going to offer '5 tips for solving your Chinese market labor problems', here on the blog, and in fact, if you truly are looking to a blog to try and solve those kinds of problems, well, I'd say you have bigger things to worry about.  

But I will offer this observation, that no matter where in the world you look to source labor and locate production, issues with skills training, development opportunities, and the best talent having lots of options besides yours to choose from seem to be pretty much the same no matter where you end up. I'd offer that you as a talent professional can try to run from talent shortages and skills gaps, but no matter where you run to, you'll probably find the same problems. 

Only you might need an interpreter to help you understand them.

Have a great weekend!

Labor Markets: Moving Parts and Search Friction

One of the best and most consistent sources of information and analysis of big picture data about the US Labor Market is the Federal Reserve Bank of St. Louis. The regional reserve bank was established in 1914, after the creation of the Federal Reserve System in 1913. The Eighth Federal Reserve District is headquartered in St. Louis and has branches in Little Rock, Arkansas; Louisville, Kentucky; and Memphis, Tennessee. Aside : Those cities sound like the stops on an epic barbecue tasting tour.

Recently the bank issued an updated version of its 2011 report titled Many Moving Parts: The Latest Look Inside the U.S. Labor Market, an examination of the dynamics of the labor market, the problems with “one size fits all” type recommendations to 'fix' the unemployment problem, and some of the challenges facing policy makers, businesses, and individuals who all are motivated and interested in getting more people back to work.

It is a really interesting, and not terribly long but probably a weekend-type read, and I'd encourage anyone that wants additional macro-perspective on US labor markets to give it a read. The key takeaway, I think, is that even though high unemployment rates have persisted for some time, it is erroneous to think of unemployment and the unemployed as a static state. The data in the report illustrate the incredible energy and transition in the labor market -  even in times of rising total unemployment many millions of people find jobs, and millions of others lose jobs, and still others exit the labor force entirely.

This chart from the report helps illustrate these labor market flows:

The charts show from Nov. 2007 until the end of 2011 that even while total Unemployment rose from 8M to 13M, and Nonparticipation also climbed by about 7 million, that in the last 4 years on average over 5M people per month actually found employment. In fact even in the depths of the recession, an average of 5.6M workers per month got jobs.

The report further examines the influence of highest level of worker education attained and the duration of unemployment and their impacts on the ability for workers to find jobs. As you'd expect two conclusions are apparent - one; the more education you have, the more likely you can find and keep employment, and two; the average time spent in unemployment is increasing, and feeding into a cycle that for many millions of people, is making a return to employment more difficult, as skills erode and optimism withers.

All told, while we mainly read and talk about unemployment, (especially in the popular media), in the context of one number - the rate of unemployment, the underlying market dynamics, the labor market flows, the 'search friction' between workers and openings, attitudes about risk from corporations, as well as national economic and political policy decisions all combine and conspire to make it difficult, in the opinions of the authors of the St. Louis Fed paper, to arrive at simple solutions to these problems. 

But I do think while simple answers simply don't exist for this problem, a good first step is understanding more about the data, the history, and how decisions about policy impact these markets. And the only way to get started is to do the homework.

So this week, if you are at all interested in these issues, your assignment is to read  Many Moving Parts: The Latest Look Inside the U.S. Labor Market, and let us know what you think.

Company Town

I've lived in the greater Rochester, NY area for over a decade, and while not my 'real' hometown, this mid-sized Western New York city has certainly has become my adopted hometown. And like many similarly sized and geographically situated cities, in the last 20 years or so Rochester has seen a kind of sea-change in its industrial base, demographic makeup, and general perception of itself, as well as the perceptions of outside observers. Rochester's situation and story in some ways is also being told and played out in places like Buffalo, Cleveland, Toledo, and others.  The story is as familiar as it is depressing - the exodus or demise of traditional manufacturing firms, taking with them many thousands of decent-paying middle class jobs; a similar exodus of recent graduates from Rochester's numerous and excellent colleges as young people flock to the excitement of New York City and Chicago, or the opportunity and sunshine of California; and the general malaise that seems to overtake a Great Lakes city when the sun sets for the last time in October and doesn't seem to rise again until April.Vintage Kodak Ad - 1920s

For over a hundred years Rochester has been known as the birthplace and hometown of Eastman Kodak, the legendary company founded in 1881, (not a typo, I promise),  by George Eastman, and for most of its history, the global leader in imaging, cameras, and film processing. Kodak, itself an invented word, invented the concept of amateur or everyman photography. By developing and manufacturing cheap, mass-market cameras and film, Kodak made it possible and popular, for just about everyone to capture, chronicle, and pass on memories of people, places, events.  As long ago as 1888, Kodak's slogan, 'You press the button, we do the rest', spoke to several succeeding generations of Americans who captured their own personal 'Kodak moments', as the snapshot became ingrained in the culture.

As time passed, Kodak continued to innovate and grow, eventually reaching almost every household in the country and employing at its apex about 145,000 employees, reaching about 90% in market share for film and cameras, and having revenues of $16 billion. But as is often the case with corporate giants that possess near-monopoly power and profits, a series of managerial mis-steps, failure to quickly assess and prepare for the rapid changes in the market and consumer preferences for new digital technologies, and the decision to protect the still very profitable if shrinking film business have all conspired to lead to what is now a precarious, teetering on bankruptcy situation for the once mighty Rochester icon.

I won't even attempt to delve into the specifics of Kodak's key failures of the last few decades, for this excellent piece from the Economist covers the saga in depth and better than I could. Rather I'd like to speculate on what, if anything, the idea of the 'Company Town' means in 2012. For over 100 years Kodak, (and really George Eastman himself), dominated the local economy, influenced community affairs, and by virtue of the incredibly high proportion of direct and indirect employment supported by Kodak, the day-to-day well being of the entire region. For a long, long time Kodak was Rochester and vice versa. Sure over time several other major corporations rose, (and have also fallen), in this city, but none ever rose so high and were so much a part of the essence of the community as Kodak. Everyone here has a friend or relative that at some point worked at Kodak.

Kodak's long and slow decline - with it shedding workers, closing facilities, spinning off divisions; has taken the element of surprise from its demise, but it has not made it any easier to accept. The likely end of Kodak as we have always known it, an American corporate legend, and in many ways the foundation of this community, will take with it more than the last few surviving employees and some landmark pieces of our downtown skyline. It will take a part of the city's soul with it as well. 

No, Kodak's end is about much more than money or jobs or fodder for eventual business school case studies. It's mostly about a legacy and a memory of a different age, when organizations, their leaders, and their cities were much more intertwined and inextricable from one another. Kodak-Rochester, Rochester-Kodak; when you live here, you can't imagine one without the other.

But soon it seems like we will have to. Rochester, certainly, will carry on. There are already positive signs that Rochester will be just fine in the long run. And perhaps something of Kodak will survive after all. But either way the city of Rochester, and America, will have 130 years of memories.

Almost all of them taken by Kodak cameras, captured on Kodak film, and printed on Kodak paper.