Tag: small business

The New Economic Reality of Unemployment


Hiring Gap A couple of weeks ago New York Magazine used  The Hiring Gap chart (see picture) as their Intelligencer topic.  It compares domestic employment powers of ten "most valuable" ( in terms of their market capitalization) public companies in America in 1964 (converted into 2011 dollars) and now.  Even though the numbers on their own are very striking and Andre Tartar's few-lines of commentaries and footnotes cut right through the fact that 

"being a top American business no longer… means employing lots of American workers,"

the data left my calculating mind somewhat unsatisfied; it begged for further interpretation.

First of all,  it's the damned "market capitalization" crap, which nothing more than a perceived value of the company by investing public – the very same public that cannot evaluate companies on its own and follows the leads of their brokers, WSJ analysts, CNBC (especially if they are doled out by sexy Maria Bartiromo or engaging Jim "Mad Money" Cramer), etc.  Thankfully, there is an instrument we can employ to make these numbers somewhat more real – Price-Earnings Ratio:

  PE Ration Here is the new ranking of the 2011 listing, based on the companies' earnings.

  The Hiring Gap Only three giants retained their places in this modified view: Exxon, Berkshire and Google.  And, by my standards, those three are overpriced anyway: any stock with P/E ratio higher than 11 is overpriced.  Google with 20 – ridiculous.  Of course, it's not as bad as some other stocks, like Wynn Resorts, for a example, with a preposterous 60.  It always shocked me that people buy stocks like that and then act all surprised when their savings go, "Bye-bye." 

Another interesting angle of the chart is its reflection of the fundamental changes in industrial mix of Large-Cap companies, which speaks volumes about this country's economic and social environment.  The only two companies present on both lists are GE and IBM.  In 1964 we did not have any financial institutions big enough to claim not just one, but two spots in the top 10.  The three tangible goods manufacturers that drove the US to its economic dominance in the 60s are gone off the list – GM, Dupont and Kodak.  So, is the telecommunication super-power of the time – AT&T.  Now, we have Apple and Microsoft, dividing the world into two camps of PC vs. Mac users.  And isn't it comforting to know that as far as our OIL-dependence is concerned, we are still at the same point as we were nearly half a century ago?

Now, the focal point of the piece – the dwindling number of the jobs infused by these companies into American economy.  In accordance with proper statistical rules, let's explain away the two companies with the highest and the lowest number of workers.  Walmart employs 2.1 million of people, but it is irrelevant, and not because their average salary rate is one of the lowest in the country, but because their expansion put out of business smaller chains and thousands of independent retailers.  Google, on the other hand, generates the majority of its revenue without any human participation, so I am surprised even by the 24K number.

Look at our beacons of stability, though – GE's number practically did not change and IBM employs nearly three times more people now than they did 47 years ago.  Holla to that!  The rest of them… well, we all know the story – there are three reasons for jobs going away and never coming back:

  1. Technological advancements contributing into increased efficiency.
  2. Outsourcing = jobs going abroad.
  3. Globalization of manufacturing and support services = jobs going abroad.   

At the time this issue of New York Magazine came out, the unemployment rate was at 8.8%.   Now it's 9%, and I believe that unless something changes fundamentally in our economic structure, it is only going to get worse.  The new reality is that we cannot look at the giants whose operations financed through their publicly-traded stocks as the source of new jobs.  

As long as investors listen to analysts' opinions and follow the "trends," the large companies' executives will continue applying their hardest efforts to minimization of costs in order to preserve their multi-million compensation packages.  The workload will continue being exported abroad and jobs will disappear.

At this point, we can only rely on small and midsize American business for the influx of new jobs.  That's where the efforts must be concentrated: helping the existing smaller companies' survival and stimulating creation of new entrepreneurial businesses.

Those who read this blog consistently know that I am developing a product that will help small and midsize businesses in their daily struggle for success, assuming I manage to solicit sufficient venture capital.

CFO Folklore: My Personal Mantra


In my earlier post Why Do I Work So Hard? I talked extensively about conscientious attitude towards my CFO responsibilities.  However, time and again I find myself worrying about matters, which are not really under my direct control: lazy marketing people, self-serving sales force, inept operations, and (again and again) bosses who constantly jeopardize their own business.

And it’s not just me.  There are a lot of people in my network, who display the same level of care.  We frequently become each others’ sounding boards when the angst gets too overwhelming.

So, here we are at lunch.  My friend JM ranting about VP of Ops fighting with his girlfriend on the phone for three hours, while the production manager was waiting for him.  I am sharing the pains of trying to catch the President to release a $1M wire transfer and his dodging me because “he had enough for the day.”

And it’s not like we don’t have anything else to discuss.  Most of my business acquaintances are entertaining individuals.  JM, for example, has an incredible sense of humor.  I am a theater and foreign cinema fanatic.  Somehow, my banking relations are all classical music buffs.  We all read Jonathan Franzen and Michael Cunningham.

And yet, we talk about problems at work every chance we get.  Most people, when they stop for a second and think about it, get very angry and frustrated with themselves.  Frequently at the end of these conversations I hear, ” I don’t own this business.  It is not my fuck up.  Am I supposed to butt in on other people’s responsibilities? Why do I even care?“

Me? I don’t get frustrated about my caring so much.  And I tell my concerned peers that they shouldn’t get upset with themselves either.  You see, years ago I figured out that the conscientious working attitude, the ambition to succeed, the striving for merit-based rewards and the care for the entire business – they all go together.  They are inseparable qualities and indifference doesn’t fit into the picture.  If this is who you are, you will always care.  

Moreover, in small business environment, this very combination of qualities is what brought you to where you are.  This is what separates you from others.  This is what got you into the CFO or Controller chair with the correspondent salary and perks attached, which, in their turn, define your living standards. 

So, I’ve created myself a mantra: I CAN’T SURVIVE ON “I DON’T CARE.”  

There is a compensation threshold, which, when crossed, brings you into the stage of your professional life, where hardworking people care about the well-being of their employers.  I’d say right now it’s somewhere around $70K a year.   At $200K a year, you either care a whole lot, or you are a fraud, or you are working for a big-size mastodon.  So, ask yourself, “Can I survive on a $70K salary?”  And if you can, go for it – not caring is a bliss.

Job Search: Ageism


Age discrimination is an undeniable fact of our lives.  Young people are never taken seriously as customers, clients, health patients, philosophers, business developers, etc.  On the other hand, media, entertainment, advertising and marketing adore youth.  And one thing is sure: their "young" status is going to change.   Discrimination of older people even more pervasive and they don't even have a benefit of hoping for improvements. 

The problem is particularly acute in human resources.  The age discrimination is at its worst when you are searching for a job, or expecting layoffs, or know you may be deemed too expensive.  

 According to a research quoted in The Gale Group's  Small Business Encyclopedia, over 52% of surveyed executives admitted that age is one of the key factors in job searches for people 47 years old and up.  What do I think about that number?  The other 48% lied.  Age is ALWAYS a factor. For one or another reason, when we hire people we take their age into consideration.  So, we should accept that, when the tables are turned, we will be treated the same way.

I have to own up to the fact that while wearing the CFO's hiring hat, I automatically estimate the age of applicants.   I don't care about their age per se.  I do it to quantify their accomplishments against the length of their careers.  It helps with assessing their work ethics and personal ambitions.  

Other hiring managers and recruiters don't even have a justification like that.  They just go, "Too old," and send the resume into Trash.  With the job security becoming a myth of long-forgotten times, more and more middle aged people will be forced to enter the circles of job search hell.  This possibility practically hangs over everyone's head in the world of vulnerable small-size businesses.

Having that in mind, I would like to share with you an extremely useful The Ladders' article on adapting your job search, your professional "brand" and your resume to your age: Job Search in Your 20s, 30s, 40s, 50s and 60s.

By the way, is it just me, or have you also noticed the funniest thing (I am not laughing) that's happening in our media?  The "official"economists, major newspaper analysts and politicians are trying to convince us that the recession has ended months ago and we are "recovering".  Yet, every article or post related to job search and HR issues contains a phrase "especially in this economy" and you can almost hear the author's sad sigh.  

I think the old terminology of recession, recovery, economic conditions have lost their meaning.  People just don't want to admit it to themselves, because, as I frequently say, they are afraid of changes, especially changes for the worse.    The phrase "this economy" gives a false hope of a better future.  The truth is – we live in a NEW REALITY.  This is the "recovered" state.  Things are only going to get more difficult.  Everyone should be prepared to face job search ordeals in their 50s, 60s, and beyond.

CFO Folklore: “The Servant of Two Masters”


440940251img1_mediumTwo-headed bosses are common when people work for businesses founded by relatives, which, I am sure, can be a source of fascinating undercurrents and rivalries.  I invite my readers to share relevant stories.

I, on the other hand, worked (more than once) for equal partners who were not related.  Each of the duos consisted of individuals so different, it was a miracle they stayed in business together.  As a CFO, forced into the middle of the co-owners dynamics, I was able to observe common behavioral tendencies in the bosses themselves and people around them.

Business partners' alliances are usually symbiotic.  One is an idea generator, the other is an implementer.  One is brains, the other is money.  One can close a deal in seconds, the other makes sure the company performs.  They always complement each other, or they wouldn't be in the trenches together. 

Either will squeeze all juices out of you, and yet their personalities differ just as much as their abilities.  One is usually more diplomatic, better with people, logical, frugal.  The other is brash, careless, erratic, a lavish spender.  They don't see eye to eye about the majority of business issues and frequently talk to their CFO or Controller separately, presenting contradictory positions.

260 years ago, in "The Servant of Two Masters," Carlo Goldoni depicted the delirium of working for two employers who try to find each other without knowing they live in the same hotel.  Sounds familiar?  Poor Truffaldino is so anxious, he develops a stutter.  Imagine the hilarity!  Well, at least he got double wages.  When your single-salary job depends on maneuvering two conflicting bosses, you don't feel like laughing. 

Most people end up aligning themselves with one of them.  Sometimes, it works out in a natural way: if one owner oversees Production, while another spearheads Sales and Marketing, it is obvious where VP of Ops and VP of Sales allegiances will lie.  

Even when it's not clear-cut, people have a tendency to navigate with their issues toward the boss who is perceived to be "nicer," regardless of his preparedness to make relevant decisions.  As the result, you may end up with a wrong solution, or the issue is brought to the other owner's attention anyway; only now he knows that you tried to bypass him.   Either way, you are screwed.

CFOs and Controllers should not form any alliances when they work for two partners.  When monetary matters are concerned, both must be kept in the loop.  In super-important cases, get them into the same room, whether they like it or not.  I am known for bringing bosses into the office from their summer residencies in the middle of July, when I had to.

Of course, you have to earn your right to do so with hard work and authoritative success.  You also need to be very diplomatic with both of them – either must think you prefer deal with him and inform the other out of courtesy.  It takes Machiavellian skills to boss the bosses.  Otherwise, you will end up stuttering, like poor Truffaldino.

CFO’s IT Conundrum: Owner’s Expectations


In many companies, CFOs and Controllers have absorbed the responsibilities of Chief Information Officers.  Unless the company is in business of creating technology or relies on it as the primary operational tool, it's only natural for the senior financial person to keep IT under her wing.  Even if the entire value chain is integrated into an ERP, 70% of the modules are ours anyway. 

Moreover, a lot of companies are not there yet.  At best, most smaller businesses today have integrated systems that cover all of their Accounting and HR functions, plus a bunch of special-purpose software for other needs.  

Leading IT function is a difficult undertaking for a CFO.  It is plagued by conflicting tendencies:

1.  On one hand, you want to be a strategic thinker.  You want to be an agent of change that will propel your company into the future.  You envision information seamlessly flowing from product design to financial statements.  On the other hand, you are the one standing guard over the company's purse.  Ideally, you don't want to spend any money at all.

2.  On one hand, you don't want to meddle in other VP's business.  They run their departments to the best of their abilities.  On the other hand, if you are to make decisions about informational support of their functions, you will have no choice.

3.  On one hand, you adore technological progress and  you love trees.  You dream of paperless offices.  On the other hand, you cannot let go of the comfort the filing room with all the source documents gives you.

This list of woes can go on and on.  However, none of the IT management issues can compare with the pain of your Boss's Expectations.  I am not talking about a techy entrepreneur here.  I am talking about your all-other-industries business owners.

Small business CEO's software expectations are usually focused on two aspects: implementation time and reporting capabilities.  In their minds, both are in direct correlation with money. 

As soon as the money are paid to the software vendor, they expect "all systems go" status.  The customization, the setups, the data transfer are all expected to happen with installation, which, by the way, is taking too long ("What are these people are still doing here?").

The reporting expectations are proportional to the amount of money spent.  Here are typical examples:

  • if you've spent around $100,000, the system is expected to "print" a report with any combination of randomly chosen data ("What do you mean, the data needs to be exported into Excel and analyzed? What did I pay all that money for?")
  • if you've spent around $500,000, the system should estimate December cash availability in March; the answer is expected while he is on the phone with you ("Can't you just look it up in YOUR system?")
  • if you spent over $1,000,000, the system must initiate a daily call to the boss's personal phone reporting in a soothing voice, how much profit was generated yesterday.

Anything short of that is "UNACCEPTABLE!!!"  And it's all your fault!