Economic Realities in the Workplace

This blog has expended a lot of words on the importance of bringing knowledge and awareness of the outside world into organizations. The struggling economy we’ve been experiencing for the past 27 months (or more) has put a variety of strains on business, adding a new imperative in this regard.

Companies struggle to maintain profitability (or even stay in business) amid feeble market conditions, never mind trying to grow the business. Meanwhile, it's difficult for their employees to be at their best when they worry about the potential loss of their jobs (or those of co-workers) in the context of a 10 percent unemployment rate.

This particular period in our history has been made all the more difficult for businesses by the additional burdens and uncertainties spawned largely in the political arena around issues like:

• The possibility of increased business and personal taxes at federal, state and local levels;
• A growing thicket of federal and state regulations and red tape;
• The rising cost of health care insurance; and
• Looming energy policy changes (various efforts to “regulate carbon emissions” and/or reduce the use of fossil fuels).

Individually and collectively, these add to the cost, complexity and challenge of doing business, both today and in the future, putting further constraints on businesses’ ability to focus on what they do best and to expand by hiring and retaining qualified people, buying new equipment, and building new facilities.

As Congress, state legislatures and other political leaders debate whether to increase taxes or to impose new taxes and regulations, business leaders and owners hesitate, paralyzed by the uncertainties of additional costs that could arise in the coming months and years. They know it's dangerous to spend money they may not have a year from now. That translates into postponement of hiring new people – since additional employees represent long-term investments – or incurring debt to build plants that may not run at capacity in a weak economy.

Instead, businesses hoard cash against the possibility that they will have to spend it later on things like elevated taxes, higher energy costs and/or increased health care premiums.

Unfortunately, employees are too often divorced from these external economic realities. Within many companies, certain myths tend to persist: that the company is immune to natural economic forces; that it has infinitely deep pockets with which to pay ever-rising wages and benefits; that company management is over-stating the impact of external forces on the business; and that they can always raise prices to maintain profitability.

Though tempting, the answer does not lie in passing along increased costs in the form of higher prices. While some price increases might be possible, this route is never the only solution. Besides, customers can find less expensive sources, postpone their purchases, or to do without altogether.

Employees need to have a solid understanding of things like revenues, cash flow, and profits. They must appreciate that increased expenses – whether in the form of taxes, energy costs or health care premiums – impede the company’s ability to earn a profit, and that profits assure that an organization can continue to operate well into the future.

Put another way, a business’ future is contingent on whether it can update plants and equipment, maintain those plants and that equipment, recruit new talent, and improve and update its employees’ talents and skills – all of which are impossible in the absence of profits. A stagnant organization – one unable (or unwilling) to reinvest in itself and its people – is an organization in its early death throes.

Those harsh economic realities and the uncertainties of our times must be part of the ongoing internal dialogue. This imperative to bring outside realities inside bears repeating now as 2010 comes to a close and we look forward to (and hope for) an improving economy in the New Year.

All employees need to understand that the environment in which their employer operates has a direct impact on its ability to continue to employ them, pay them what they deserve, allow them to pursue self-improvement and personal career goals within the organization, and to make the capital investments that will help maintain productive, cost-effective operations.

To do otherwise, to keep employees in the dark to guess and make assumptions, is dangerous on many levels. But at base, it isn’t fair or honest. Have a conversation with your employees about these simple facts:

• Higher corporate taxes and increased energy costs mean less money to invest in our people and plants.
• These same increased costs also affect our suppliers, which means the price of the goods and services we buy from them will likely go up, too.
• Higher taxes and energy costs also impede our customers’ ability or willingness to buy our products.
• More regulations mean a further shifting of resources away from productive investments in our people, plants and equipment.
• Higher health care costs will necessitate some reduction of benefits and/or increased co-pays.
• There is no deep, infinite well of money for salary and benefit increases, or for structural investments and capital improvements. It all comes from a business’ ability to turn a profit on revenues after expenses. And if expenses like taxes, health care and energy go up, profits decline.

It’s your responsibility as a business leader and manager of people to make sure employees appreciate the direct links between public policy decisions by our elected representatives and a business’ ability to prosper, as well as the people that that business employs.

“Because it’s there”

Knowing my love of adventure, a friend recently sent me a newspaper article about a twenty-nine-year-old family friend named Eli Andersen who had circumnavigated Graham Island standing atop and paddling a large surfboard. I’d never heard of Graham Island, but thanks to Google maps, I found out, and I was even more impressed by the feat.

      Graham comprises about half of the landmass of the Queen Charlotte Islands, BC, north of Vancouver Island, south of the Alaskan panhandle. It took Eli six weeks to paddle around Graham.

      The notion of a wild adventure like that appeals to something deep in me and I was fascinated. I think that this young man touched on what appealed to me when he said, “I like to lie down in my sleeping bag at night after I have made camp. I congratulate myself on a long paddle, or finding the ideal campsite, or had made good decisions. I pat myself on the back and say 'good job Eli, you did it.' I enjoy that feeling.”

      I know that feeling, too. It's an ineffable sense of accomplishment. It’s reaching well beyond what you believe you are capable of doing and then doing it. It's deep fatigue, that feeling of tired, aching muscles telling you how difficult it was, and the comforting knowledge that you did it, a truth that no one can take away, proven by the fact of where you are at that moment.

      It’s crazy, isn’t it, to engage in such dangerous ventures as paddling solo around an island in the northern Pacific Ocean. Why do we do it? As a college kid, much to my mother's horror, I hitchhiked and freight-hopped my way from Salem, OR, to the Grand Canyon, a distance of about 1,500 miles. And when I got there, I hiked to the bottom of the canyon.

      Over the years, I’ve camped out under the stars in a remote corner of the Isle of Skye in Scotland; trained for and run six marathons; climbed Mt. Hood; nearly drowned while canoeing the St. Croix River in Maine overflowing its banks due to spring floods; climbed vertical rock walls; and hiked into the High Sierras numerous times. They were all tough, physically trying and sometimes-dangerous experiences, some more so than others. But, as we press to the edge of our own abilities and strengths, we gain confidence and a better understanding of our personal limits.

      Why do I do it? In the case of the High Sierras, it’s because when you can camp out at 11,000 feet, you get unbroken vistas of a hundred miles; a night sky full of trillions of bright stars; cold glacial melt water to drink; crisp, clean air to breathe; complete silence, save any wind; utter solitude; and the harsh beauty of sheer granite cliffs and high altitude, aquamarine lakes. You congratulate yourself in the knowledge of your accomplishment, how hard you worked to be able to see and experience it all, knowing that you are among the few people up to it.

Photo: Bill LeMenager

      Mountaineers always respond to the “Why?” question by saying, “Because it's there.” Seems as good a reason as any. In fact, what that answer says is that they can imagine themselves atop a particular mountain, just as Eli could imagine himself circumnavigating Graham Island alone. To picture one’s self doing something is tantamount to doing it. It’s throwing down the gauntlet and daring one’s self to do it. Failing is one thing, but failing to try is not acceptable.

      That’s the nub. Not trying is unacceptable.

      Pres. Theodore Roosevelt, himself an avid and fearless adventurer, understood this truth. He once said:

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly; who errs and comes up short again and again; because there is not effort without error and shortcomings; but who does actually strive to do the deed; who knows the great enthusiasm, the great devotion, who spends himself in a worthy cause, who at the best knows in the end the triumph of high achievement and who at the worst, if he fails, at least he fails while daring greatly. So that his place shall never be with those cold and timid souls who know neither victory nor defeat.”

Another president, John F. Kennedy, challenged the nation to go to the moon, at the time a tremendously and unthinkably difficult test. “We choose to go to the moon in this decade,” he said, “not because [it is] easy, but because [it is] hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win. . ."

      That statement, in a nutshell, defined for an era who we were as a nation, what our goals were; that we were fully aware of the risks of the mission, in the context of our confidence in our ability to do it. But to fail to try was not acceptable to the American spirit, and the nation as one eagerly rose to the president’s challenge.

      One's mountain needn't be a moon mission or an Alpine peak to conquer, or an island to paddle around. It can be something as close to home as a painting to conceive of and finish, a gourmet meal to plan, cook and serve, or a book to write and publish. And, it might be overcoming a job-related challenge.

      Tales of adventures are merely internal human struggles writ large, and literally played out on a real life canvas. Edward Whymper, a late-nineteenth century English mountaineer and explorer, answered the “Why?” question with remarkable clarity:

“We who go mountain-scrambling have constantly set before us the superiority of fixed purposes or perseverance to brute force. . . [W]e know where there's a will there's a way; and we come back to our daily occupations better fitted to fight the battle of life, and to overcome the impediments which obstruct our paths, strengthened and cheered by the recollection of past labours, and by the memories of victories gained in other fields.”

In the overly formal language of the Victorian era, those words neatly sum up what I’ve long struggled to verbalize succinctly. After those exertions spent overcoming uniquely difficult obstacles, after stressing our bodies to the limit, after testing our will against the challenges we put before ourselves, we return to “fight the battle” of everyday life. The barriers and difficulties we confront there can seem so paltry in comparison as we recall our “past labours.” We can picture ourselves similarly overcoming our everyday battles.

      We are well prepared for life’s daily tests, because we know ourselves so much better than had we not confronted the “superiority of fixed purposes, or the perseverance of brute force.”