Joblessness Data

Let me start this blog by saying that I am not a professional statistician.  I have chosen to address this topic to shed some light on this topic using some research and a layman's understanding of what I learned.

Every month we are fed by the Labor Department unemployment rates.

The rate for September raised many eyebrows.  Several economists and management gurus questioned the validity and reliability of the method used for calculating the rate.  Others went further to suggest manipulation for political reasons.

The reasons for this debate are many.

The most compelling explanation by the skeptics is that for the rate to drop from 8.1% to 7.8% 900,000 jobs would have been created in September.  The implausible statistical quirk may be a result of the method used for determining the rate.  Bureau of Labor Statistics (BLS) uses a household canvass to measure how many of us are employed.  Professional statisticians advise us to discount these data because they lack reliability.

Can you be more specific?

For the rate to drop .3% in one month one of several factors must be in play, including:

First, the economy must grow rapidly and, as a result, it is creating lots of jobs.  For this to be the reason, our GNP would have to grow by a healthy rate (5% or more) -- which was not the case for September.  The number of jobs added during that month was a mere 114,000.

Second, since there is inadequate job creation millions of job seekers stop looking for work.  That has been the experience throughout the recovery.  For some reason, BLS does not count those who have given up looking.

Third, BLS counts part-time jobs as if they were full time contributing to further obfuscation of the real problem the nation faces.

So the numbers do not add up because they lack face validity.

We lost 9 million jobs during this recession.  Just 5 million have been recouped.  Even worse, the level of private sector jobs remains 13 million below the pre-crisis job growth trend.

The employment gap is a national crisis.  23 million people are either unemployed or under employed. These people are not a statistic, they are real human beings with needs, aspirations, and obligations.

Politicians, like Nero, are playing the fiddle while Rome is burning.  Except that it is not Rome burning, but our fellow Americans who are suffering.

Where is the sense of urgency?  Where is the bipartisan approach?  We need action, not excuses, and soon.  Real soon!!!

The Politics of Work

The European Lesson

I just returned from a four weeks visit to Europe.  During my stay I would watch every night one or two evening news on Italian television to keep up with world events and better understand Italian and European concerns regarding job creation and the economy.

Needless to say, the European economy varies from member-state to member-state.  German and most Northern European economies seem to be faring better than their Southern and Eastern counterparts.  The pain is most evident in Greece, Ireland, Spain, and Italy.  Why?  The global recession impacted them the most.  Why? Because their government deficit was way above the stipulated ceiling of 3% of GNP, and their total debt exceeded their GNP.  It was also evident from the various reports that the excesses of the past 40 years had come home to roost.  

During the expansionary and boom years of the last 4 decades, politicians were spending far more than their annual revenues.  On the social front, politicians eager to gain the approval of their constituencies endorsed laws and practices advocated by labor unions and other interest groups.  In addition, the spending binge fueled corruption and in some cases outright thievery.

I learned in my studies of business policy that the test of whether a policy is good or bad is dependent on a simple question.  Can the organization afford the policy under good as well as bad economic times?  If the answer is no, then the policy is not sustainable over time.  Politicians failed to ask this basic question before getting on the bandwagon of spending.  

As governments have been applying the ax to many policies to bring spending under control, it is evident that the burden has fallen most heavily on the lower economic classes.  Increase in taxes, postponement of retirement, unemployment, and inflation have led to confrontations of all kinds, some violent, and a steady deterioration of the social fabric.  It was painful to watch nightly elderly folks, the handicapped, the youth, and the unemployed display their anger and plight.  

As political parties jockey for advantage, a bit of reflection is in order.  Asking the arsonist to put out the fire seems to me to be foolhardy.  But that is what it seems to be happening, including here at home.

It is evident to me that labor laws need modernization in Southern Europe and that the narrative about finding permanent positions needs to travel in a different direction ... the direction of finding meaningful and higher paying work.

Work versus Jobs

In Italy, there seems to be a fixation with job security.  

People want permanent jobs. Period.  Anything less than that is seen as uncivilized.  Unions want government guarantees that no one will be laid off for economic reasons or fired without "just" cause.  Their rationale is simple.  Temporary workers cannot get a mortgage without it.  And as a result, they cannot start a family or lead a "normal" life.  This kind of thinking, of course, fuels the notion that the best place for job security is to work for the government.  Never mind that government rolls are bloated and need to be cut down.  

I found it curious that an administrative judge would be asked to rule on "just cause",  most often ignoring the need to reduce costs or to eliminate inefficient practices.  The unions are most vehement on this issue.  The ranks of the administrative judge cadre is dominated by union-friendly judges. Once the progressives, unions are now hanging on to obsolete and often uncompetitive policies.  Once innovators, now unions are conservators of the status quo.

These antiquated labor policies are stifling growth and investment.  Global and domestic companies shy away from countries with high labor costs and from countries with labor laws that make it impossible to fire workers in case of economic downturns and restructuring needs.  

Italians are proud to point out that, unlike Americans, they work to live.  To them, the purpose of a job seems to be to meet one's economic needs. Never mind the fact that work is as natural as play and that we can gain tremendous satisfaction and self worth from our work.  Of course, this is a great generalization.  Not all Italians see it that way.  Although of Italian descent, I find the view that work's sole purpose is economic as antiquated and obsolete.  It ignores the psychological and social rewards we gain from work. At the same time, I too yearn for la dolce vita.

From childhood, we have been encouraged to work.  We are gives chores to do. We have homework to do.  We have to study.  We have to do our part. Sure, some types of work are more satisfying or less physically draining than others, but, in my view, all work is noble.  

The American Conundrum

The American story is very different.  Americans, by and large, live to work.  It has been ingrained in us since the beginning.  Maybe to a fault.  Our problem is not enough jobs.  

We are not as obsessed by the permanent versus temporary nature of jobs.  We understand that businesses might have to lay off workers when sales decline or when  unprofitable.  The problem here seems to me availability -- not enough good paying jobs to go around.  Why?  Because some work has shifted elsewhere, some overseas, in search of lower costs.

Germany has solved this issue by concentrating its efforts on niches where their competitive advantage is not derived principally from cost but rather from quality, service and reliability.  

Because we are in a political season, politicians are looking for wedge issues to attract voters.  I find this approach as divisive and not conducive to problem solving.  The dialog should be postponed for the legislative season when principled policies can be discussed and enacted.  

The most common topics are:

1.  Equality

While everyone is entitled to equal access, is everyone entitled to equal rewards?  There are those who believe that rewards should be dispensed based on results, while others believe that fairness requires that we share the rewards equally.  Some might argue that not everyone's inputs into the pot are equal to begin with: some have higher or more skills, others might work harder, etc. The equal pay for equal work issue, though, has a lot of merit on its own.  We do under-pay women and we have for centuries.  It is time to get into the 21st century on this issue.

2.  Proportionality

Some advocate that fairness is determined by the proportionality of one's contribution. Others disagree saying that everyone is entitled to be cared for, that every one should get a living wage, regardless of his/her contribution.  Is this another way to spin the equality argument? Possibly.

3.  Procedural fairness

Honest, open and impartial rules should be used to determine who gets what.  There is lot of agreement on this point, regardless of political persuasion.  The system is rigged with far too many loop holes.  People will point to affirmative action as an example of a partial rule.  Others will point out that the wealthy have far greater access to college education because they can simply afford it.  And, we all know that the old buddy network is alive and well.  

Summary

At this point you may wonder what the above three points have to do with work.  My view is that many people are left out of the workforce because they lack access, because their contribution is unfairly determined, and because dependency on government hand-outs makes it easy for some to forego work because the handout received is greater than the paycheck one might receive.

What is your view?  

Farewell to Steven Covey

Steven Covey died on July 16, 2012 following a bicycle accident. He was 79 years old. I remember fondly meeting him at the Ritz-Carlton Hotel in Bahrain following his workshop with our management team at Zain. I remember shaking his hand and thanking him for his wise counsel. 

 Covey was well-known all over the world for "The Seven Habits of Highly Effective People" which sold more than 20 million copies. He argued successfully that personal character, purpose and self-discipline mattered a great deal. I still carry in my wallet a business card (a gift from his organization) summarizing on one side the 4 Imperatives of Great Leaders: Clarify purpose, Align Systems, Unleash Talent and Inspire Trust, and on the other, the three leadership conversations: Affirm worth and potential, Be a source of help, Clarify expectations and accountabilities. 

 I admired his exemplary life. He was a great scholar, successful entrepreneur, and a respected family patriarch. He walked the talk -- a feat worth celebrating and imitating. He indeed practiced what he preached -- a deed that often escapes most of us. He also helped confirm my notion that the power of any religion rests on its ability to influence and, indeed, become a way of life. There is no doubt that his Mormon religion contributed to his philosophy of life. His seven habits are, more or less, the distillation on Mormon teachings. 

 The seven habits will be his enduring legacy: 

1. Be proactive. 

2. Begin with the end in mind. 

3. Put first things first. 

4. Think win-win. 

5. Seek to understand, to be understood. 

6. Synergize -- learn to work with others for mutual benefit. 

7. Sharpen the saw -- keep yourself physically, mentally and spiritually refreshed. 

Covey adopted these principles to the family later in life by publishing the "Seven Habits of Highly Effective Families". He had 9 children and 52 grandchildren, who revered him and admired his righteous life style. He was disappointed to learn that his belief that highly effective people would result in highly effective businesses did not prove to be true. 

We have learned that it is one thing to be effective as individuals and a completely different thing being successful as a company. His own experience at FranklinCovey proved that. 

I have tried to adopt the seven habits to my own life and I report that, whenever I do, they help me a great deal. But, I have not been successful in applying all of them. Two habits that I have not been able to fully apply are number 5 -- seek to be understood, and number 7 -- keeping myself refreshed physically and spiritually. But I remain committed to keep trying. 

 We mourn his passing, and we celebrate his many contributions to mankind.

Great by Choice

One of the great benefits of air travel is to get caught up in our reading. I took two books with me on my latest vacation. Great by Choice by Jim Collins and Morten Hansen, and A Passion for Adventure by Saad Al-Barrak, my old boss at Zain.

GREAT BY CHOICE

Collins is a well known management researcher and former faculty member at Stanford University. His other books include Good to Great, Built to Last, and How the Mighty Fall. Hansen is less known but he too has a formidable background in the academic world at INSEAD and Harvard. 

Together, Collins and Hansen spent five years searching for historical cases that met three criteria: 1. The enterprise sustained truly spectacular results for at least 15 years relative to the general stock market and relative to its industry. 2. The enterprise achieved these results in a particularly turbulent environment, full of events that were uncontrollable, fast-moving, uncertain, and potentially harmful. 3. The enterprise began its rise to greatness from a position of vulnerability, being young and/or small at the start of its 10X journey. The final choice of companies that met these criteria included: Amgen, Biomet, Intel, Microsoft, Progressive Insurance, Southwest Airlines, and Stryker. 

Their research soon questioned the validity of these well entrenched myths: ...The best leaders did not have a visionary ability to predict the future. ...Being the most innovative is not necessarily a prerequisite for success. ...Fast decision making and fast action do not necessarily lead to advantage. ...Just because the world is rocked by radical change, it may not be wise to inflict ...radical change on oneself. ...The most successful companies did not generally have more luck. In the book, Collins and Hansen introduce the reader to a 10x leadership model composed of three elements: Fanatic Discipline, Empirical Creativity, and Productive Paranoia coupled with level 5 Ambition. This model can help the reader diagnose and improve his/her own organization's desire to become great. 

A PASSION FOR ADVENTURE

In his book, Saad Al-Barrak chronicles his life and how he turned Zain in a telecom giant. Having worked for Saad, I was able to ride along his incredible story telling and witness first hand Zain's rise to world class level. In his journey, Saad broke all the rules, challenged all the assumptions, and led the organization toward unequalled levels of performance. His charisma and intellectual brilliance left a deep mark on both the culture and stature of Zain. When in 2003 Saad took over at Zain, the company's valuation was $ 1.5 billion dollars; when he left in early 2010 the company's valuation had climbed to $ 28 billion dollars. Zain would surely meet the 10X criteria that Collins and Hansen write about, albeit he did not stay at Zain for the full 15-year period. 

 In this short blog, it is not possible to do justice to either book. The intent is to wet the appetite for you to read them yourself. I learned much from doing so. I came away with the reinforced idea that there is no single best way, that it all depends on a number of factors. The older I get, the more skeptical I am of "the best way" to do anything. Neatly packaged, these recipes for success are often just that, interesting recipes. There are too many outliers out there that show us that there are many, although unequal, different ways to skin a cat. I am sure that you have seen a cat or two traveling along your learning curve.

In Search of Employee Happiness

Before boarding my last flight to Europe, I bought the latest copy of the Harvard Business Review (January-February 2012). The front page title had captured my interest: "The Value of Happiness - How Employee Well Being Drives Profits."

Over the years I had often pondered the question of employee satisfaction and its impact on the bottom line. Line managers, I found, are pretty skeptical about the notion that happy employees are more productive. The research I had studied during my graduate years pointed to a negative correlation between job satisfaction and productivity. That is, over the longer haul, employee dissatisfaction affects productivity because employees might decide to leave, file grievances, increase their absenteeism, show up tardy, or behave in an unsafe manner, thus increasing the associated costs of hiring, grievance processing, accidents, or work scheduling.

In humorous terms, I would point out that happy cows might not yield better or more milk, but unhappy cows might gore you. I would get a thunderous laugh and that is about all.

The HRB article does a great job of documenting how the pursuit of contentment has shaped the West's culture and economy. The author Peter Stearns walks you through some interesting comparisons. For example, most East Asian cultures have lower expectations than North Americans are accustomed to. Some Latin American cultures, on the other hand, have higher expectations than their North American cousins. Stearns goes on to point out that attitudes toward happiness do not just differ, they can also change. Understanding the nature of such change can better illustrate the context for happiness and allow us to assess its advantages and downsides.

Research by my alma mater, Louis Allen Worldwide, shows that focus on mere satisfaction should not be the end point. Rather, we should focus more attentively on the level of employee engagement. That is, the extent to which employees are willing to go the extra miles matters a great deal. Employee satisfaction might be a pre-determiner, but it is not necessarily the end result. Research by several organizations shows that highly engaged employees make a greater contribution to the success of their organization than less engaged or disengaged employees. Consequently, the more highly engaged are your employees, the better is your competitive advantage. In a scenario where honing our competitive advantage is key to our survival, the focus on employee engagement is not only an offensive but also a defensive weapon.

During my career, I have had the opportunity to work in highly engaging work cultures where the focus on organizational success outweighs personal stardom and 'lone ranger" temptations. The energy is more formidable, and the satisfaction level much higher than what I have experienced working in cultures where co-workers were not as connected and committed.

Our choice as leaders is rather simple: highly engaged employees and better results versus less engaged or even disengaged employees and lower results. On the surface, the choice seems simplistic, yet in practice, as we focus on other factors we take this fundamental choice for granted.

I am sure that you have your own war stories to tell. I bet that you will find in the recesses of your mind many examples where some organizations you worked at treated this subject differently and with different results. I welcome your observations and comments.

Why Executives Fail?

I recently received a summary description of professor Sydney Kinkelstein's article of 8 years ago: "Why Smart Executives Fail". In the article the author shared his field experience. Executive failures can be seen through the lens of bad habits. Here we go:

Habit #1. Executives see themselves and their companies as dominating their environment. This lack of respect for the competition can be fatal. Someone sooner or later will invent a better solution, if you are not vigilant. I worked many years ago for Control Data Corporation. The company does not exist anymore. Senior executives thought that dominance of the large computer systems world would make them invincible. Guess what? Here comes the PC.

Habit #2. Executives identify so completely with their company that there is no clear boundary between their personal life and their corporation's interests. This total association might be a manifestation of the character of the executive. You know the type. They introduce themselves with their titles because they have nothing else that matters to them more.

Habit # 3. Executives think they have all the answers. Leaders who have all the answers typically have no great followers. Know-it all leaders are shunned by bright subordinates. I had the opportunity to work for a brilliant man who unfortunately surrounded himself with claques -- clapping at every word, laughing at every joke, hiding their real feelings. A palace coup eventually toppled this executive.

Habit # 4. Executives ruthlessly eliminate anyone who is not completely behind them. This habit creates many yes-men and yes women, and idol worship. People with different ideas are essential in any great organization. I witness the presence of consultants inside an organization whose primary role was to police the loyalty of people toward the leader. Anyone suspected of being less than 100% compliant was soon relegated to the dust bin or pushed out. However, those who live by the sword tend to die by it, we are taught.

Habit # 5. Executives are consummate spokespersons, obsessed with company image. This blatantly way of seeking attention turns people off. Few like soap boxes. I have attended too many rah-rah meetings where everyone is driven to a high degree of fervor. That fervor, however, was not matched by results. Soon the top guy became a joke, not to be believed.

Habit # 6. Executives underestimate obstacles. Excessive hype plus yes-people eventually leads to painful lessons. The air of invincibility masks the potential for disaster. I witnessed during my career executives minimizing problems only to be overcome by them. In one case, a leader in hammer type printers company ridiculed the threat of the jet printer as being dirty and unable to print multiple copies. The growth of the jet printer industry followed. A missed opportunity!

Habit # 7. Executives stubbornly rely on what worked for them in the past. Changing times and changing situations often require a new set of answers and approaches. Talking about the great feats of the yesteryear is no antidote for pressing and tough issues. Getting trapped in a problem solving paradigm is akin to having blinders on.

Anyone of us can associate with at least one or more of the bad habits.

To know which one(s) apply to us makes us aware of the pothole in front of us. There are no perfect people but there are aware people. Awareness can facilitate clearer thinking and decision making. The most dangerous people inside an organization are those who do not know what they do not know. They are blind and ignorant at the same time.

Reflect on your own vulnerability. Manage it. Turn it into a positive. Have fun!

Work Place Democracy ... A Utopian Dream?

I remember well the late 1970's and the 1980's. The landscape was full of experiments ... Quality of Work Life (QWL), quality circles, autonomous groups, self-directed groups, you name it, organizations tried to outdo one another with these workplace experiments.

The search for the ideal organization and job design was fueled by the ever increasing success of the Japanese model which included higher worker participation. From Scandinavia, experiments in socio-technical job design, captured the imagination of HR practitioners. Management gurus all over the Western world promoted the notion that increased worker participation in the traditional functions of management such as selection, pay program design, and work organization would improve employee satisfaction and, as a consequence, productivity. Some Northern European countries went much further by imbedding the notion of worker participation in their labor laws, and they mandated the worker council -- including representatives of the employees in all strategic and operational decision making of the organization.

We have not heard much about this subject in the past ten years or so. Although the worker councils still exist, they are more or less relics of well intended social experiments. I have seen no empirical studies that show a significant benefit to the bottom line or to the job satisfaction level of employees.

THE MONDRAGON MODEL

There is one experiment that is worth noting here. The Mondragon Model. It is an experiment dating back to 1954. I first read about it in the book "The Organization of the Future" published by the Drucker Foundation, editors Frances Hesselbein, Marshal Goldsmith and Richard Beckhard. In chapter 11, Joel Barker summarizes the history, driving force, and success of this model. The setting is a poor region of Spain beset by high unemployment, poor education, and no positive outlook for the future. A young Jesuit priest by the name of Don Jose Maria Arizmendiarreta set out to change all of this. First by starting a vocational school and later embarking on an entrepreneurial experiment that created a mushrooming number cooperatives. The group by the early 1990's had a revenue volume of $ 2.6 billion and employed more than 21,000 people.

The principles of Mondragon included democracy, worker ownership, innovative financial management, pay equity, and self-funded retirement schemes.

I have not followed the success of this model in the latter days. However, I remain impressed to this day with the notion that worker democracy and ownership can be a powerful alternative to the stockholder model. I also admire the community building benefits the model created for the affected region.

I invite the reader to comment on this subject. At a time when jobs are scarce, communities are suffering from high unemployment and overall decline, the Mondragon Model can be a source of inspiration for job creation by stimulating communities in joint, collaborative initiatives.

Enjoy the ride on the learning curve!