Thursday, January 31, 2013

The Customer Is Always Right

I have postponed writing this article because I have never suffered unemployment in an economy like this one. Yes, I have seen hard times. I graduated in 1973 just in time for stagflation and the first oil crisis. Good jobs were hard to find. For a few months I packed rolls of cloth in burlap sacks, not exactly what I expected with a college degree in hand. Still, I was able to find a job that paid enough to cover my basic living expenses with enough left over for beer and even some money for savings. In 1982 I lost my job in what was then the worst recession since the great depression. I used the opportunity to go back to school and earn a degree in engineering. I did this on a combination of savings, my wife’s job, and a scholarship. Since then the cost of higher education has increased at 5 times the rate of inflation and student debt has become a national disgrace.

Today, the only meaningful improvement in U-3 unemployment comes from people dropping out of the workforce. Yes, people in the baby boom (like me) are starting to retire. Unfortunately, many of my peers are drawing Social Security simply because they have no options. They can not find full time employment. For generation Y (those born between 1980 and 2000) the U-3 unemployment rate is over 11.5%. Life is on hold for the so called boomerang children. They are locked in a perpetual state of adolescence, living with their parents, postponing marriage, forming a household, and having a family. All the long term issues associated with such a social condition are yet to be discovered, but the experience of countries like Spain where the problem is worse are not good.

I have been studying job search methodology. The more realistic sounding authors call for the job seeker to forget about his or her needs for a moment and consider the needs of their prospective employer. A personnel officer from Chick-Fil-A once observed, “We don’t hire you because you need a job. We hire you because we need you!”

Charles Hugh Smith, an entrepreneur and financial blogger observed, “The only way to understand why employment is dead in the water is to stand in the shoes of a potential employer or entrepreneur. Remarkably, this perspective is unknown to economists and progressive politicians because they have never been an employer.”

An employer will only hire a new employee when he is pretty darn sure that new hire is going to generate some profits. That is a pretty tall order. The typical overhead costs directly associated with an employee run about 50% of gross salary. In addition there is indirect overhead, materials, office space, equipment, and energy for example. This can run as high as 50%. I have seen these kinds of numbers in a variety of sources.

If an employer pays an employee $50,000 a year that employee needs to generate $100,000 in new business or sales just to break even.

Rex Nutting observed, “Real compensation per hour (adjusted for inflation) has risen by less than 1% since 2007, even though the average worker produces 9% more per hour. By any measure, unemployment is a national tragedy and disgrace.” There are two primary reasons our nation faces such a wretched situation, the cost of government (taxes and regulations) and worldwide over-capacity in most industries and businesses. There aren’t many opportunities for existing businesses to grow and/or the cost of any proposed growth is preventively high.

There are two ways to attack this kind of situation. I know a young man who is never unemployed even though he is a full time college student. Ever since his middle teens he has been inventing his own jobs. He has walked dogs, been a house sitter, installed car stereos, set up and ran audiovisual equipment for our church, rock concerts, and the county. He is extremely tech-savy and a born entrepreneur. If a job doesn’t exist he just invents something. He has the best possible mindset for this economy.

However, most of us (including yours truly) have been programmed by parents and life to work for a great corporation or in a government bureaucracy. To find a job in that kind of organization requires a great deal of intelligence (not that kind of intelligence). The smaller the target the better your chances that you can craft an approach that will work; ask what keeps your prospective employer awake at night; ask how can I provide value that is at least twice what I want to be paid. The better answers you can provide to those questions during the employment process the more likely it will be that you will find that dream job. Consider an interview not an interview but a presentation of your business plan for a prospective employer. Consider your prospective employer as a customer and remember, “The customer is always right.”

One more thing: Consider this quote from a speech given by Winston Churchill during the darkest days of World War II, “Never give in. Never give in. Never, never, never, never—in nothing, great or small, large or petty—never give in, except to convictions of honour and good sense. Never yield to force. Never yield to the apparently overwhelming might of the enemy.”

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