Archive for March, 2010

If Winning Isn’t Everything, Why Do They Keep Score?

Consumer confidence is up, mass layoffs are down.  On the surface this may seem to be indicative of good things to come, but peeling back the onion tells us a different story.   According to the monthly survey of consumer confidence, positive sentiment rose to 52.5%.  While still an abysmal showing given that two thirds of our economic performance is driven by consumer spending, it was an improvement from the previous months 46%.   Drilling down, it was found that 42% of respondents have a bad outlook on the economy while only 8.6% had a positive outlook. 

Perhaps more telling were the 1,570 mass layoffs, where a single employer fires at least 50 people, reported by the Department of Labor for the month of February was down from January.  That slight improvement did little to quell the concerns of those 155,718 people who were kicked to the curb in just those layoffs.  The four week moving average for unemployment claims is 453,750, far above the 300,000 that would be an indicator of an improving economy.   The reality is that as much as the administration and the mainstream media want the economy to be better, especially in light of coming elections, it is not. 

Certainly there are steps that can be taken to improve the economy, such as the Obama administration’s recent announcement that they will open the shore off of Virginia for oil exploration. One step forward.  Unfortunately that coincides with an agreement made to close portions of Alaska to further drilling.  Two steps back.  

In order for the economy to get back on track, our nation needs to take two steps forward.   There is little doubt in my mind that we can accomplish this; and much, much more.   We are a mere paradigm shift away from regaining the stature as the greatest nation on earth.   However, this cannot and will not be accomplished until the federal government steps aside and allows the market to heal itself from the very ills caused by an overly intrusive federal government and their excessive taxation and regulation.  

With 16,000,0000 jobs lost since the start of this recession, we need to implement plans that will work.  Unfortunately with each new plan implemented thus far, from the Stimulus to the Jobs Bill, we are seeing a continued uptick in unemployment. 

As any good coach knows, if there is trouble by halftime, it’s time to readjust.  If the fans are restless, give them consideration.  Often times they know the game as well, or better, than the coach on the field.  Perhaps they are seeing things that the coach isn’t seeing or the players aren’t identifying.   We, the fans, understand that the game is half over but by no means is it lost. 

It’s time to readjust, key in on opportunities and identify a way to post a winning score.  In economic terms, the score is getting unemployment below 5%, keeping inflation in check and getting the housing market back on track.   The current playbook needs to be scrapped and one that works brought in.  

By creating incentives, such as massive tax cuts, to get businesses to hire and consumers to buy, we will see both an improved economic condition and increased revenues to government.  In a game where Hail Mary’s continue to fail, it’s time to recognize that rewarding those who have opted not be winners is hurting those who seek to win the game.   It’s time that we get back on track and use the playbook that can once again win America an economic Super Bowl ring.

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March 31, 2010 at 8:06 am Leave a comment

If You Can Find A Path With No Obstacles It Probably Doesn’t Lead Anywhere

AT&T Inc.  Announced that it would take a $1 billion non-cash accounting charge in the first quarter because of the health care overhaul and may cut benefits it offers to current and retired workers.

From a business perspective, the accounting charges being taken by massive domestic employers could spell a lot of trouble for employees who have every right to be fearful of getting kicked to the curb.   

In just the last week, AK Steel, Caterpillar, Deere & Co., Humana and Valero Energy have all announced similar changes, which 3M chiming in late Friday to announce their hit of $90 million dollars.

In doing simple math, these types of accounting charges will add up to two things; higher consumer prices as costs are passed on to consumers and higher unemployment as employers look for ways to limit their exposure to the newly passed healthcare legislation.    Either of these alone is usually enough to derail an economic recovery, but together they spell a perfect storm for any hope of a near term economic recovery. 

Beyond the larger companies getting hit, what is this doing to smaller companies?  With 67% of all jobs created by companies of 499 or fewer employees, it is critical to understand what business owners will be doing moving forward.  

For them it’s a double edge sword.   According to the National Federation of Independent Businesses, the high cost of healthcare is killing small business but most entrepreneurs are ideologically opposed to a government takeover.

By their very nature, entrepreneurs are skeptical of government.  While they welcome some aspects of the healthcare reform, the view of government being able to succeed where the private sector has struggled is dubious at best, especially when considering the government failures in the areas of Medicare and social security. 

What history tells us is that the costs associated with the new legislation will be substantially higher than anticipated.   Consider that when Medicare was established the anticipated cost in 1990, when adjusted for inflation, was to be $12 billion dollars but ended up costing $107 billion.  Extrapolating what has occurred with Medicare exponentially is what businesses are considering today.  

The recently passed legislation puts about one sixth of the economy under the purview of government.   Businesses are justifiably troubled by this and are going to look for innovative ways to reduce their costs so as to remain competitive.  

Labor costs are typically between 50 and 60 percent of an organization’s capital outlay.   That cost is going to escalate, but again nobody knows to what extent.   With card check, cap and trade and other potentially high cost legislation pending business owners continue to warily take a wait and see approach.  

The reality for those who are employed by large and small firms is a new found uncertainty stemming from the certainties being higher taxes, higher costs and potentially permanent double digit unemployment.  

Now is the time to consider your options, as the job market will get more volatile in coming months.   As every employee should know, no job is indispensible.   The more strategic one’s position is within an organization, the harder it will be to find a job of similar economic equivalency.    The more tactical, the higher the probability that companies will seek outsourcing solutions in countries that won’t hamstring profitability with excessive taxation and regulation.  

It is ironic that healthcare first came to the forefront during World War II when it was offered by employers to prospective employees as a way of circumventing government mandated wage controls.   Now we have come full circle, with a new government mandate that employers now must find a way to circumvent if they hope to retain any semblance of profitability or a competitive edge in the marketplace. 

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Chris Tidball is the author of Kicked to the Curb: Twenty Essential Rules For Coming Out On Top When Your Life Has Been Turned Upside Down.  To learn more, please visit www.christidball.com.

March 29, 2010 at 7:40 am Leave a comment

Let Concern Drive Us To Action

With the ink still drying on healthcare reform, we are beginning to see the private sector response to the public  sector mandates.   Caterpillar, Medtronic and Humana are just a handful of companies who are already anticipating layoffs as a direct result to this new legislation.   Even Verizon, a supporter of the bill, has indicated that the costs are so great that there may be future implications.  

While many provisions of the bill don’t take effect for years, this could be a eerie precursor of worse things yet to come.   The big wildcard in the healthcare debate is exactly how many jobs will be lost.  Even economists are not settled in this regard.  While the prevailing wisdom seems to indicate that this act by Congress will result in permanently higher private sector unemployment, it is unknown to what extent these jobs will be replaced by government positions necessary to oversee this new entitlement. 

According to the Chicago Breaking Business News, Caterpillar, the world’s largest machine manufacturer has said that this new will increase their costs by more than $100 million during the first year alone!. “We can ill-afford cost increases that place us at a disadvantage versus our global competitors,” said the letter signed by Gregory Folley, vice president and chief human resources officer of Caterpillar. “We are disappointed that efforts at reform have not addressed the cost concerns we’ve raised throughout the year.”

A letter Thursday to President Barack Obama and members of Congress signed by more than 130 economists predicted the legislation would discourage companies from hiring more workers and would cause reduced hours and wages for those already employed.

This should come as no surprise to even those with the most rudimentary understanding of economics.  The bill as it stands today will raise costs, increase regulations and mandate that way businesses are run.  This is not the way that entrepreneurs are used to conducting their affairs and, by their very nature of creativity and innovation that made them successful, they will likely come up with new ways to circumvent what appears to be an unconstitutional and largely unfunded mandate.  

In Kicked to the Curb, I discuss some of the historical implications of government intervention in the private sector and the results, whether they be intended or unintended consequences.   With the passage of this bill, we will see both.   If the intent is to grow government, then it is likely to occur.   The problem will be the funding of government which, even at its currently level, is far from sustainable.   As we have witnessed with a mere 10% unemployment rate, federal, state and local governments are all struggling from a substantial decline in revenue. 

Should unemployment reach mid teen levels, as has been the case in other nation’s that have experimented with socialized medicine, this could necessitate either a substantial tax increase or reduction in the size and scope of government at all levels.  

Either of these inevitable outcomes will have a tremendous impact on the general population, who are beginning to understand that elections have consequences.   An increase in taxes is certain to force even more businesses to cut back and could cause either a double dip recession or a full blown recession.  A decrease in the size of government, while much needed, could create a perfect storm if thousands of employees were to saturate the unemployment rolls amidst an environment where the private sector is simply refusing to create more jobs.

I am not alone in this fear as a recent poll has suggested that 79% of voters fear that healthcare reform could result in an economic collapse.  The reality is that we have entered a slippery slope, in particular businesses who will have to bear the burden of these costs that will necessitate their recouping money through layoffs or increased costs to consumers.   The reality is that the solution will likely be a combination of both, which unfortunately will mean an increase in both unemployment and inflation at a time when neither is acceptable.  

Fortunately much of this legislation, in particular some of the higher cost items, don’t take effect for several years.   Businesses should use this time wisely to educate their employees about the ramifications of full implementation and what this could mean to their future employment opportunities.  To fully understand the impact on the employment outlook in our nation business leaders have an obligation to disclose when and how the new bill will impede productivity and profitability.   With a better understanding from those who create the jobs, perhaps those who have the jobs will make their will better understood at the ballot box in future elections.  

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Chris Tidball is the author of Kicked to the Curb: 20 Essential Rules For Coming Out On Top When Your Life Has Been Turned Upside Down.  He provides bottom line solutions to help businesses maximize their profitability and can be reached at chris@christidball.com.

March 26, 2010 at 5:44 am Leave a comment

If It Moves Tax It; If You’re Smart Avoid It

The importance of business to the bottom line of our nation is something that can never be marginalized, as it is the lifeblood of our economy.   Throughout history, nation’s that have cast aside private sector innovation in exchange for government solutions have failed; without exception.   Even in the Marxist Chinese regime, capitalist concepts are consistently used to improve their bottom line. 

The graph adjacent to this column provides a visual analysis of unemployment rates in six states where the dichotomy between business and government that has become the great abyss.   In an ever more polarized political world, the value of business is often being diminished by those who view the salvation of America through the prism of bigger government.

One can’t emphasize enough that government has not, nor can it ever be, the solution.   In states where government has traditionally held a limited role and looked favorably upon business such as Texas, Wyoming and South Dakota, we see that unemployment rates are trending well below the national average.  In states where government has taken great strides to impede the private sector, California, Ohio and Michigan, we see unemployment trending well above the national average.  

Interestingly, there is a direct correlation between lack of government oversight and success of private enterprise.   Many businesses opt to avoid states because of intrusive government, high taxes and a generally unfavorable business climate.   Such states include Washington, which has a gross revenue tax, California with a high 8.8% state tax along with a lot of anti business legislation and Oregon with a 9% state tax.   Interestingly, these are all states with high unemployment rates.  

According to the Tax Foundation, businesses should always seek out the best business climate when incorporating, which will generally have a positive impact on unemployment rates which, in turn, benefit the states.   Those political leaders who recognize this dynamic will benefit because of increased tax revenues.  

The Foundation goes on to list the Top 5 states for conducting business as Wyoming, South Dakota, Nevada, Alaska and Florida.   The Bottom 5 states are New Jersey, New York, California, Ohio and Rhode Island.  

When considering where to incorporate, look at several key factors: 

1)     Examine the states regulatory climate which has an absolute correlation to not only the likelihood of a business succeeding but drives everything from unemployment to taxation. 

2)     What is the state’s tax situation?  States need funds to operate and those with high unemployment will turn to businesses to make up the difference when people are out of work and tax revenues are depleted.  

3)     What is the state’s stance on individual privacy?   In Nevada and Wyoming it is possible to be a “hidden officer”.  Many states don’t permit this.  

4)     Determine if a state will allow you to run your business the way you desire.  In other words, will the government stay out of the way? 

5)     Look at states that offer the best business climate; lower taxes, capable employees and limited unionization.  

Now going back and looking at the list of the top and bottom five as provided by the Tax Foundation, it becomes evident that states with notoriously bad business climates are not good places to set up shop.  Interestingly, the bottom five have unemployment rates at or above the national average while the top five fare much better, especially if the seasonality of agriculture and construction are taken out of the equation. 

So what does this mean moving forward?   For those who have been kicked to the curb, give consideration to where you are in relation to the jobs.   If you are considering hanging your own shingle, take a look at the business climate in your state.   There’s a good chance being out of work and having limited opportunities have a direct correlation to the level of control by politicians in your state house. 

As government gets more intrusive and certain states dig in their heels in opposition, look for the dichotomy between good business states and bad business states to become an even greater abyss.   To ensure your longevity and success, make sure you position yourself where the opportunity will lie in the future.   In the words of Ronald Reagan, “Government is not the solution to our problem, government is the problem.”

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Chris Tidball is the author of Kicked to the Curb: 20 Essential Rules for Coming Out On Top When Your Life Has Been Turned Upside Down.  He provides businesses with no nonsense, bottom line solutions to maximizing their profits and can be reached at chris@christidball.com.

 

March 25, 2010 at 7:28 am Leave a comment

The Implications of Healthcare on the Viability of the American Business

With the new healthcare bill signed into law, the wheels of change have been set into motion as businesses analyze the financial implications to their bottom line.   While much of the bill does not take effect immediately, there are certain costs that businesses must figure out how to absorb. 

The first concern of many business owners is exactly what is contained in the healthcare reform legislation.  It seems that while many politicians were eager to sign it, not many can actually explain it.  It is precisely this type of uncertainty that will have business owners on edge for the coming months, remiss about growing their organizations until the mandates and associated costs become clearer. 

The little bit of information that has bubbled up to the surface is certainly alarming, such as the $409 billion in additional taxes reported by Bloomberg today.   Equally as concerning is the $69 billion in penalties that the government will levy against businesses and individuals who don’t comply with what seems to be an unconstitutional, and largely unfunded, federal mandate. 

In my recent discussions with small business owners, the tone hasn’t been overly optimistic.   As the nation comes out of the recession, these people realize that they must have the ability to grow their organizations to meet new consumer demands.   Due to the uncertainty, most are taking the position that they simply won’t be hiring though.  They will do more with less with some of the more vocal opponents of the bill telling me that they are either going to retire or shift the majority of their work overseas.  

Invariably my recommendation is that business owners must adapt to any crisis.  From natural disasters to economic downturns, businesses have proven to be amazingly resilient over the years, which is precisely why our nation became great.   It is critical that we all remember that it wasn’t government that made America great, it was small business owners and their employees.  

Businesses must look at the healthcare mandate as a new cost of doing business.  While seemingly punitive in nature, it is not something that will be going away any time soon.   Businesses have options to become creative in maximizing their bottom line in light of Obamacare.

While hamstrung by this legislation, they will face the dilemma of laying off, moving jobs overseas or simply ceasing operations.   To say the least, millions of Americans will be kicked to the curb as a result.

I am not a fan of closing down one’s operation because that is a sign of giving up.   Rather, businesses need to take a creative approach to finding innovative ways to provide their products and services without increasing costs.  

The biggest beneficiaries will be outsourcing agencies.   In today’s global economy it is entirely within the realm of possibility to own a business in the United States but outsource every position in the company overseas, thus freeing the ownership from being penalized by new mandates.  

The other big beneficiaries will be individuals who are willing to take it upon themselves to work as independent contractors, in essence becoming business owners themselves.   While there are costs associated with moves such as this, there are also many benefits and tax breaks available.  In addition, many independent contractors will have incomes that are under the threshold for healthcare tax credits, meaning that they can get insurance for substantial discounts.  

While many, quite possibly the majority, of Americans will see their healthcare premiums and medical costs rise as a result of this healthcare legislation it’s important to understand that there are those who will come out ahead.  

Businesses seeking creative solutions will gain a competitive edge in the marketplace by taking advantage of a new generation of employment.   While this will sadly come at the expense of traditional employees who will be forced out of jobs, we have to recognize that we are on the cusp of redefining employment in ways not seen since World War II.  Ironically, it was at that point in history when health insurance was offered to employees as a way to circumvent government imposed wage controls. 

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Chris Tidball is the author of Kicked to the Curb: Twenty Essential Rules For Coming Out On Top When Your Life Has Been Turned Upside Down and can be reached at www.christidball.com.

March 23, 2010 at 5:38 pm Leave a comment

The Implication of Healthcare Reform on Small Business

What will the sweeping healthcare reform passed by the House of Representatives do for the employment prospects of the unemployed and underemployed?  To understand the likely scenarios, it is first important to understand what is contained in the bill.

The legislation does contain some key popular, albeit very expensive provisions, such as prohibiting insurers from denying coverage based upon pre-existing conditions and providing subsidies to those who can’t afford insurance.  It also contains some questionable items, such as mandating that all Americans carry insurance, a provision not likely to withstand a legal challenge on constitutionality. 

Unfortunately this bill does little to curb the rising costs of healthcare for small businesses, which would have been easily addressed with simple solutions such as tort reform or allowing individuals to purchase insurance across state lines.  In addition, most of the provisions of the bill don’t take effect until at least 2014, an overtly transparent move intended to protect those who passed this legislation from having to bear any semblance of responsibility for inevitable costs that will be exponentially higher than claimed today.  

Many of the mandates impact businesses with 50 or more people, while small businesses are defined as those having fewer than 500.   This means that, by definition, most small businesses will be penalized by the legislation and will have to now determine the best way to protect their ability to make a buck.  

In all likelihood we will see businesses scale back in either hiring or benefits.   In essence, they will either rob Peter to pay Paul or simply not pay Paul at all.   The passage of the bill all but assures us of continued double digit unemployment for the foreseeable future.   Businesses that were sitting on the sidelines are now hamstrung by new mandates that will have a negative economic impact.  Businesses with less than 100 employees will likely figure out ways to do more with a lot less, scaling back full time employment in exchange for more part time employees.   Bigger businesses will likely split into multiple small companies, again as means to circumvent the punitive nature of the legislative mandates.

That said, there will be a silver lining for some.   Individuals looking to work as independent contractors will likely see a dramatic increase in jobs, as businesses search for alternatives to traditional employees to whom they have to pay benefits.   Companies who provide outsourcing solutions will also see an increase in their desirability as business owners seek to shift the burden of providing entitlements to others.   Unfortunately, we will also see a dramatic increase in off shoring to foreign nations as the new mandate will put companies, even those vehemently against such a move, in positions where they are now forced to move jobs overseas or go out of business. 

Make no mistake; there are beneficiaries to this legislation, namely those who currently are uninsured.  Unfortunately, the beneficiaries aren’t the people who provide the jobs that are now in the unenviable position of having to decide between laying off, scaling back or ceasing operations all together.   As we have seen throughout history,  the only certainties in life are death, taxes and the inevitability of massive government intervention always costing more than expected while delivering results far short of expectations.  

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Chris Tidball is the author of Kicked to the Curb and provides businesses of all sizes with new and innovative solutions to maximizing their bottom line.  He can be reached at chris@christidball.com.

March 22, 2010 at 7:48 am Leave a comment

Faith Based Solutions For Putting America Back To Work

With the new Hiring Incentives to Restore Employment (HIRE) bill signed, it seems that there is a glimmer of hope for the millions who have had their world turned upside down by runaway unemployment.  Unfortunately, the only certainty is that this government solution will put us into further debt while failing yet again to create more jobs.  

This $18 billion dollar bill provides tax credits for hiring the unemployed and a variety of short lived tax breaks for certain businesses.   What it does not do is provide an answer to the question that businesses keep asking; where are we going with the remainder of the economic agenda. 

Think about it; what is the incentive to get a $1000 dollar tax credit to hire someone from the unemployment rolls when I may have to pay $10,000 in new taxes and disincentives as the result of healthcare reform or cap and trade legislation.   Businesses become successful by making wise monetary and strategic decisions and this jobs bill does not provide the incentive to do either.  

Certainly there are steps that could be taken immediately to give businesses some incentive, but items such as permanent corporate or capital gains tax cuts have been pushed aside in favor of entitlement spending.   In the meantime those looking for work continue to stagnate as Congress spends their days on other priorities of far less importance than paychecks for the unemployed and underemployed, now totaling nearly 25% of our population.

Rather than spending time waiting for something to give in this economic climate, my advice is to seek spiritual guidance and look for faith based solutions.   A perfect example is the Employment Support Group with whom I met at the Redeemer Anglican Church in Jacksonville, Florida.   They recognize the crisis facing millions of Americans and understand that their collective effort will do more than a hundred jobs bills could ever do. 

Churches across the nation are forming groups such as this and leveraging a combination of faith and networking; the two critical elements necessary to come out on top in today’s drab economy.  

By recognizing that solutions will come from the faith and business communities and not the government, these groups can work collectively to create new opportunities through their local business community.   While many businesses may be hesitant to hire the long term unemployed, who may or may not have a stellar prior working record, they understand the benefits of hiring those who come with references from civic and church groups who often carry a high level of credibility and clout.  

By starting a faith based initiative, churches have the ability to further reach out into the new community and increase visibility which can in turn improve attendance and membership.   Those leading the charge are often business leaders who have been dealt an unfortunate set of career circumstances but utilize this opportunity to network.   The creativity that evolves from such groups can result in new job opportunities that turn the unemployed into entrepreneurs, freeing them from the shackles and uncertainty of corporate America. 

Take advantage of faith based opportunities in your community.  If there are none, don’t wait; start your own.   If you wait to do everything until you’re sure it’s right, you’ll probably do much of nothing.   If you need some assistance, a great new site to check out is  Work Ministry.

March 19, 2010 at 6:42 am Leave a comment

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Chris Tidball is a claims and revenue management consultant and author of the "20 Essential Rules" series of self and organizational improvement books. You can ask him a question at chris@christidball.com

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