Predicting the Future by Gary T. Drake

© Copyright 2009 Gary T. Drake
All rights reserved.

Will the DOW crater to 3200 during the next twelve months?  Will unemployment increase?  Will banks be forced to dump millions of dollars in foreclosed homes on an already depressed real estate market?  Will mortgage companies decide to become landlords, further driving down the prices that can be charged for rental properties?  Will oil prices spike to over $100 a barrel?  No one on earth really knows the answers to these questions with absolute certainty. One thing is very likely, however:  Many companies will continue to need to become increasingly more competitive, in order to survive.

Whether companies are forced to reduce their numbers of full-time employees due to world-wide financial system calamities, or whether they implement reductions in force merely to increase short-term profitability, the challenge for everyone will include determining how a finite pool of highly skilled and experienced technical resources can best be leveraged during times when they are needed most.  In addition to having to navigate a plethora of legal hurdles surrounding the treatment of employees, companies today must work very hard to protect their intellectual capital.   Modern technology has made it very easy to copy volumes of printed material that is now widely available and transportable in digital form.  Company loyalty, which was taken for granted decades ago, is almost unheard of today.  Many employees now feel as though "fat cat" company executives have grown rich on the backs of their workers and would drop them like a bad habit during an economic downturn, rather than risk a negative impact to the bottom line.   

Economic uncertainty and the single largest cost of running a company
Many years ago, some of us worked for a large aerospace company that employed thousands of highly skilled and some very specialized engineers.  Their ranks included design engineers, mechanical engineers, test engineers, environmental engineers, and just about every type of obscure engineering specialty known to mankind at that time.  During the late 1980's, the company was going through a shocking transformation that impacted its employees on a daily basis.  Once over 90,000 strong, this huge stalwart of government defense contractors had shrunk to less than 40,000 people world-wide and was in a state of decline that did not change course for many years afterward. 

Partially out of frustration over a situation that he had no control over (and because he was a highly intelligent and very clever individual), the managing vice president of engineering at the time commissioned a video production.  This movie was, in a lighthearted way, designed to highlight the predicament of the engineering staff  during what had been a slow decline of a company and the community that depended upon it socially and economically.  The video began with scenes of a young and increasingly prosperous city expanding around the huge defense plant during the 1950's.  The scenes transitioned as dates rolled over the screen, until  they began to represent noticeable decline in the community that once surrounded the plant.  Graphitized buildings, broken windows, homeless people on the street, the scenes began to tell a story of a once great company that was now a shell of its former self.  The highlight of the film for me, was a scene that focused on the front of one of the engineering buildings.  A large group of former employees was gathered below the steps in front of the building as a well dressed gentleman addressed a crowd of once handsomely paid engineers hoping to find a way to feed their families.   "Today, we are looking for  RF thermal dynamic environmental test engineers experienced with 3-D solid modeling of multi-plane hybrid microelectronics assemblies", the well-dressed man shouted through a bullhorn.  Two people from the crowd raised their hands and were allowed to enter the building.  This scene was repeated a few times for effect, as the barker summoned persons that could meet a series of various highly specialized job titles and descriptions.

One of the points that we were supposed to take away from this film made by an engineering executive over twenty years ago, is that highly specialized skill sets are not easy to come by once they are lost to corporate downsizing or other attrition.   So how can companies that must downsize their staffs due to economic or other reasons best manage a combined pool of employees and contract resources?  One way, is to enter into a partnership with a "trusted advisor" type of consultancy that can help maintain and safeguard the corporate brain trust while providing increased value to the business. 

As some of us learned in business school, the single largest element of cost in running most companies is employee related cost.  This includes not only salaries and benefits paid to employees, but also the high cost of recruiting, training, and retention.  In the mist of today's economic uncertainty, it may not be possible for some companies to weather a financial storm while maintaining large numbers of under-utilized full-time employees, while paying them full health and other benefits, plus vacations, sick time, paid holidays, etc.  In the future, more companies will need to  turn to consulting as the best way to get critical tasks done quickly and economically.

Rent to "own " and "try before you buy"
Over the years, I have hired numerous individuals as consultants or contractors that, once proven to be valuable resources for our business, were hired as full-time employees.  This practice remains one of the few no-risk methods of acquiring skilled resources to get major projects completed in a timely and cost effective manner.  Like a construction crew that you would hire to build a house, consultants and contractors do not require that you pay them costly health benefits, paid vacations, training, gym memberships, company cars, or other perks.  Good consultants will only charge you for the work that they deliver to your complete satisfaction.  When you add up the cost savings resulting from hiring consultants or contract labor, as opposed to recruiting, hiring, training, and retaining full-time staff, it is easy to see how you will end up getting much more value for your limited budget by entering into a partnership with a good consulting firm that can be your on-call trusted advisor.

Prediction for the future
Many years ago, I was part of a management team that was involved in an outsourcing transition.  One of the many tasks involved in the transition was to standardize the company's payroll cycle.  The outsourcer determined that it was just too costly to maintain multiple different payroll schedules for different classes of employees.  In one case, our company inherited a group of hourly, union represented employees that had been used to being paid on a weekly basis.  The outsourcer wanted to transition these employees to a more standard bi-weekly payroll cycle.  When the move was announced, I had one lady approach me in a panic.  Her voice was higher pitched than normal and she sounded frantic.  She shouted at me that if she only got paid every two weeks instead of every week, she was not going to be able to pay her bills.  I attempted to calm her by informing her that she would not be getting even one penny less than what she had been making and that while she would only be getting her paycheck every two weeks, each check would be twice as large as her former weekly checks.  Despite my reassurance, this lady continued to scream at me that she would not be able to pay her bills and that the change in payroll schedules was unfair.  Like this unfortunate lady, some people just don't understand how to budget or plan their lives properly.

I have friends who have been in the real estate business for many years.  Despite being reasonably intelligent people about most things, many real estate professionals have been hit hard by market changes which have resulted in these people generating unstable or highly variable income streams.  One might think that these professionals would have anticipated the possibility that their income might not be the same each month, as the market goes through various up and down cycles.  Apparently, many of these folks got caught up in the euphoria of making "big bucks" for short periods of time.  It is easier than one might imagine, for someone to look at a single large monthly draw and begin to delude themselves into thinking that they can sustain that level of income indefinitely and start spending at a level commensurate with a large monthly income.  I predict that in the future, many more people besides real estate professionals will need to become better at planning and budgeting their lives, because more people will be forced to change their ideas about how they earn a living.  The historical employment arrangement that was typical for so many years is slowly evolving into one where even full-time employees are considered to be "at-will" and can be terminated at a moment's notice, without cause.  More companies will be forced to turn more often to consulting for expertise to get projects completed.  More employees will become accustomed to working as consultants or contractors in order to earn a living.  In the future, the term: "pay for performance" is really going to mean just that.  


About the Author
Gary Drake is currently CEO of Fast Forward Investments, LLC.  His more than 26 years of industry experience includes executive and leadership roles at Gartner, Inc., Science Applications International Corporation, Computer Sciences Corporation, and General Dynamics Corporation.  For the past 12 years, Mr. Drake has consulted to some of the world's largest companies and has helped numerous other public and private organizations derive increased business value from their investments in information technology.


Home  Terms of Use | © Copyright 2007-2009 Fast Forward Investments, LLC | Contact Information | Privacy Policy