A Right Recruiting Newsletter, 10/2009
This month’s Newsletter will highlight the results of our Federal Stimulus Survey. We conducted this survey last month and have been gathering the results of the last few weeks. For those of you new to our Newsletters and who might not have received the survey, the questions are below. People responded with the appropriate number, 1 through 5.
Federal Stimulus Survey:
1) My company's business has not been helped by the Federal Stimulus Program and we DON'T expect to be helped.
2) My company's business has not been helped by the Federal Stimulus program but we DO expect to be helped as money becomes available.
3) My company's business HAS been helped by the Federal Stimulus program because we have received a specific contract from the program.
4) My company's business HAS been helped by the Federal Stimulus Program because our industry has seen a general pickup in business attributable to the program.
5) My company's business has been HURT by the Federal Stimulus Program because the program has diverted sales away from us to other industries or companies.
We asked people to send back an email with their answer as it relates to their company as of September 2009. As with most of our surveys, the questionnaire went to people working at small and mid-sized manufacturing and technology companies in the region. We received responses from over 150 companies. Our database includes companies in almost all manufacturing and technology industries. Sometimes, we received multiple responses from two people in the same company. When that occurred, if the responses were different, we kept the one from the most senior person. It seemed logical to assume that person would have a better view of the overall business.
I like it when surveys results surprise me. It serves as a reminder that I don’t know as much as I think I do. A couple of things from this survey surprised me and, if I thought it would do any good, those surprises would also serve as a good lesson to our well-meaning friends in Washington. For those of you who read our Newsletter on systemic risk, there is an element of that discussion embedded in the survey results as well.
My approach to this was not political. This was not a pro or anti-administration survey. As with everything in life, my goal was selfish. In planning my expenses, capital purchases and hiring for next year I wanted to know the following:
1) Was any visible business uptick the result of government stimulus? If so, it was likely to be temporary and I shouldn’t budget for a big increase in 2010.
2) Was there significant expected demand in the pipeline that was not yet visible? If companies expect future stimulus benefits my business might see increased demand in the future and I would need to plan for it.
3) If very few companies expected any stimulus benefits, than I could assume that my business would only increase gradually as the economy gradually improves. I could also assume my taxes would increase, probably more than marginally.
The Big Reveal - Survey Results
Now, I will reprint the stimulus questions but include the percentage of answers to each question, rounded out for easier math.
Federal Stimulus Survey:
1) My company's business has not been helped by the Federal Stimulus Program and we DON'T expect to be helped. 50%
2) My company's business has not been helped by the Federal Stimulus program but we DO expect to be helped as money becomes available. 5%
3) My company's business HAS been helped by the Federal Stimulus program because we have received a specific contract from the program. 1%
4) My company's business HAS been helped by the Federal Stimulus Program because our industry has seen a general pickup in business attributable to the program. 20%
5) My company's business has been HURT by the Federal Stimulus Program because the program has diverted sales away from us to other industries or companies. 2%
An attentive reader will notice an obvious problem - those numbers only add up to 78%. I promise that there indeed were about another 20% of respondents who answered with an unforeseen Number 6. Hence my surprise at the results. There was an option that I had not anticipated. I hate when that happens to me, don’t you? I thought that I had thought of everything. Alas, I had not.
The Best Laid Plans of Mice and Men … Option 6
What did I miss? I missed the fact that there are other government programs in play other than the stimulus. While technically not a part of the stimulus program, these programs are indeed part of a general governmental agenda that affects business decisions and planning.
A significant part of the responses, about 20%, came from people who were neutral about the effects of the stimulus plan but who indicated that other federal programs were having a negative effect on their businesses. These programs varied but all were hurting business and all were hurting employment. While they were neutral about the stimulus, they were negative about other federal programs.
A group of companies that make capital equipment indicated softening sales, specifically from utility companies. These OEMs attributed this to concerns about how the cap and trade bill will affect capital spending. Their clients were unable to predict their cost structure and the regulatory framework that the bill will create so, as would be natural, they cut back on all capital spending. That seems logical. How do you figure your ROI without knowing your future costs? This was magnified by the fact that not only was the end result of the legislation unknowable, the timing of the legislation was also unknowable.
That represented about 25% of the unforeseen responses. The others came from companies that had medical products. Their concerns seemed to be focused on future payments for their products – who would pay for them and how much would they pay? Some mentioned the possibility of a potential tax on medical devices that would pay for health care. Some mentioned a potential change in Medicare payments. Some mentioned just plain confusion about what the health care system would look like in 1, 3 or 5 years. Like the initial group with cap and trade concerns, this group was frozen because of a lack of visibility into the future. They had no visibility.
Interestingly enough, not all pharma and medical device companies shared this view. Many reported that their business had not been helped by the stimulus package but they did not mention any negative effects from the health care debate. There can be 3 reasons for this disconnect;
1) My stupidity in not anticipating the aforementioned answer Number 6. Perhaps more companies in the sector are seeing a negative effect from the debate but did not list that answer because it wasn’t on the survey.
2) One group is wildly optimistic about how a changed healthcare system will affect their business.
3) One group is wildly pessimistic about how a changed healthcare system will affect their business.
My guess is that it’s Number 1. I find it’s a good rule in life to never underestimate one’s personal ability to do something stupid.
The depressing part of this is that we are left with the following scenario:
Imagine a car with two drivers. One controls the brake and one controls the accelerator. The car approaches a railroad crossing and the “train approaching/warning” light starts blinking. The accelerator driver responds by doing what he thinks is best – hitting the gas to speed past the train. The brake pedal driver responds by doing what he thinks is best – hitting the brakes to stop short of the train. The end result to this behavior, unfortunately, is likely to be a very large crash.
Both drivers are responding correctly with the tools they have at hand. It is somewhat reminiscent of the overly complex but contradictory business systems described in the last Newsletter – “Systemic Risk- Something New To Worry About”.
I said in my email that this would be a short Newsletter. For me to make suggestions on how to solve this “dilemma of contradictory outcomes” would be both arrogant and dangerous. I am neither smart enough to have an answer nor stupid enough to veer into a discussion of politics.
However, at some point, one would hope that someone might wonder about the possibility that the federal government is spending billions to stimulate the economy while at the same time is sunk into a creating a legislative morass that erases that stimulus before it has any effect. Fortunately, the American economy can survive many misadventures. It can survive misadventures caused by business bubbles and it can survive misadventures caused by governmental blunders. The big question is whether it can survive both simultaneously. At times like this I remind myself of the late 1970’s when we had:
1) 10,000 Russian nuclear missiles pointed our way
2) 20% mortgages because of runaway inflation
3) Unemployment over 10%
4) The potential for gas rationing and a return of gas lines
Compared to that, even the worst case scenario behind this survey appears to be pretty rosy.
What We Are Seeing Here On The Ground
From here, it seems that things are improving. More and more of our clients are indicating steadier or improving business conditions. Some have called back their second shifts. While our business is improving, more heartening is the content of the assignments we are receiving. Earlier in the year, everyone wanted to cut costs. Lean skills, financial skills and cost cutting assignments were most of our business. This is pretty typical when the economy turns south. After all, a good Industrial Engineer should be able to save more than his or her salary in savings.
However, over the last few months we’ve gotten more and more projects related to top-line growth. These are sales and marketing related jobs. That’s an important switch and a sign of confidence. In my experience, for a company to invest in a new sales person or marketing director, they must first believe that there are new sales to get. Hopefully this is a harbinger of good things to come. But, in the back of my mind lies the suspicion that our recovery is leaning into a self-created headwind.
As ever, thanks for reading this far and please, don’t forget Right Recruiting for all of your employment needs.
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