The economy is booming. Unemployment is at its lowest point in years. Things are just great in most places. So what's there to worry, about? Some would say "plenty." But it's the positive things that sometimes turn around and bite you, and to make you ask: "Who's in charge here?"
Take unemployment. It's mostly good for the economy. A low unemployment rate–in January at 4 percent, the lowest level in 30 years–usually translates into a more mobile work force. The inevitable consequence of a tight job market is that companies are sometimes forced to raise compensation, to recruit and retain skilled employees. Then to pass along their higher overhead costs, they raise prices. Now is no different. For the most part, workers know they don't have to try very hard to find another job with similar pay and benefits. So they believe, rightly so in many cases, that they have more control than usual. This confidence also leads to increased consumer spending and borrowing and on to even stronger job growth and more spending. Where will it end?
Think about the consumer. Rising education levels, a revolution in social values and the proliferate use of the Internet and e-commerce has changed the buying habits of consumers. Educated consumers embrace the Internet as a tool for simplifying their life. They consider themselves experts in purchasing and will evaluate themselves who offers the greatest value, highest quality, best treatment and respect to themselves as consumers. They are willing to bypass traditional distribution channels to get that perceived value by cutting out the middleman, hence making them feel in total control of their purchases. Creative marketing, price controls, and increased service are required by the bricks-and-mortar businesses offering products or services.
Look at a totally different area of the work place. Health insurance coverage. HMOs face an increasing amount of liability, which they pass on to their clients in the form of price increases. Meanwhile, the government continues to pile on benefits mandates. Health care costs continue to mount as our population ages–most of them covered by an employer-based health care plan. Those of us in business face double-digit price hikes with no resolution in sight. Insurance carriers are not particularly friendly to small businesses wanting to offer group health coverage as an employee benefit, either. The cost is just out of reach for some small businesses. Larger businesses may try to pass increased co-payments on to their employees, or will likely offer plans with less coverage.
The government works wonders in other ways. Every day, it seems, we hear of yet another government requirement that forces businesses to spend money. OSHA and the EPA are the usual culprits, but they only represent the top of the iceberg. To hear the bureaucrats talk, they're taking their action–putting their mandates into place–to protect us from each other. What they don't talk about, though, is that most government agencies need to take action–any action–to protect themselves. After all, who needs a "do-nothing" agency? Their funds would be cut in a minute by a Congress looking for agencies whose budgets sit idle. As of this writing, Congressional hearings are trying to define the meaning of the Labor Department advisories. Some lawmakers accuse the Clinton administration of using advisories to put policies in place that couldn't get congressional approval, and panicked employer groups worry that ignoring governmental advisories leaves them liable to civil or criminal proceedings.
That brings us back to the question we posed at the beginning–who's in charge, anyway?
If we examine the four examples we've cited, it's certainly not the business owner. The owner is the victim. But we've never liked to play the victim role. There is no easy answer–or any single answer–to this situation. In a market-based economy, low unemployment will always produce the kind of situation we're all encountering. Health care is an extremely complex subject that defies an easy solution. And government agencies have become a life force to be reckoned with–it takes considerable clout to affect even a single decision.
When business is good, management and business owners aren't thinking as much about the company's vision, or evaluating their strategic plans. It's during a crisis time desperate CEOs turn to consultants to help them define their core values, trim their budgets, tweak their product or service offerings, identify their customers, and define their geographic markets
We wanted to raise an issue that we're sure in on everyone's mind in one way or another. We're dealing with problems that seem unsolvable or too complex. But we do recognize the value of strategic thinking about the vision of your company as an ongoing process–in good times and bad. A clear vision of your company's products, services, employee talent, market segments, competitors, suppliers, geographic markets, etc. will help keep you in charge. Systematic reviews of where you want your company to be next year, in five years and ten is the essence of competitive advantage.
Who's in charge here? We like to think we still are. IBI