Working Thoughts

“You wouldn’t believe it.” he says, although I’m sure I not only would believe it, but I can top it. “I was in first place in my league until Aaron Rodgers has a concussion and has to sit out. My back up was whoever the guy is from the Lions.” I pretended to listen, but I’m really thinking about my own team. These fantasy football stories aren’t for the person hearing the story, they’re for the person telling it. Occasionally it’s about how they won the league, but much more often, the tale is about a loss. “If Rodgers didn’t get hurt…” There’s always an “if.” He’ll be back next year.

The beauty of fantasy football is every year you get to pick your team. Most of the elite players – the A players – are taken in a draft or auction. The handful you select become your guys, your team. You then get a chance to pick up free agents during the season to supplement the team. It’s fun to look over the team and watch on Sundays.

Something similar is happening in the business world. We’ve hit a sweet spot with demand and productivity and it’s creating a Fantasy Football type of workforce.

Suppose for simplicity sake there are five types of employees – A, B, C, D, and F.

Normally a big company, and for shorter durations, a smaller one too, will tolerate D employees in the hopes that they can become at least a C employee. But when the economy is tough F, D, and many C employees are let go. The business just can’t support them. This is your basic business cycle economy or put another way, aggregate demand for goods and services is down. When people stop buying, revenue suffers and revenue pays the bills like payroll and health care.

But what’s weird is corporate profits hit an all time high in the third quarter of 2010. A staggering $1.66 trillion. Up from $1.61 trillion in the second quarter and $1.30 trillion in the third quarter of 2009. A tremendous growth rate. Well, when you look closer at it, much of the third quarter growth was from the financial industry and the value of those gains tend to be theoretical or only materialize over long horizons.  But either way, profits are out there and cash is sitting on the books of many large companies. So why aren’t they hiring?

The reason is because of demand and the A employees. Demand is just enough to keep the machines running and creating economies of scale opportunities. But demand isn’t too high to hire extra workers (temporary hires are filling the gaps when needed) to pick up the slack. Meanwhile A employees are reviewing how the processes work and identifying inefficiencies. They are re-engineering their companies without causing disruption. Productivity goes up and meets a slowly improving demand level. The cycle continues.

A employees are talented and are getting raises. And just like in Fantasy Football, they are carrying their teams. If the raise isn’t there, they are being cherry picked by other companies.

This somewhat sounds like a structural economy issue as well. The demand is there, but the skills for the D, C, and B employees aren’t. This is an effect of globalization. The demand is there, but it’s being met not in the US, but in countries like India and China – manufacturing jobs particularly.  This doesn’t spell doom for D, C, and B employees because the scales tend to even out. The rising tide (cheap labor isn’t so cheap) in countries like China will make companies look again at the US, but while that is happening, education – learning how to problem solve – needs to take priority. Otherwise, their skills won’t be differentiated from other workers and other countries. We need more A employees.

This isn’t about labor anymore. It’s about talent. Elite performers get picked and others just fill out the roster or so the story goes.

Working Thoughts 1/11/2008
Examine Each Job as One of Many Crime Scenes

Working Thoughts 1/11/2010
Job Creation in the 2000s?