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An Open Letter to Employees:
Start Now to Prepare for the Future

By Mark W. Sheffert
December 2004

During the past election year, we heard a lot of debate about unemployment, economic recovery (or the lack of it), and jobs being outsourced overseas. Sadly, the real picture is lost in the political rhetoric.

Beyond the headlines and sound bites, the real picture is this: The world has changed, and employees have to change with it or get left behind. I truly feel for you if you have lost your job, are afraid of losing it, or are stuck in a job you don't enjoy. But there are powerful market forces at work in today's global economy, and simply feeling bad about it is not going to change reality.

Just the Facts

While the economy is growing, there are still a number of factors causing unemployment and job insecurity. We probably won't  ever see again the low unemployment rates that we had during the '90s. 

That booming economy was created by a bull market that turned into a huge bubble, then vanished into the thin air it came from. Businesses don't have extra cash lying around anymore to hire people that they don't need. The economy must create about 150,000 new jobs a month just to keep up with population growth, let alone replacing what was lost when the dot-com bubble burst.

Your company now faces global pricing pressures, competing not only locally or nationally, but with companies in China, India, Europe, the Philippines, and so on. We're embarking on an economy driven by "knowledge workers," in which successful businesses are flexible and agile. The means of production is brain power, not machine power, and business systems that can span continents. As a result, your company has to keep its fixed costs as low as possible. (So take a lesson from Chevy Chase's Clark Griswold character in National Lampoon's Christmas Vacation: Don't put a down payment on a new swimming pool with hopes of a big year-end bonus, because this year your bonus might be a membership in the Jelly of the Month Club.)

Another factor in unemployment is technology. Put yourself in the shoes of your employer. What would you do if you could use robotics or software systems that show up every day, do their jobs flawlessly, don't expect vacation and 401(k) pay, don't ever get sick, never complain, and when their skills aren't needed anymore, can be terminated without severance pay, unemployment pay, or a suit for wrongful termination?

I'm not just talking about blue-collar jobs here, either. Look at Capella University, the nation's fastest-growing online university, and Phoenix University, the largest. Fully accredited, but without the overhead costs of buildings or tenured professors, they provide instruction via the Internet. Students can now learn from the best professors around the world, attending class from home at their own convenience and at a fraction of traditional university tuition. Old-school professors working part-time in their dusty offices may someday join the ranks of unemployed steel workers.

Productivity rates are increasing and that's another reason for unemployment. Technology plays a part in that, but so do efficient manufacturing processes, such as Lean and Six Sigma. Employees are also working longer hours and taking on more responsibility (and getting burned out – didn’t I say I feel for you?).

Bankruptcies are at an all-time high, at least in large corporations, and mergers and acquisitions are increasing again, resulting in job consolidations and layoffs. At the same time, skyrocketing costs for health care and pensions are putting a huge strain on employers. Take a look at the airlines, for example. They can't afford to pay the cockpit crew around $300 per hour per person to fly international flights and fund pensions that pay those crew members $150,000 a year. This could give rise to more international, rather than regional, airlines. Pilots in other countries are willing to work for less. If airlines go broke, pilots will have to settle for less anyway.

Perhaps the trend getting the most attention is the outsourcing of jobs offshore. Some people believe that if they stomp their feet long enough, they will get businesses to stop being "Benedict Arnolds." Those people better not hold their breath, because this trend isn't going to change. It just makes economic sense. If you were an employer who could get the same work done overseas for a fraction of what it costs to get it done in the U.S., what would you do?

Be Part of the Solution

Those facts might make the glass look half empty, but that means it's also half full.

Remember in the '70s, when manufacturing jobs were going overseas? That change in the U.S. economy helped create new jobs in the '80s that hadn't existed before. That kind of evolution will happen again now. A recent study by the McKinsey Global Institute estimates that of the $1.45 to $1.47 of value that is created globally from every dollar spent on jobs overseas, the receiving country captures only around 33 cents, while the United States gets back $1.12 to $1.14 in cost savings, money that is invested in research and development – which leads to jobs that are higher paying than those lost.

David Flotten and James Olmey, both employment lawyers for CFG Insurance Services in Minneapolis, agree that outsourcing overseas doesn't necessarily mean a net loss of jobs. Their advice to employees today is to expect that new jobs will be created and be ready to adapt to them. Flotten told me that employees should become more multi-skilled, because there's no doubt that technology will change around them, "so take the hand that you're dealt and make the best of it."

By the way, being part of the solution does not mean automatically suing your employer when you lose your job. Some lawsuits are justified, but many are frivolous, urged on by contingency-fee lawyers, who are the only ones benefiting while businesses are paying the price. The result is less profit from which to pay employees wages and benefits.

I read in the September 2004 Journal of Accountancy that 44 percent of executives at privately held companies believed that their organizations would be sued this year by a current or former employee; 50 percent believed that a current worker would file a complaint with the Equal Employment Opportunity Commission.

Conflicting Expectations

At the heart of employee-employer issues is the same thing that's wrong with many broken personal relationships: conflicting expectations.

Employees see massive layoffs and bankruptcies resulting in higher unemployment. At the same time, the courts have given them more rights, and our high standard of living has led them to believe that benefits and perks are an entitlement. Meanwhile, employers are dealing with difficult economic realities and are forced to manage costs, the biggest one usually being their workforce. (By the way, I realize that this employee-employer relationship is a two-way street, and I intend to write an open letter to employers next month.)

Pierce McNally, a lawyer with Minneapolis-based Gray Plant Mooty, believes that there is a growing chasm in the employee-employer relationship because employers view it as a contractual relationship – hiring someone for certain duties, and keeping that person on as long as those duties need to be performed and are performed well – while employees view their jobs as something like property that they own, from which certain rights are derived, such as portable health insurance and retirement plans.

Employers have to have a very good reason to terminate an employee, McNally says, and the irony is that that's why more jobs are being outsourced overseas. If business is tough, "You can terminate [an overseas] contract and a whole cadre of people, without having even met them," he says, which allows employers the flexibility to manage a contractual relationship without the threat of getting sued.

Is that why immigrants without special skills or education are usually the ones to take minimum-wage jobs? "Perhaps they've come from a time and place where a contractual type of employer-employee relationship is a step up, not a step down," says McNally.

Change or Get Left Behind

So, my dear employees, what should you do? First, focus on doing your current job the best you possibly can (good workers are always in demand).

Second, understand what is happening in the global markets and that you, the unions, and the politicians cannot control it.

Third, take inventory of your skills, and if you think they won't withstand the changes in the global economy, re-educate and re-engineer yourself.

Fourth, look into the future to find where opportunities might be, and stay aware of employment opportunities that could leverage your abilities or new training. The knowledge economy is in your hands, so make the best of it.

Change is not an easy thing, especially when you've been in the workforce for a while. It's projected that by the year 2008, more than 40 percent of the workforce will be over the age of 40. But it is possible for old dogs to learn new tricks.

The Prudential Insurance Company had an advertising tagline a number of years ago that said, "The future belongs to those who prepare for it." In today's globalized economy, there's never been a truer saying.


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