Bound For Glory: 2003… and Beyond!

For most in our industry, 2002 was a bad year. For many, 2001 was no bargain either. After a full year or perhaps two of consistently declining revenues and a slow-to-disastrous market, the tendency is to become depressed and think that things will never improve.Of course they will! Despite claims of “sea changes” and major traumas to our industry, the reality is that our industry has followed a pattern of a long boom and a short bust for many years. This author well remembers his interviews of a dozen years ago when, in preparation for a product dealing with the anticipated ’91-’92 Recession, he contacted scores of people with forty and fifty years in our industry. Hearing the stories of the Great Slump of ’46 and the Crash of ’57 gives one a long-term attitude. The reality is that after every Recession, our industry comes back, stronger, better, with higher per-desk-averages and higher average fees than before the Recession. And so it will be again…In point of fact, this Recovery seems to be shaping up remarkably well. As a result of an unusual confluence of seemingly unrelated factors, we may look forward to an improved 2003, followed by a significant boom for many years following.Observe the following factors, and note how each reinforces the others…Short Term1) TrendlinesThe economy is in recovery. But if that is so, why don’t you feel it? Because it is growing too slowly to generate new jobs! For the past year, we have been in what economists call a “Growth Recession.” Generally, it takes 3.5% growth rate to yield new jobs. We’ve been limping along at half of that. Recall that after ’91-’92 recession, it was 35 months before unemployment returned to Pre-Recession levels…The point is, however, that when trendlines are up, it doesn’t take much for other factors to give a real boost in the direction they are already going. In fact, GDP hit 4% growth the third quarter of 2002. Combined with the following factors, an impressive jump-start may already be on its way!2) ProductivityProductivity the amount of output for an hour of work grows significantly in the latter portions of a downturn. You’ll hear this touted as a positive, due to its keeping a lid on inflation. (More output for the same cost of labor means companies don’t raise prices). Rather, it is simply a factor of less hiring, thus more results from fewer workers. Workers become more efficient because their employers demand it, and there is no “fat” in payroll to absorb incompetence or time-wasting. And, of course, the lay-offs that occur in the early portion of a recession are a powerful motivator to those who remain.Along with that, you have businesses working existing employees longer hours, rather than hiring additional workers.The rapid recent increase in productivity (3rd quarter 4% increase versus 1.7% in the 2nd quarter) means that the recession is coming to an end. Such productivity increases happen at the end of a downturn; it cannot continue forever, and companies will soon be forced to hire, as other factors kick in to increase demand.3) The Legacy of Alan GreenspanAlan Greenspan was perceived as perhaps the best Federal Reserve Chairman in history up until this recession. See book, “Maestro!” by Bob Woodward. He wishes history to continue to view him in this manner.After maintaining interest rates at low levels all year, the Fed cut interest rates a further half point in November, to reach a 40-year low. Greenspan has many other tools at his disposal as well, including injecting massive cash into the economy by buying back US Treasury bonds.Extremely low interest rates and a Fed Chairman determined to maintain his “Maestro!” accolades are a powerful help to an already recovering economy.4) The End ( Almost) of GridlockHere are the facts. A divided government prevents things from getting done. Under normal circumstances, some may argue that this is good. However, if one wishes serious economic growth policies, it is a hindrance.Moreover, we now have a President who is not only an experienced businessman, but a classically-educated Harvard MBA. And a Vice President with a string of successes at turning around failing corporations in several fields. Rarely have we had a ticket so thoroughly capable of knowing how to get the economy moving. And now that obstructionism is reduced, they are quite likely to do so. Look for “investor-class” tax cuts, i.e., elimination of double-taxing of dividends, increased stock loss limits, expansion of IRA and Keogh limits, speeding up of across-the-board tax cuts.Additionally, if “tort reform,” i.e., limits on irrational lawsuits and damage awards against business, can be enacted, the economy will really surge long-term, as companies of all sizes, particularly the healthcare industry, will benefit markedly. This damaging practice of litigation-for-profit directly leeches money from research, investment, and other productive areas into totally non-productive wastefulness. If it can be ended, increased investment and hiring will be the result. It will take 60 Senate votes, so hope for some in the opposition party who put Country over Cash.But you can bet that the White House and the President’s new economic team will be pushing hard in these areas. If they succeed, we will all benefit greatly.5) The Stock MarketYou can argue as to whether the Stock Market leads, trails or reflects the economy. However, both are down at the moment.Should, as many believe, the Bull Market return, it would certainly have a most beneficial effect upon the economy at large, due to improved attitudes and more “wealth effect.” Improved production for you would be the result.6) IraqAs this is written, the liberation of Iraq has not begun. Nevertheless, this President is well-familiar with Napoleon’s maxim, “If you start to take Viennatake Vienna!” and may be expected to follow through.While few wish a war, a just, necessary, and successful war will add to existing trend lines. And those economic trend lines are up!Some recall previous wars which did not turn out well or which harmed the economy. However, they forget that it was only after many years or when the economy was already spiraling down that these results were seen.The nation will cease production when the bombs start falling, as we all watch TV. However, Professor Bernard Lewis, probably the pre-eminent Middle East authority (recommended book: “What Went Wrong?”) has said that we may look forward to the Iraqi people cheering from the rooftops when the tanks roll into Baghdad. Should that be the case, consumer and business confidence will soar.Intermediate-Term1) A New Major MarketRecall the Glory days of International Trade in the 90’s, when one of every four dollars was linked to global trade. Bill Clinton has said that 30% of the entire growth of the 90’s came directly from that source. Much of that is gone now, the result of an international economic slowdown.How about a new major modern market, though? One which needs everything from fertilizer and farm machinery, to telecom and PC’s, to paving equipment and electricity grids? And suppose the U.S. controls that market? Would that help the economy? You bet it would!Is there such a market, in need of everything required to run a modern society? There sure is! We call it Post-Saddam Iraq. And they can pay for what they need too. Cash, not credit. Think… Marshal Plan and “Rebuilding of Japan”for which we get paid.2) Lower Oil PricesWhen oil prices drop, it has the same result as a tax cut for every company and person in America. It is an enormous benefit to us all. But it takes a long while to develop new oil supplies. Or does it?Iraq’s oil reserves are second only to Saudi Arabia’s, and may even exceed them. And without crude, Iraq will have nothing to pay for the rebuilding of its country. Oil revenue generated more than 90% of foreign exchange before the UN-applied sanctions of 1990. Moreover, a post-war Iraq would be so desperate for income that it will almost certainly ignore any quotas set by the OPEC cartel.With foreign investment, a new government could ramp production up to 8 million barrels a day within a decade, compared to 2 million now, or 6 million by the Saudis.We will rebuild Iraq, as the President has said. And they have the oil to pay for it themselves. To the benefit of all concerned!Long-TermFinally! We’ve been hearing about it for years, in books and articles, but the long-term future for our industry is incredible. The demographicspopulation trendsof 78 Million Baby Boomers followed by 43 million Gen-X-er’s practically guarantee a brilliant long-term future. That’s what Paul Hawkinson, editor of this fine publication, meant when he wrote, “the talent shortage is systemic, not economic”.So What’s Going to Happen?We can expect slow improvement, but that improvement will be enhanced by our reduced numbers. The “business pie” will be split in far fewer ways.Areas of direct profit to clients will come back fastest, such as sales and marketing. Office support will follow, as will engineering and production. IT will continue to lag badly, due to grave over-consumption and over-hiring during the “bubble years.” Computer Science classes have seen massive declines, as students switch to more marketable majors. Clients have already utilized maximum temp and contract services during this slow time. As things improve, Permanent Search and Placement may be expected to strongly lead the way. Internet trainers will continue to focus on undercutting our industry by “training” our clients, so serious telephone recruiters will far outpace those few remaining souls who rely on the “net.”In sum, we can look forward to a solidly improving year, followed by a fine 2004. After the last two years, we deserve it!The V-Shaped RecoveryMoreover, so long as you stay in business and concentrate on training to improve your skills, you will also be almost guaranteed a booming recovery when the market eventually DOES come back. Historically, every recovery in our industry has proven to be “V-Shaped.”Why? Because roughly 40% of your competitive firms and two-thirds of your competitive consultants won’t be there any more! Thus, a 10% market uptick is a 30% Production improvement for you! A 20% market improvement is a 60% increase for you! You’ll get triple benefits … because the business when it returns will be split in two-thirds fewer ways.That’s why this recession like all recessions will, when it ends, result in the same romping, stomping, roaring boom market we always enjoy in the aftermath of a slow market.So do we Add to Staff?No. No. No. Too soon. Wait until things come back more strongly, as in six months. Meanwhile, enjoy the improving market, pile up some cash and improve your skills. Invest in long-term training products, which means not “here today, gone tomorrow” public speaking, but hard-bound books, videos or audios (Suggestion: www.larrynobles.com). When the market comes back, it will come back so fast you won’t have time to improve your skills. A reduced reliance on the Internet would also be in order, unless you plan on competing with your clients who receive the same training as you from the same people for the same candidates. If you like classified newspaper ads, you’ll love the Internet. It just isn’t very profitable. Focus on real skills.So Where Are We ?We are right where we always are at the tail end of any recession. We have seen this market before. And you are to be darn well complimented on being here. The right place at the right time!Historically, incontrovertibly, the greatest growth in this industry has been in the aftermath of a recession when the market comes back, and the most under-staffed industry is … ours! And so it will be again.That time is not yet … quite. But the confluence of short, medium and long-term factors we now see before us will surely yield what such factors individually have always yielded a fine long growth curve for us all. This time, however, the unusual combination will greatly multiply the effect.Will all of the predicted scenarios here come to pass? Maybe not. Problems happen. But, you know, it doesn’t matter. The trend lines are already up: things will improve. Any one of the additional factors will give the market a solid additional jump-start. Two or three of them will really get us moving. Cumulatively, we are talking “Jackpot!” And “Jackpot!” is likely.Work hard. Hang in there. Improve skills. Don’t expand. Invest in real training.After the Darkness comes the Dawn. And it is on its way. A fine bright long sunny day of Glory and High Profits. For our industry. For your firm. And most definitely for you!

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Acclaimed international author, speaker, and trainer Steve Finkel is a veteran of over 30 years and six recessions in our industry. Personnel Consultant Magazine, published by the National Association of Personnel Consultants, has referred to him as possessing "the most in-depth knowledge of search and placement in industry history." Recruitment International Magazine, Europe's largest industry publication, has described him as "the world's premier author and trainer in search and recruitment." His revised and up-to-date 360-page book Breakthrough! is now distributed in 25 countries and is also available on Amazon. Contact him at 314-991-3177 or www.stevefinkel.com.

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