Job Creation and Recovery

It appears to me that the public discussion, at least coming out of politicians and the press in Washington, DC, seems to be missing several key points in the encouragement of businesses to create jobs.

For 25 years, I have, among other things, helped companies and government entities to improve productivity and operational and financial performance. For decades, companies have pursued improved productivity, leaner operations, and more efficient processes, with less waste, less rework, and less labor content. Consultants like me have helped government entities and companies in most, if not all, industries tie staffing levels to demand for products and services. I’ve helped insurance companies align staffing with sales activity, policies in force, and claims caseload. I’ve helped an accounts payable department in a government entity tie staffing to incoming bills to be paid. I’ve helped startups understand the timing of when to add staff, add executives, expand offices, and open new offices, all tied to workload.

Of course, I have done many other things but the point is that the mindset of people in the US economy is geared to connecting hiring to increased workload and demand for products and services. For fifty or sixty or more years, companies have been trained to avoid speculative hiring and to not add staff until existing staff is “fully” utilized with an acceptable level of overtime.

Government entities may have the luxury of hiring without corresponding demand for goods and services, but for-profit companies no longer feel they have that option. In this economy, it may not be reasonable to expect companies in the US to hire until demand for goods and services improves. Perhaps that is the intent of the various economic stimulus packages, but the connection, other than providing cash, between stimulating the economy and stimulating hiring is cloudy, perhaps as indicated by the tepid hiring and slow recovery.

If the federal or state governments want to stimulate hiring, the stimulation needs to be directed at demand and not simply at providing funds to act on assumed demand. The large cash hordes in so many companies may be the best indication that cash is available but demand is growing weakly, if at all.