LIFE MOVES PRETY FAST

by Paul Cormier, President, Cormier Strategy Advisors Inc.

May 2014

“Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.” – Ferris Bueller (Ferris Bueller’s Day Off)

Back in January 2014, I wrote a piece for this website entitled If You Are Looking for a Job, Know What You are Looking for.  In that piece I mention that about 80% of Americans claim to be dissatisfied with their jobs and several recent surveys continue to put the numbers in this range.  It clearly resonated at the time as it had the highest readership of any piece I ever posted to my website or LinkedIn and at least a few people I know who liked the article have subsequently found new positions (hopefully the advice helped).

In the piece I mention six attributes of a client relationship (most can substitute employer here) I look for:

1. Will I be considered a member of the team?
2. Are my principles culturally aligned with the potential client?
3. Do they have a sense of purpose?
4. Will I have a chance to learn and grow through this relationship?
5. Do I get a sense the client will value me?
6. Will I have a trusted relationship with those I work most closely with?

But it got me thinking.  Why are so many people dissatisfied and disengaged?  Why do employees feel like they can’t identify with the company’s culture or feel a sense of teamwork or that their company has a purpose?  Why don’t they feel they are learning or that they are valued or that they can trust their colleagues?

I look back to the 2007-2009 recession and financial crisis for answers.  Any major event such as the near collapse of the financial sector is going to leave scars.  According to Standard & Poor’s, in the fourth quarter of 2008, US S&P 500 corporate operating earnings per share were negative for the only time in quarterly data going back to 1988.  Banks were on the verge of collapse and some brokerages did collapse.  Corporate managements were on the hot seat.  There was so much uncertainty that concentrating on sales growth was too risky.  They needed to control costs and so they started slashing (and costs had become bloated and a lot of this was necessary at the time). 

But a funny thing happened.  It became the standard management playbook.  Many corporations saw a transformation – they used to exercise leadership, now they exercise management.  What is the distinction?  I went looking for definitions of leadership and management and found as good a distinction as required is a simple place – Wikipedia.  Wikipedia starts with the definition of leadership as “a process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task” [An integrative theory of leadership by M. Chemers (1997)].  Wikipedia defines management as “the function that coordinates the efforts of people to accomplish goals and objectives using available resources efficiently and effectively.”  Think about the two definitions.  Hard to believe anyone hasn’t written a folk song about management, huh?

But that is what has happened; many companies have become about management, not about leadership.  Is there influence, enlistment, aid, support, accomplishment, a common task?  Both leadership and management are important.  One seems increasingly missing.

I understand the value of generating profits, but I get worried that in the pursuit of short-term profits we are sacrificing long-term growth.  Here’s why.

Again, using data from Standard & Poor’s, from 2008 to 2013 S&P 500 corporate operating earnings per share have risen at an annualized pace of 16.7% while sales per share have grown at an annualized pace of 1.4%.  This has caused S&P 500 operating profit margins to double from 4.7% to 9.6% during this timeframe to levels never before seen in history. This reflects the short-term gain in profit, but what has been the cost?

Savings have been derived by concentrating less on product innovation and development, by reducing training, by reducing staff.  Of course employees are disengaged.  Duh!  Why wouldn’t they be?  By focusing on the cost side of the ledger, companies are not providing employees a purpose to rally around; they feel like another “resource” to be managed and are fearful they are the next to go.

And the customer is noticing it too.  In the last two years, sales by S&P 500 companies are growing slower than US nominal economic (GDP) growth.  Customers and employees are becoming disengaged and this is feeding off each other.  It is a bad situation.

Business is about pivoting; it is about adapting.  The signs are obvious.  The data is stark.  Many companies need to adjust.  You have to grow the topline long-term to be successful.  Life is moving pretty fast.  If some companies don’t look around soon, they could miss it.

Paul Cormier is President of Cormier Strategy Advisors Inc., a firm which provides clients with strategic consulting, project management and short-term management services.