Short term Gain – Long Term Pain

Over the last few years we have been hearing repeatedly about the successes of ‘off-shoring’, which is the sending of low level work to third world countries who it is believed can perform the work equally successfully for a fraction of the money of local employees.

In the rush for short-term quarterly results, executives are forgetting the long term costs associated with their actions. They are seeking to show profits and their associated bonus cheques. Shareholders are pacified that their interests are being tended. Unfortunately, the long term results are devastating to the local economies.

By outsourcing to third world countries, their economies are growing exponentially at the same time as killing local markets. What is not mentioned, is that for every Head-office job lost, there are 5 local service jobs lost.

How is that possible you ask? Let me list the ways.

  • Restaurants 
  • Dry cleaners
  • Gas
  • Office Supplies
  • Office Space
  • Telephone services
  • Local merchants selling everything from cigarettes to candy bars

Are all affected.

The other issue which is not discussed, is that there is a difficulty with semantics.  So if a call-center is sent to China or India, the interpretation is not the same, and the client becomes frustrated and more likely to go to the competitor, who provides service locally.

Furthermore, no Senior Executive is going to admit to failure, so the disastrous stories are rampant, although we never do read about it in the press.

One local company in Software R & D for mobile phones off-shored to India because of a senior executive who wanted to bring jobs to the town where he  grew up.

Local software engineers with Bachelor and Master’s degrees, who knew the software, And speak both English and French lost their jobs, as it was deemed they were too expensive.With salaries in the low thousands, as opposed to nearly one hundred thousand dollars annually, and the associated overhead costs, it was sold to shareholders and executives as a cost effective choice.

A mere six months later, with deadlines not being met, and no end of software problems, the CEO was fired and the software engineers who had been let go were being contacted to return. The cost of this 6 month fiasco was in excess of $5 million ,not to mention angry clients. Had it not been that the Venture Capital partners were understanding, this company could have gone bankrupt.

This is but one of the many stories we hear in the Executive Suite.

Due Diligence please. 

 

Job Posting Boards – Company perspective

During an economic downturn, companies are constantly seeking new and improved ways to cut costs. However, one must always be careful that you get what you pay for. So, if you are looking for the best possible talent, it will absolutely NOT be found on a
Job board.

Job boards are for entry level positions, and job-hoppers.

Human Resource departments are always seeking out ways to grow their empires and show the executives how valuable they are, and by presumably doing all the recruiting themselves, they can cut out executive recruiters. Which, of course, is a total fallacy.

All of a sudden, human knowledge and experience has been reduced to a few key words. So, according to this, someone with 4 years of experience who never did any part time work,  is of the same value as someone who worked constantly in other endeavors.  Someone with 20 years of extraordinary knowledge and experience is passed over as he does not fit in the category, and may be missing a couple of key words. Semantics.

The other problem with this particular approach, is that what often happens is hat other skill sets are far more important than what was originally described. So unless a resume is written which totally fulfills the exact criteria of the ‘key word’ search, it is not considered at all. The most important issue, is the ability to think clearly and solve problems, and absolutely no computer search program can determine whether or not someone actually knows correct grammar, to speak well, think clearly or make decisions.

We recently ceased doing business with a local software R & D company. The company writes very complex code and develops a product sold internationally. Slightly over  a year ago, they hired a new VP Human Resources, a woman, who, interestingly enough, has no experience in HR, software or business. She was a translator. Very articulate, bright, and self centered, she temporarily occupied an HR position while the incumbent  was on maternity leave. With a new resume stating “Acting VP HR” she applied for new positions and landed this job. She charmed the President of the company who employed her, and Immediately set forth to re-organize the department and fire those who didn’t have the image she wished to present. One of the people had been with the company for years, and was highly competent, however, she is dowdy.
Her next plan was to eliminate all external firms. 

First she insisted that all current vendors reply to a lengthy “Request for Proposal” regardless of their previous successes with the company. This was her way of saying that she would only do business with those she liked, as no one else was aware of her selection criteria. Only a scant 2 months later, she announced that only one firm would be doing business with the company and all others should cease and desist calling any of the executives of the corporation.


One must mention at this point, that the company was growing and looking for over 30 highly technical people with security clearance. Her next step was to post all the positions on job boards on the internet. She fulfilled her goal of receiving many resumes, so many so, that she had to hire 3 more clerks in HR to read and process them. As this took place during a recession, the internet was flooded with people seeking employment. As the clerks were not seasoned IT professionals, they had the hiring managers review and interview dozens of potential candidates as opposed to actually doing their work, which resulted in them working nights and weekends to keep up. They did hire successfully, from her point of view, and due to the economic situation, they offered low salaries which people snapped up. She looked like a genius. All those new hires, no fees to outsiders.

Now, you are probably wondering why I am continuing to discuss this highly successful woman. One year later, over 40% of her new hires had left. After one and one half years, over 50% had left. At the end of year 2, the company was obliged to cancel a $20 million project as it was impossible to complete on time. The company paid severance packages, outplacement, and was put up for sale. Their credibility in the market ruined.

It is not the cost that is important but the quality. The majority of the people hired had only accepted the positions as they needed to pay the rent. They were offended at the low salaries and felt absolutely no loyalty to the company. As soon as something better came along, they resigned and moved on.

The company went from 5% turnover to 50%  staff turnover.

You make the judgment call. 

 

Learn to Read the News paper

“The sky is falling in, Chicken Little”……

“The world is coming to an end”……

“The economy is in a more desperate state than the 1929 depression”..

“200 killed in avalanche”…….

Have you ever noticed that there is never any good news on the cover pages of your local newspaper? It is always relegated to a tiny thumbnail article buried somewhere In the depths of incredible negativity.

A lot of the journalists and pundits create more of the messes we live than the actual events themselves by self-fulfilling prophecy. If you say it enough, it will come to pass.

Over the last few months, we have been bombarded with bad news, bank failures, bankruptcy filings by huge billion dollar multi-nationals, war, doom and gloom.

I, on the other hand, have been entertaining my friend’s by showing them how to actually read the newspapers. Page one of the business section is doom and gloom.

The thumbnail’s on pages 3 and 5 however, tend to paint a very different scenario.

A $41 billion corporate merger, another with share prices up 62% over last year, another company showing record profits with 31% over last year, bank dividends over 17% for the period, military deals in the hundred’s of millions, airplane sales for $600 million, and more.

“Job losses hit 129,000 in January of this year”…..8% unemployed………”

Now, lets look at that. It’s always about how you look at the numbers. If 8% are unemployed, that must mean that 92% are employed.

If one follows the stock market and the real estate market over a long period of time, one will notice that when the market is out of control, it will be corrected, then return to more normal growth.

Real estate is exactly the same. We have huge boom markets when everyone is investing heavily in real estate. When the charlatans come out of the woodwork and are selling their methodology to make a fortune in real estate, then you know it is the time to get out.

We had the crash of the Savings and Loans in the United States where many lost their homes and their shirts….what followed was a boom in real estate for another many years.

If one looks at real estate deeds of sale over a 100 year period, it is always up. They aren’t making any more land.

Technology stocks were the same……then we had the ‘dot. com bomb’  and prices dropped drastically. Similar to tulip futures !

So, take the high road, invest in good stocks or property and stay in the long haul.

Don’t listen to the experts. Listen to common sense. 

 

Trying to get perspective