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21st Century Job Creation I

(March 09, 2004) - Yesterday, we discussed the fact that the economy has continued to experience a net job loss since the end of the recession. In 20th Century recessions, the issue was inventory buildup that exceeded demand. Factory workers were laid off until inventory balances righted themselves. 21st Century information workers have their ties permanently severed. Rather than replacing heads in existing jobs, economic recovery depends on real job creation in a non-manufacturing environment.

Creating a new job is a PITA, particularly in our new high productivity (read lots of overtime) environment. While increases in demand will produce the requirement for the components of a business that are demand driven (sales people, customer support, account managers), the downturn taught us how to do more with less. Hyperactive productivity extractors (like Workstream...reviewed here) make us wonder if there is even less to be done.

Harnessing the best that a bottom-line mentality can produce, we have collectively reduced costs, expenses and jobs in our organizations to the point that only a radical rethinking can extract more savings (again, Workstream's strength). As a result, we are busier than ever, teetering on the edge of loss of control. Many potential clients are complaining about over-demanding customers, long work hours, massive development schedules and the painful hard work of onboarding new sales people (everyone is getting new sales people though it appears to be a reshuffling of existing players in the industry and not new jobs per se).

Creating a new job is an investment decision. In the manufacturing economy, where demand forecasting is nearly a science, refilling a position vacated during a layoff involved a simple set of return on investment calculations. One more worker enabled the production of 200 new refrigerators in a market that needed 300. In an information economy, the investment is far more speculative, driven by optimism, confidence and belief in one's ability to see opportunity where others see risk.

In other words, 21st Century Job Creation involves more risk than it did in the 20th Century. Any good manager understands that increased risk require a higher payoff. The problem is one of imagination, resources and the ability to quantify risk and return. It's very different than it used to be, and a good deal harder. It involves imagining new services and value additions beyond what was good enough last year. It can not be done from a bottom-line perspective. As long as we continue to focus on cost effectiveness and productivity, job growth will falter.

We are in a transitional period. Burdened with economic views that were built in a manufacturing environment, we face a new, as yet undefined, set of investment equations. It's a perfect environment for entrepreneurs who make decisions based on gut hunches. It's a different thing entirely for existing businesses with something significant to lose.

Creating a job means figuring out what that new person or team is going to be doing. It requires either confidence in the opportunity set or confidence in the team. Because it's an investment decision, it means risking current levels of profitability against future returns. It takes thinking, planning and courage. The courage is the hardest part. The smaller the business, the greater the risk and the more courage required.

In one way, the options are limited. Either you create new jobs by acquiring new customers or by delivering more value to existing customers. One involves a form of direct marketing speculation, the other requires the further development of trust and expansion of existing relationships.

The flow of salespeople throughout the economy and within our industry suggests that current managers are all thinking along the same lines: expansion of the customer base. Since sales effectiveness (no matter how bleak it's been recently) is a relatively well known commodity, the investment in job creation can be calculated by estimating the potential number of new accounts.

The alternative, expansion of existing relationships is more of a marketing gambit. Think about our recent article on Deploy. By actively listening to customers (in a quantified way), the firm is laying the groundwork for expansion in existing accounts while cleverly moving to take on known trouble spots in the search for new customers.

Tomorrow: 3 Job Creation Scenarios

John Sumser

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