Monthly Archives: April 2016

Know More About Labor Chips

unduhan-36The narratives that influence our economy have a great deal of momentum. Giant, irreversible, tectonic shifts are transforming the landscape: urbanization, globalization, information technology, the decline of print media, mobile technology, workers losing ground against companies. The momentum behind them seems so vast and powerful that a change of course is unlikely.

But fatalism isn’t a substitute for analysis. And even the biggest and most-enduring trends can reverse, or get, um, disrupted. And we may be finally seeing that when it comes to corporate profits and wages.

The salient feature of the U.S. expansion, which began in July 2009, was that the fruits of growth have been unevenly distributed between capital and labor, between companies and employees. After the financial crisis, companies moved swiftly and relentlessly to reduce labor costs, find new markets, and improve productivity. And so profits bounced back impressively.

On an economy-wide basis, after-tax corporate profits grew from an annualized rate of US$671 billion in the third quarter of 2008 to $1.77 trillion in the fourth quarter of 2014. (The data can be seen here.) That’s significant, especially when you consider that corporate profits more than doubled in six years as the economy grew slowly.

Profits rose in part because companies were both effective and ruthless when it came to holding down labor costs. Thanks to a host of big, long-standing trends — the decline of labor unions, slack in the labor markets, the threat of outsourcing — a smaller percentage of company revenues was paid out as wages, leaving a larger share as profits. And so after-tax corporate profits rose from about 4.6 percent of gross domestic product in the third quarter of 2008 to about 10 percent of GDP in 2014. (The data can be seen here.) In many quarters during this expansion, that proportion has reached record highs. Meanwhile, median income in the U.S. in 2014 was below its 2008 level.

This trend — higher corporate profits and lower worker income — too, seemed unstoppable. Until recently. And that’s because political, social, and economic factors are now beginning to exert force in the opposite direction.

Unions certainly have not seen any significant resurgence. (Only 6.7 percent of private-sector workers are unionized, according to the Bureau of Labor Statistics.) But workers have benefited from other forms of pressure on employers. Although the federal minimum wage hasn’t budged since 2009, several large states and cities have passed laws in the last few years that have mandated higher hourly pay. Many large companies, including Aetna and Walmart, sensing the social and political pressure for higher wages, have imposed higher minimum wages themselves.

At the same time, there has been a slow-building but significant shift in the labor market. The U.S. economy is now in the midst of its longest stretch of job growth in modern economic history. It has added payroll jobs for 71 straight months, and has added nearly 15 million jobs since February 2010. Meanwhile, companies say they want to hire many more workers. As we’ve noted, the number of job openings in the U.S. has soared; at the end of July, there were more than 5.6 million vacant positions to be filled.

That means it has become a real challenge for companies to retain existing workers and hire new ones — employers today have to offer people higher salaries to walk across the field, or to come off the sidelines. And if they have to boost pay to fill open positions, they may find themselves having to increase pay for the people who already work there. To a large degree, the laws of supply and demand, which worked in companies’ favor between 2009 and 2014, is now working against them.

Learning and Performance Giants

There is a complex web of subtle and often hidden learning and performance challenges that affects everyone’s workday. Regardless of title or tenure, no one is immune to the barriers it puts up between you and your coworkers and between you and your goals. And there are no shortcuts to navigating your way safely through it. However, your capacity to recognize these challenges and take deliberate steps to manage them can create a distinctive competitive advantage.

I call these challenges the hidden curriculum of work because it is this unspoken, unwritten work that doesn’t show up in your job description, yet determines your ability to stand out. Learning to navigate it is a business imperative with significant untapped human-capital potential. And just like any other form of capital — social, political, financial — a leader can either squander it or leverage it.

Leaders should think of these challenges as sleeping giants because they represent big opportunities to learn and grow, but are hidden in plain sight. Indeed, these sleeping giants make up a large part of your company’s untapped learning and performance capital. If you want your people to get smarter and faster and elevate bottom-line results, you need to wake these giants and face them head-on.

For example, as a leader you rely on accurate, real-time updates and you don’t like surprises, especially when the news is not good. However, it is precisely when the news is bad that effective communication often declines. If your corporate culture is such that leaders unconsciously “blame the messenger,” people become reluctant to deliver bad news. This Mum effect — a term coined by psychologists Sidney Rosen and Abraham Tesser — means that people distance themselves from bad news out of fear they will be blamed by association. When this happens, critical issues get buried and disingenuous interactions overtake transparent exchanges. The sleeping giant here is the chance to examine how your corporate culture treats transparency. Although truth-telling may be an expected norm for your team, it’s probably not happening as often as you’d like.

Do You Want For The CEO

An executive’s character traits are linked to certain patterns in a firm’s investments, strategy decisions, and overall performance, a new study finds.

CEOs have wide-ranging influence over their firms. They are charged with plotting a company’s strategic course, helping set the workplace culture, and attracting new talent to the executive suite. Plenty of research exists on how factors such as CEOs’ management styles, experiences, and industry expertise inform their attitudes and behaviors when they are at the helm, which in turn helps determine a firm’s performance. But very little analysis has been conducted on the relationship between a company’s fortunes and another fundamental aspect of a CEO: personality.

It’s easy to see why the underlying character traits of a CEO, although undoubtedly important, have mostly been ignored. For one thing, how do you measure a person’s disposition? Assessing and codifying dimensions of personality is a costly, time-consuming process, requiring detailed interviews of a large number of hard-to-access top executives. It’s simply too impractical, expensive, and unwieldly for the scope of most researchers.

However, the authors of a new study found a way around this problem and, in doing so, uncovered some significant links between CEOs’ personalities and their companies’ investments, strategic choices, and financial performance. Rather than chasing down face-to-face interviews with busy CEOs, the authors analyzed the language they used during earnings conference calls.

Psychologists have established that the way people speak — including their word choice, tone, and reference points — is highly predictive of their personality and remains stable over time.

By scrutinizing the language used on calls, the authors were able to explore the links between CEO personality and firm performance on a large scale. They analyzed more than 72,000 transcripts of the question-and-answer portion of conference calls with investors and analysts that took place from 2001 through early 2013, involving more than 4,700 individual CEOs. The authors focused specifically on the Q&A sections because CEOs presumably speak more freely when fielding questions than when delivering prepared remarks.

In line with previous linguistic research, the authors analyzed the transcripts to isolate 33 different linguistic features that, taken together, indicate what kind of personality someone has. These features include certain keywords or markers that indicate emotion, hesitation, or contemplation on the part of the speaker, as well as self-references and the use of terms or phrases associated with a range of feelings, including positivity, negativity, and certainty.

Next, the authors used each CEO’s linguistic evaluation to categorize him or her into one of the so-called big five personality traits. The big five framework, (pdf) which became a cornerstone of psychological research during the early 1990s, suggests that people primarily display one of five personality traits: agreeableness, conscientiousness, extroversion (versus introversion), neuroticism (versus emotional stability), and openness to experience. These essential traits represent the “patterns of thoughts, feelings, and behaviors that reflect the tendency to respond in certain ways in certain circumstances,” as one researcher who studies the framework put it.