Letter from the Chairman.
While no CEO enjoys wielding the ax, many are getting good at it. Last year 2.5 million Americans lost their jobs, and this year a few million more will. On the precipice of a ’30s-like Depression, CEOs in conjunction with their boards of directors are laying off large swaths of their employees. In the halcyon days just a few years ago, Donald Trump’s punch line “You’re fired!” did not seem so terminal, but in today’s labor market, losing your job seems like a death sentence. The old adage is all too real: a recession is when your neighbor loses his job; a Depression is when you lose yours.
A job provides more than just a living; it offers self-worth, respect, dignity. Unemployment is terrifying to those working, and horrifying for those who are not. The official unemployment rate has reached 7%, but the unofficial rate, which includes those working less than they want as well as those who have abandoned their search, is close to 15%, not so distant from the Depression Era’s 25%. When you talk to people like my father who grew up in the 1930s, they recall searing images of people sleeping in the streets with newspapers wrapped around them; and, as a consequence, they developed and have often maintained a horrendous fear of being unemployed. Today’s psychology is veering in this direction.
In a recent posting to his Boards At Their Best blog, Jim Kristie wrote: “I’m sure boards hate to sanction management’s layoff decisions. My wish is that both management and the board feel the preciousness of having a job – and that they’re not engaging willy-nilly in what often seems to be a wholesale axing of employees. Most especially, my wish is that directors long for the day when they can take pride in how many jobs management has created.”
This is not the first time I have heard this sentiment. My father (who for 35 years ran The Hay Group, a worldwide consulting company specializing in human resources management) wrote to me upon my decision to join Hay in 1975 that “Business is all about producing jobs as well as products and profits ... Political systems of all kinds can only keep populations prosperous and happy through producing jobs, and hopefully producing jobs that have as an integral part, the preservation of the dignity of man. There will come a time even in the United States when a company will be judged by the number of jobs it produces ... There will come a time when the businessman’s job will be to create productive and effective jobs that provide livings with which employees can improve their lives.”
The time may be now. President Barack Obama has proposed incentives for businesses to create new jobs. Rather than continuing to cut workers, CEOs must begin to think more about building businesses that secure and enhance employment. Boards of directors in general and their compensation committees specifically may want to underscore this notion by rewarding top management for retaining jobs and creating new ones. In these dire times, an incentive system that reinforces this objective could help get our country moving again. Today, job one is jobs won.