Growing without employing

07 Dec Growing without employing

I recall a discussion about rising unemployment which I had with the late Peter Drucker shortly after 9/11 in which he told me that throughout modern history people have been haunted by the specter of unemployment as an apocalyptic event when in fact employment was not only cyclical but a steadily rising tide for all.
It’s a comforting thought in today’s market place when unemployment is at 10% and along with partial employment closer to 30%. Yet, Drucker’s reassurance is in stark contrast with a discussion I just had with a major financial institution which told me, point blank, that they were going to double in size by 2015 without adding a single employee.
Clearly, some industries will be able to use technology and contracted or outsourced employees to grow their business. The most likely candidates are large businesses who are most subject to high levels of regulation and risk. These are the companies that also need to provide stockholders with the greatest assurance of low fixed costs and variable costs that can be easily scaled up or down without long term consequence.
But the real trend here is the dramatic shift in US employment from large scale employers to small and mid-sized business (SMBs). Expecting unemployment to drop without understanding the need for us to fuel employment in SMBs is pure folly. Large companies will send every job they can offshore simply because the talent is increasingly available and almost always less expensive. This includes knowledge work as well as basic build and assembly work.
If you’re trying to anticipate when this will happen get ready for a surprise, it already has. All net new jobs created in the US for the past decade have been in SMBs. The paradigm shift is over, done with! But yet we are still living in the past, hoping large employers will make up the gap with further stimulus dollars. We can buy time that way but we can’t buy long term employment. To do that we will need to fuel the engines of innovation in SMBs. I’m increasingly convinced that this is the only place where we can create enough jobs and innovation to create new ideas, industries and sustainable employment growth in the US.
What if we can’t do that? Well, take heart, Drucker was right, unemployment worries are always temporary, but only on a global scale.