"For want of a nail…” updated

Because an employee was laid off, certain data was not gathered.
Because certain data was not gathered, a report was not made.
Because a report was not made, a contract was lost.
Because a contract was lost, revenue was lost.
Because revenue was lost, a company was lost.

A thought for Labor Day

"The masters, being fewer in number, can combine much more easily: and the law, besides, authorises, or at least does not prohibit, their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work, but many against combining to raise it. In all such disputes, the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks, which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year, without employment."

- Adam Smith, Wealth of Nations

For more selections from Wealth of Nations, see “The Invisible Adam Smith”.

BYOD and corporate efficiency

"Call it a movement of sorts, but employees are increasingly ditching their company issued computers and smartphones in favor of using their own devices to get work done. One big reason: Their company's tech is, well, terrible."
- "BYOD or bust: How bad tech hurts companies", Cadie Thompson, CNBC, 2013-10-24.

However, read the full article about all the complexities companies face when employees use their own devices.

Corporations are killing the geese that lay the golden eggs

Corporations are sitting on lots of cash but won't hire new employees because there is insufficient demand.  There is insufficient demand because too many people don't have enough money to buy as many goods and services as they would like.  Because not enough people buy goods and services, corporations won't hire.  Because too many people don't have enough money…

Quote of the day: entitlements

"Indeed we do have an entitlement problem; some feel so entitled to power & wealth that they're willing to undermine our economy and our democracy."
- Annabel Park, founder of the Coffee Party

Click here for original.

Let's see!  Is the CEO of U.S. Bancorp entitled to $9,311,164 for 2012 compensation?  Or did he earn it?  Who decided this?  Did the shareholders or the self-selected board of U.S. Bancorp?  If Richard Davis earned it, did he do it with his own "hard work" or did thousands of employees contribute to the success of U.S. Bancorp and earned far less than one-hundredth of what he received.  If the latter, did they receive a bonus for their hard work?  Now these are the people who are entitled to better pay.

See "CEO pay watch: U.S. Bancorp's Richard Davis", Patrick Kennedy, Star Tribune, 2013-03-13

"Makers" are takers and "takers" are makers

The "masters", in Adam Smith's parlance, claim they are the makers, the one's who get things done.  Or are they the "takers" who depend upon other people's work but take credit for it?

Adam Smith did write, "It is the stock that is employed for the sake of profit, which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operation of labour, and profit is the end proposed by all those plans and projects."

In other words, if someone doesn't invest the capital, lots of things won't be done.  Would you be reading this on your computer if there hadn't been the capital to start a company that made a lot of computers?

Smith also wrote, "The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences [sic] of life…" and "The liberal reward of labour, therefore, as it is the necessary effect, so it is the natural symptom of increasing national wealth. The scanty maintenance of the labouring poor, on the other hand, is the natural symptom that things are at a stand, and their starving condition, that they are going fast backwards."

If there are no laborers, then there is no one to carry out the "plans and projects of the employers of stock".  Michael Dell may have been able to assemble computers in his dorm room, but he needed others to make the parts.  As his business grew, he needed others to assemble and ship the computers.

But how many CEOs started the companies that they head?  Very few. Most either came up through the ranks of management or were hired from outside.  They weren't the ones who put "into motion the greater part of the useful labour".  Thus, they are not the ones who make, but are the ones who take the work of others.  In fact, they often consider the actual makers as taking from the company and as such are disposable.

How many restaurant chain CEOs are cooking the hamburgers?  Where would the CEOs be if there were no hamburger cooks, no cashiers, and no clean-up crew?  If their companies have a good year, how much of their bonus are they willing to pass on to the people who made those profits possible?

We have at least one good example of the effects of treating well-paid employees as expenses rather than assets.  I saw Circuit City's demise coming when they fired all the high-paid experienced clerks.  These clerks made the sales; the executives took the profits of those sales.  See "Labor is not a commodity".

Why state secession is a bad idea

Several petitions are under way for various states to secede from the Union.

Be careful what you ask for.

What the proponents of secession ignore is that the United States is and has always been a country with a mobile population.  Not only was the United States started by people who moved from other countries or their descendants, but these people kept moving west, often overrunning people already there.  In the Twentieth Century people moved in almost every direction.  Small town people went to the big city.  People moved from one city to another to seek different opportunities.  Corporations moved people from state to state for many reasons.  I myself have lived in three states and my wife in six.

If a state were to secede, what would they do about "immigration"?  Would business people from other states need a passport to do business in the independent state?  Would tourists need a passport?  If no passport were required, what would the independent state do about "illegal immigration".

What about people in the seceded state?  Would they need passports to work or vacation in other states?

What about all the wars that the United States has been involved in?  Would seceded states continue these wars?  Often the states with secessionist movements have a significant portion of their populations who are bellicose.  If the seceded states were involved in their own foreign wars, would they drag the United States into their wars?

Speaking of war, wasn't it a Republican who led a war against states seceding from the union?  Isn't it ironic that some of the major proponents of secession call themselves Republicans?  Did Lincoln "die in vain"?

Let's Look at Entitlements

Political reporting is full of stories about the need to rein in entitlements, mostly meaning Social Security and Medicare.  Remember these are insurance programs for which people pay premiums.

Consider auto insurance.  Suppose you buy a car and buy collision insurance for it.  The day after you pay your annual premium of, say $1,000, you are involved in a crash that totals your car.  Is the insurance reimbursement an entitlement?  Of course it is.  Is it an unjustified entitlement.  Well, if you've been paying car insurance payments for years and never had a claim, you might think so.  It's your premiums that are giving the owner who had made only one payment the reimbursement.

The question with Social Security and Medicare is if enough premiums are being paid in to cover the payouts, not whether those who paid in are entitled to the benefits or not.  One can question the level of payouts but not the fact that payouts are made.

In both the auto insurance and Social Security cases, the recipients are not determining the benefits.  It is either the insurance companies or the Federal Government.

However, there are other benefits that are being determined by the recipients, not some "disinterested" second party.

Consider CEO salaries.  It is not an independent group of shareholders that are determining the ever increasing CEO salaries.  It is a board often picked by the CEO!

Consider board member salaries and fees.  Who determines that board members will get $100,000 plus for five or six board meetings a year plus expenses?  The board members!  Who determines the stock benefits given to executives and board members to "align their interests with those of the shareholders"?  It's certainly not the shareholders.

Consider the "golden parachutes" given to fired executives.  Do you think a laid-off worker would receive a few million dollars and lifetime high-value health insurance?  If the worker receives any benefits at all, they are often considered entitlements, especially if part of a union contract.  Why don't more supporters of "capitalism" recognize the golden parachutes as undeserved "entitlements"?

Consider that corporations depend on employees  and customers to succeed.  Employees are often treated as costs rather than investments.  Customers are often treated as annoyances rather than supporters and free advertisers.  And too often, executive pay is inversely related to customer satisfaction.  See "Executive Pay and Customer Satisfaction".  That certainly smacks of entitlement on the part of the executives.

Consider that the owners of professional sport teams strong-arm cities and states to provide a larger portion of their increasingly expensive stadiums.  They argue that the newer, bigger stadium will be an investment in the local economy.  I wonder how many of these owners are willing to pay for all the schools, roads, sewers, and so on that modern communities need and provide.  Oh, the stadium will pay for those.  That sounds like a multi-million dollar entitlement to me.

My guess is that the "entitlement" of Social Security puts more money into a local economy than all the corporate entitlements.  My guess is that the "entitlement" of Medicare gives a lot of support to the local health care facilities than all the corporate entitlements, plus the employees of those facilities spend a lot of their wages in the local economy.

In short, an entitlement is something others receive, we only receive what is due us.

The economy ran into trouble when…

...When employees became associates;
...When personnel became human resources;
...When employee pay stagnated and executive pay soared;
...When executives were more concerned with the bottom line than with employee safety;
...When executives complained more about regulation instead of examining their own business.

Netflix comes out ahead again on customer service and trust

We put a Netflix DVD in a mailbox outside a post office on Sunday, October 14.  On Saturday, October 20, it was still listed as not returned.  I clicked on a button about returns, noted that I had returned it on October 14, clicked that it was a street mail box, gave my ZIP code, clicked OK or whatever, and poof!  The DVD was no longer in my account as not returned!!!

We thought about the problem a bit and wondered if it was because we opened the mailer at the wrong end.  That cut off the closing tab from the return envelope.  My wife jury-rigged a closure.  Maybe that closure didn't hold and the package wound up getting jammed in a sorting machine.  I also realized that the post office where we returned the DVD does not have the same ZIP code as we do.

I called Netflix and within two minutes was speaking with Travis of the cheery voice.  Essentially he said, "Don't worry.  It's not your problem.  It will probably turn up."

I know there are lots of company's that take the customer's word about a problem and make amends quickly.  But there are also many company's that don't trust their customers any farther than they can throw them.  The former are companies that treat their employees with respect; the latter are companies that create rule-burdened bureaucracies.

Adam Smith was pro-labor

The masters, being fewer in number, can combine much more easily: and the law, besides, authorises, or at least does not prohibit, their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work, but many against combining to raise it. In all such disputes, the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks, which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year, without employment."
- Adam Smith, Wealth of Nations, Book I, Chapter VIII, Of the wages of labour
What he describes is not a free market.

Circuit City, I could have told you so

When Circuit City announced that it was firing its highest paid sales people, I thought that it would be counter-productive. The lower paid people would probably not be as knowledgeable and would thus sell less. Also, many customers would boycott Circuit City and go to other electronic retailers. This week my thoughts proved correct. Circuit City's holiday sales fell 11.4 percent and its stock is "about 80 percent below where it was the day before it made the staffing announcement" last spring.

"Cost-cutting backfires for retailer Circuit City", Duluth News Tribune, September 12, 2008, Rachel Beck, Associated Press. For an online version, try http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/01/13/BUFBUD4TG.DTL
If that doesn't work because of archiving, try a search for

"Circuit City" staffing "Rachel Beck"

Voluntary compliance works?

George W. Bush has made a big thing of getting voluntary compliance from large corporations to foster the public good.

I wonder if these same corporations will depend on volunteer compliance from their cashiers in making sure their registers balance at the end of the day.