Learn to count noses and costs

Anyone undertaking their own on-going program of personal due diligence has to learn to look at the news they see, hear and read, with two questions in the back of their mind.

The first of these is to do with demographics, or the mix of population. This is the “learn to count noses” part in the title.

Will there be enough work twenty years from now? Count noses. Everyone who can possibly work twenty years from now is born, aren’t they? (Unless, of course, you think we’ll give up schooling and go back to child labour.) How many are there? Is it enough?

I recall doing work with a client back in 2006. They already were in a situation where about 10% of their total work force wasn’t there: the positions were vacant and hiring was going on. This organization wasn’t expanding rapidly — it was quite stable, in fact — but it couldn’t ever get ahead.

A quick look into the numbers showed that the majority of open positions were caused by incumbents taking retirement, and that most of them were in their field operations in more rural areas. Demographically, these were the same areas that had been bleeding population to the cities for decades. (The average student left to go to university and never returned.)

The business they were in required them to have these operations where they were. But they already had a labour shortfall: moving to these communities wasn’t attractive.

What I offered them was an approach to both get by with fewer in the field, but, more importantly, get by with far fewer at headquarters, so that they could recycle that savings into incentives to staff the field positions. But more important, they had the numbers in front of them showing how many more retirements they would face, and what the local workforces would look like (and that if they didn’t invest in these communities to make them more attractive, they’d never have this problem solved).

You can have national unemployment suggesting there’s no problem, and a local problem staring you in the face.

Closely coupled to this is learning to think about costs differently.

Things are not the same everywhere. Even when you have the opportunity to, for instance, grab offshore labour to reduce costs, it may not be the right move.

In the case of my client, that wasn’t an option because of the need to do the work in specific locations.

Still, putting money into local schools — to make them capable of offering distance learning options to compete with big city alternatives — into local sports and recreation facilities (to make the community more attractive to live in) and to (much like the guest workers in the Gulf oil fields) periodically provide a vacation trip for shopping and cultural purposes as a benefit isn’t just a labour cost.

It’s a cost of keeping positions filled. Those that provide field operations need to be there to do the work: spending to attract and retain them in remote locations is an expense to keep operations moving. Insurance, if you like.

Standard accounting doesn’t tell you that. It’s just a set of numbers. Benchmarks would say you were wasteful relative to others in your industry. Yet it might be just the ticket to solve a demographic issue.

That’s why the cursory look we normally give these matters isn’t good enough, both for our own futures, our investments, or even understanding the dynamics of a region.

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