HR Trails Almost Everyone Other Career Related to Freelancing - Let's Discuss...

Welcome to the recession, team! It's just like any other recession, except that it was caused by a Global Pandemic, which seems a bit - extreme.

But I digress. If we're no longer in the peak economic cycle and over 30 million Americans Sidehustlehave hit unemployment since mid-March (WTF, and the number is likely much bigger if you count all the underutilized employees that companies are holding onto via cash reserves and stimulus programs like the Payroll Protection Act), it seems like a good time to talk about freelancing, because all of us might need an alternative source of income at some point in the near future.

You know, a side hustle.

Who's good at having a side hustle? According to research conducted by The Hustle, a nifty little business newsletter you can get delivered to you daily, it's who you would expect. Professions most likely to have a side hustle are first and foremost creative pursuits, the kind where companies often have difficulty justifying a full time position. Graphic design, online media and photography all lead the charge in freelancing and putting together portfolio careers rather than relying on (or being able to rely on) a single source of income (email subscribers, click through if you don't see the charts below).

Hustle 1

What's that? How's HR doing related to having a side hustle?

Shitty.

I regret to inform you we are neither good at it or comfortable with it. See the chart below from the same research, which shows HR as the third least likely profession to have a side hustle, behind the sexy, risk-taking tribes that are lawyers and engineers (woof).

Hustle HR

For god's sake, bankers experiment more with a side hustle than we do. #sad

If you're reading this post as an HR or talent pro, I've got good news for you - you're already hungry for knowledge and experimentation with the status quo, or you wouldn't be here. 

Why do HR people rarely experiment with the side hustle?  Some thoughts:

--We write the policies on the people side and it feels a little hypocritical to do our own thing after we wrote the blurb on moonlighting.

--Our profession is made of up of rules people, and having more than one job doesn't feel like it's in compliance.

--Our skill set doesn't lend itself to side hustle as the work product isn't as transferrable as the graphic designer. 

--We simply aren't a profession full of entrepreneurs. #truth 

Let's examine some of those reasons. We ARE full of rules people and if we wrote the policy manual, we're compelled to follow it. But that sounds like it might be time to reexamine the policy in a gig economy. 

As far as whether our skill set lends itself to the side hustle or not, well, all you really need to do is look at the tens of thousands of HR Consultants who have hung their own shingle to help small business in American and it's clear - the transferrable skill set argument doesn't hold water.

The real reason for such a low side hustle score is we are full of rules people, and HR for the most part doesn't have an entrepreneurial spirit.

And that's 100% ok.  But in a recession that looks like it may be deep and long, it's probably time to figure out what you could sell if you had to.

There's never a better time to look for a side hustle writing an employee handbook for a small company than... wait for it... when you still have a job.

Recession = get ready to bootstrap.


THE HR FAMOUS PODCAST: e12 - Getting Paid to Not Work

In episode 12 of The HR Famous Podcast, long-time HR leaders (and friends) Jessica Lee, Tim Sackett and Kris Dunn come together to talk quarantine watching habits, unemployment insurance coverage and the Payroll Protection Plan. The team brings up the challenges and nuances individuals might be facing when working through their unemployment insurance and PPP. 

Show Highlights:

3:30 - The team starts the convo by talking movies and Netflix series. Tim calls out KD on not Unemployment watching Parasite - Turns out KD was thinking about a whole other movie with Kevin James. 

6:00 - Talking about Hulu and Netflix specials - KD even wrote about the Netflix American Factory docu-series. 

9:20 - Tim brings up the elephant in the room, Unemployment and the broken system of unemployment insurance. What are other countries doing that the US isn't? He also brings up PPP - the US Payroll Protection Program.

12:15 - Jlee and Tim talk about the differences between states on the unemployment savings account weekly payouts. 

15:25 - Is unemployment a forced savings plan? KD talks about loving it on the broad level brochure, compares the plan to social security and it's struggles + the start of the new recession era.

21:00 - Tim talks worker bias. If you're going to work, and someone else is unemployed and getting benefits - are we jealous? Paying into a system for something we aren't receiving can be discouraging. 

23:15 - Jlee says Tim is sounding like Andrew Yang with the concept of universal income. Regardless, this era will be challenging future changes in the UBI realm. 

28:45 - How people should handle receiving the PPP through the CARE Act - are some of your employees making more on unemployment? 

31:00 - KD brings up that using the PPP doesn't always make the most sense. With restaurants and service base industries how does bringing back workers work when there's no business? 

33:05 - Tim talks about the tax, health insurance and other complications with folks choosing unemployment vs. being rehired

35:15 - The team talks about how fast everything has been moving, even for federal government - but with speed comes some issues and misses.

39:30 - Closing it out by touching back on the more lighthearted Netflix watches. 

Resources:

Jessica Lee on LinkedIn

Tim Sackett on Linkedin

Kris Dunn on LinkedIn

HRU Tech

The Tim Sackett Project

The HR Capitalist

Fistful of Talent

Kinetix

Boss Leadership Training Series


When Employees Want COVID Unemployment Over a Job at Your Company...

This post is for the business owners (and the HR pros who support them) that have lower paying jobs that have been thrown into turmoil by the COVID lockdown and the resulting recession. The company I'm a part of isn't part of this situation, but I've been following the news closely.

As expected, federal enhancements to unemployment meant to aid the unemployed is causing confusion and frustration among some business owners, laid-off workers, and the employed, according to interviews.

The federal program pays $600 weekly to the unemployed, in addition to state unemployment payments. With the extra federal money, workers in more than half of US Unemployment states will receive, on average, more than they were earning while employed, according to an analysis detailed by The New York Times.

If you go read the article, you'll see those who got a raise (or could) through federal unemployment analyzing it like this:

"Marcus Anthony, a 48-year-old warehouse worker in Macon, Georgia, said he was receiving $300 more weekly in unemployment benefits — for a total of $730 after taxes — than he would with his regular paycheck.

He said he's feeling conflicted about his eventual return to work.

The extra money "will undoubtedly come in handy during these uncertain times but will be missed when I'm called back to work because I make far less," he said. "On the upside, I guess after the pandemic I hope to return to a life of normalcy with a full-time job with full benefits."

And this:

"Miriam G., who requested that her last name remain private, said she initially felt relieved when she was spared from layoffs at the public-relations firm where she worked in New York City and instead given a pay cut.

Now, she's thinking her laid-off colleagues might be better off.

"I'm trying to decide how is the best method to go about the conversation with my management about how unemployment benefits are more supportive right now than my steady paycheck," she said. "

Add to this employers who thought they were heroes by getting a loan to continue operations through the Payroll Protection Act, only to find their employees pissed that they would get employment protected rather than go into unemployment due to the pay differential, and it's clear - employers have a lot to consider (click on the link if you haven't seen the story, it's a doozy).

So what do you do if you're an employer and you have the following?

1--Employees who don't want you to protect jobs because unemployment is richer, or 

2--Employees who have been furloughed but are signaling they don't want you to bring them back for the same reason.

My advice? First, understand and be empathetic to the fact that some may actually be prioritizing their safety over the money.

Now that we've got that out of the way, let's get real. I offer up the following quote from Don Draper on Mad Men for all the business owners who feel slighted and under-appreciated by these circumstances:

People tell you who they are, but we ignore it because we want them to be who we want them to be.” 

Simply put, when people who are working full schedules (or you're paying in full while you try to wait this out) want to get the compensation provided by the Federal unemployment benefit - or want to stay out and not return to work if you furloughed them and want to bring them back, they're telling you what they value most.

Money in the pocket during a recession is key. So you can't blame the people who view the world in that way, right?

Right.

But you can prioritize the people who didn't feel that way for the rest of your company's existence. You know the ones I'm talking about - the ones who never blinked, who never considered that going on unemployment is better than working, regardless of the compensation of both paths.

Simply put, the people who never blinked and valued the job over the unemployment compensation are the building blocks of your company moving forward.

There's a work ethic in this group. If you find yourself in this situation as an employer of folks who net under 30K annually, you should be empathetic to the group that wants to get as much compensation as possible, but you should never view them the same as the folks who wanted the job - above and beyond all else.

At some point, the benefits run out and we are likely still in a recession with employment levels significantly lower than what we knew before March 2020.

Protect the people who hung with you during this time. They're different. There's something in them that made them value the job over all else. Celebrate the group who hung tight and refused to join the group think that unemployment was better than a job.

They're who you build around coming out of this.


COVID Lockdown Netflix Recommendation - "American Factory"

I know, you're burned out on streaming. You've worked through a bunch of things during the COVID lockdown - you whipped through Joe Exotic, Ozark and Bosch - and you found yourself working through a 3rd tier series like Last Chance U.

I see you America. That's why I'm here with a Netflix Recommendation that only a professional manager or HR person could get excited about. American factory

AMERICAN FACTORY.

Let's get started with the description of this two-hour documentary from Wikipedia:

American Factory (美国工厂美國工廠) is a 2019 American documentary film directed by Steven Bognar and Julia Reichert, about Chinese company Fuyao's factory in Moraine, a city near Dayton, Ohio, that occupies Moraine Assembly, a shuttered General Motors plant. The film had its festival premiere at the 2019 Sundance Film Festival. It is distributed by Netflix and is the first film produced by Barack and Michelle Obama's production company, Higher Ground Productions. It won an Academy Award for Best Documentary Feature.

Filmed from February 2015 until the end of 2017, Reichert and Bognar were granted filming access by Fuyao at both their Ohio and Chinese plant locations. They were inspired to make this film as the events they aimed to depict were taking place in the same Moraine Assembly plant once occupied by General Motors, which was the central topic of their 2009 Oscar-nominated documentary short The Last Truck: Closing of a GM Plant.

I know what you're expecting: China bad, plight of the American blue collar worker miserable.

Turns out, it's more complicated than that.

GM closing the plant follows this script.  But then a Chinese company, Fuyao Glass America, shows up to reopen it. Chinese companies buy American companies all the time. Big deal, right? But Fuyao let the filmmakers film everything.

And so American Factory isn't 100% about the plight of American industry or the workers it left behind as globalization occurred . The part that is astonishing about American Factory is that it shows it all through the eyes of Chinese factory workers and managers arriving to reopen and restaff a plant in the rust belt - as well as through the eyes of the Americans. 

You'll be rocked when the crew travels to China for company celebrations and you see the attitudes of the Chinese workers and the whiplash cutaways to the American plant and team (spoiler alert - the USA team has about 20% of the urgency of the Chinese team).  The Chinese team doing the same work as the Americans are standing on marks for quick team meetings before the start of their shift. They're celebrating the company through skits, song and other group activities that would make 99% of Americans cringe.

You'll also be rocked as you see young Chinese managers and Chinese workers in the Toledo plant (brought over to help launch the plant) come to grips with the limitations of the American workforce they've hired.

If you haven't had great exposure to globalization yet in your career, I can't recommend American Factory enough. 10 out of 10. As a manager of people or an HR pro, you'll find the contrast between cultures fascinating and the HR and management issues in this culture mashup fascinating.

Globalization is full of gray. I'm 100% on team USA, but American Factory keep you honest about what it takes to compete in global economy. 

Trailer below (email subscribers click through to view):


The HR Famous Podcast: e10 - Unlimited PTO vs Accruals - Which is Better?

In Episode 10 of The HR Famous Podcast, long-time HR leaders (and friends) Jessica Lee, Tim Sackett and Kris Dunn get together to discuss how COVID-19 has changed their daily life, the Cuomo brothers and work-life balance. Tim wants to talk about PTO: accrual vs. unlimited. What’s better? There are different answers with many variables…

The gang continues to talk about how PTO will be molded by the COVID-19 crisis with Kris wondering if unlimited PTO might attract the “average” performers. The team closes by talking about the differences in how different types of employees want their PTO and Tim brings up the demise of the Unlimited PTO plan.

Listen below and be sure to subscribe, rate and review (iTunes) and follow (Spotify)!

Show Highlights:

1:56 – Tim brings up the question “How your life was pre-coronavirus vs. now – what’s the percentage?” He says he has had a 50-60% change where Jlee has had nearly a 90% change, drinking more and bonding with family.

4:05 – KD talks about how he isn’t doing anything. He’s going on a run sometimes and avoiding people as much as possible. He’s also being a little more introspective. Tim calls KD out on his new deck-lifestyle with the cat.

7:00 – KD hits the cancel culture with a “BACK OFF” and brings up the Cuomo Brothers (recently featured in a POLITICO article , since Chris Cuomo has the coronavirus but is still doing shows from the basement. Where’s our work-life balance? Is he a bad example? JLee says haters are going to hate, and maybe he should use that sick leave – but he’s doing a service to the people by showing them what COVID-19 looks like. POLITICO is just hating.

12:10 – There’s rarely a moment where someone reaches the top without outworking someone. KD calls out the bullsh*t – for everyone, you have to put in the work and people who don’t work as hard, can’t expect the same results. You have to grind it out. Shout out to Chris Cuomo.

14:47 – Tim brings up unlimited PTO vs Accruals – you’re not going to be using 4 months of BeachPTO, but what would win if you had to choose? Would more people choose the unlimited plan?

18:26 – KD says the answer is different pre and post COVID-19. Tim brings up that HR pros have different opinions than the majority of workers.

22:15 – KD likes a system where you use it or lose it for your vacation time – but sick leave can be rolled over for extended sick leave, extended maternity leave, etc. It’s important for major medical! Jlee kind of agrees but when she was younger, she banked those days for an unused PTO pay out.

25:03 – Tim says PTO will be shaped by COVID, because people may stop coming to work sick. Hybrid PTO packages might be in our future…

28:00 – KD challenges Jlee – what plans would workers select, if they could? Jlee says, there’s no way it’s a one size fits all.

31:20 – KD asks Tim, “What plan will the top performer select?” Tim says unlimited, but Jlee and KD say no – KD says the real answer doesn’t matter because the best managers treat their high performers different.

34:48 – Jlee and KD talk about accruals being preferred over unlimited because sometimes, you don’t want anyone to call you and you want the official day off.

38:50 – The team closes it out with their final comments and how unlimited PTO just might go away post-coronavirus.

Resources:

Jessica Lee on LinkedIn

Tim Sackett on Linkedin

Kris Dunn on LinkedIn

HRU Tech

The Tim Sackett Project

The HR Capitalist

Fistful of Talent

Kinetix

Boss Leadership Training Series


Opportunity for Great HR Pros: Making Remote Work Recommendations Post-Covid While Cutting Rent...

It's all going to change! Once people have worked from home for this long of stretch, they're never coming back to the office!

If I could short the stock of every expert who has made these proclamations in the COVID-19 Cubeslockdown era, I would. That being said, the world of work IS likely to change based on what we've learned. But offices aren't going away. They'll change.

In white collar America, the trend has long been leaning towards more remote work. Some companies have taken the full plunge, some have barely dipped their toe in the true "remote workforce" water.

The most likely outcome in a post-COVID world? Companies with large white collar workforces are likely to ask the following questions after we're through this crisis:

What did we learn about our people's ability to work 100% remote?

What adjustments do we want to make to our previous assumptions about using remote workers?

What positive financial implications can this have for our business?

Ding! Ding! Ding! Hey HR leaders and HR pros! Some of the your companies will be late to ask these questions because everyone is in survival mode, even after people return to the office. That's why thinking about the future of work at your company should be something you own. So let's work through what your game plan should be.  Ready? Here we go.

1--Get the number of white collar professional FTEs at any location in your company. For sake of this exercise, I'm going to use "200 FTEs"

2--Get lease info - the amount of rent you pay to a landlord to support those FTEs with office space. For our exercise, I'll use this calculator that says on average, a 25 person company with average space requirements would need an estimated 6,250 square feet (25 people x 250 sf/employee).  Do the math for 200, and you arrive at 50,000 feet of space for a company/location with 200 white collar workers.

3--Calculate your current cost - I'll use an average of $24 bucks per square foot for decent space in Atlanta, which means the annual cost for 50,000 feet is $1,200,000 (note this is an effective per square foot rate after rebates, free rent and T&I).

4--Now you - the HR/Talent Pro - make a recommendation to you leadership team on that we learned a lot about working remote during COVID, and your company should take advantage of more remote work as not only a recruiting advantage, but a financial advantage.  

Run the numbers based on your current state/future state. If your company was almost 100% work in the office, you make the recommendation that we're going to drop the number of days worked in the office by your workforce by 40% (moving from 5 days a week in the office to 3), and the impact is clear. If you already had some remote days, do your own math but make the cuts related to time in the office significant.

5--Calculate the savings and make your recommendation. If your annual cost for rent is $1,200,000, and you propose to drop days in the office by 40% - and you state that over time, that equates into an opportunity not just offer remote work as a recruiting advantage, but as a financial advantage that could deliver $480,000 in savings.

Some of you will say your lease has 5 years to run. That's what subleases are for, Sparky. Some of you will say the owner/founder of your business owns the building. Sounds like a sweet deal for Tommy. You can still sublease, my friend. If you sublease the space you don't need at $12 per square foot, you're looking at $240,000 in annual savings in the example above.

And of course, if your lease and your agreement is up for renewal or will be in the next year, you should do this math quickly and make your recommendation.

THE WORLD OF WORK WILL CHANGE due to the Shelter in Place lockdown we experienced via COVID-19. It just won't go 100% remote.

Grab this opportunity as an HR Leader and make your recommendation for remote work. Regardless of your current position as a company, more remote work is a recruiting advantage - and a financial one as well.


Why Paying 100K for a Taco Bell Manager Makes Complete Sense...

Taco Bell is going to pay managers 100K per year.  Insert your joke <here>.

The home of Doritos Locos Tacos says it’s going to test paying managers $100,000 a year at some company-owned locations in the Northeast and Midwest Taco bellstarting later this year. Taco Bell/Yum announced the plan Thursday and also said that as of Jan. 1, 2020, all of its company employees “can become eligible to receive” at least 24 hours of paid sick time per calendar year.

Translation - the job market is really, really tight. The people we see landing in our store GM roles aren't what we need them to be.

But 100K to run a Taco Bell location?  That's crazy, right?

Not so fast, my friend. It's not crazy. Let's run some numbers.

Taco Bell said it will start the six-figure salary pilot later this year, but did not name an exact date. The company does not yet know how many managers at its 450 company-owned stores will get the $100,000 salaries or how long it will offer the higher salaries. Current salaries for general managers at Taco Bell’s company-owned stores range from $50,000 to $80,000, a spokeswoman said.

According to Statista, the average per unit sales for Taco Bell restaurants in 2017 was $1.5 million.  The average reports have found that average pre-tax income for franchisees in the food and beverage industry is roughly $90,000

Let's say you own a string of 10 Taco Bell locations, and your stores average 1.5M in revenue per year and 90K in pre-tax income. You replaced 3 of your managers last year, and you offered a salary of 70k. You were concerned about your inability to find good people.

If you're progressive with how you view the impact the right manager can have on revenue, the decision to test a 100K salary from your current level of 70K is a no-brainer.

BTW - note that this trial is at company-owned stores. My scenario was as a franchisee, but in reality, franchisees ARE GOING TO HATE YUM BRANDS FOR DOING THIS. 

What impact can a 100K person have on a single Taco Bell location? I think it's dramatic impact. 

But you still have to find the right person, then sell them on the opportunity and convince them to give it a try. Simply paying the talent you see now more money doesn't do anything - you have to go out and upgrade the type of candidate you're talking to in order for this trial to have the impact Taco Bell seeks.  And that's the catch - there's work to be done with how you recruit to unlock the potential of this trial.

Me? I'll take 3 Bean Burritos, fresco-style. And a large Diet Mt. Dew with no ice.

No sauce.


2019 Employer Brand Song of the Year Winner - Amazon!

It's the end of 2019 and reflection time. One reflection I've had this year is how much Amazon is dominating my life.

As a consumer, it's obvious and great. I can get anything I want without leaving my house, and it generally comes no later than 2 days after I ordered it.

But as a citizen, you have to be a bit wary of what Amazon has become, both as a partner and an employer. The Bezos creation has so much market power and smartly reinvests most profits back into the business to build for the future.  That was really cool to write about in the past. No profits, all reinvestments. Then something happened and it went from being smart to also having some pretty remarkable societal impact. Consider the following:

--Amazon has long been written about as a hard place to work - both in professional grade positions and in warehouses. My favorite related piece of this was the trademark application that had humans in cages while the machines zipped around.

--Amazon's also having a well-documented impact on retail. We spent a decade complaining about WalMart putting small stores out of business. That seems cute now.

Being a hard place to work and representing the Grim Reaper of Retail still holds true for Amazon. But there are other trends that are newer, but just as troubling:

--Amazon's a tough partner. Their recent decision to build their own delivery fleet of transport jets is the right business decision, but looks pretty hard towards UPS and FedEx. That's life in the show. Read this great post on this impact on FedEx here.

--Amazon's also putting together it's own network of local delivery, but they're pushing the responsibility to aspiring entrepreneurs to invest in fleets with the promise that Amazon will always have work/volume for them. In this way, they're also deferring the tough responsibility of running fleets of drivers to anyone that can finance a few 100K to ramp a franchise up.  Is there any doubt the cautionary tale from UPS/FedEx will hold true here as well?

--There are lots of tax issues with Amazon (meaning they don't pay a lot of them).

At the end of the day, things evolve. Change happens. Jobs and companies are destroyed and new ones emerge - I get that. And I'm certainly addicted to Amazon as a consumer. Their ability to create a marketplace and invest in money-losing free shipping as a means to put other people out of business is genius. You and I would do the same thing if given a chance.

But a couple of months ago (before the Christmas rush) I had the moment. I had ordered a pair of slacks from Amazon, and I got the notice they were being delivered - on Sunday. An hour later, there he was. A delivery person employed by a third party, looking like he had been in the van for 12 hours already.

Do I really need a pair of ####ing slacks on Sunday?  That's what Amazon has taught us to expect.

I got my slacks on Sunday, but a whole bunch of people got used in the marketplace and supply chain to make that happen.  That's why my 2019 Employer Brand Song of the Year award goes to Amazon and is - wait for it - "Use Me" by Bill Withers.

As Amazon continues to grow, everyone's getting used a little bit.  Song embedded below - click through for the post if you don't see it.  Worth a listen.

My friends feel it's their appointed duty
They keep trying to tell me all you want to do is use me
But my answer yeah to all that use me stuff
Is I want to spread the news that if it feels this good getting used
Oh you just keep on using me until you use me up
Until you use me up

I returned the slacks to the Amazon return center at Kohl's 29 days later.  Damn.


New Research Show Income Gaps Are (at least partly) Due to Working More Than 40 Hours Per Week...

Hat tip to my homeboy Tim Sackett on the research cite below. Sacks must have crazy email subscriptions and Google alerts to mine this gold.

Cut and paste from Marginal Revolution appears below. Littlefinger

That is a new paper by J. Rodrigo Fuentes and Edward E. Leamer:

This paper provides theory and evidence that worker effort has played an important role in the increase in income inequality in the United States between 1980 and 2016. The theory suggests that a worker needs to exert effort enough to pay the rental value of the physical and human capital, thus high effort and high pay for jobs operating expensive capital. With that as a foundation, we use data from the ACS surveys in 1980 and 2016 to estimate Mincer equations for six different education levels that explain wage incomes as a function of weekly hours worked and other worker features. One finding is a decline in annual income for high school graduates for all hours worked per week. We argue that the sharp decline in manufacturing jobs forces down wages of those with high school degrees who have precious few high-effort opportunities outside of manufacturing. Another finding is that incomes rose only for those with advanced degrees and with weekly hours in excess of 40. We attribute this to the natural talent needed to make a computer deliver exceptional value and to the relative ease with which long hours can be chosen when working over the Internet.

Our good friend Kathy Rapp will be back later this week with analysis of the Microsoft 4-day work week pilot in Japan. While we can all agree that 4-day work weeks are awesome, can we also agree on the following points?

1--There's always going to be some maniacs who are incredibly talented and will work 6-7 days a week for decades.

2--Those maniacs will generally climb the corporate ladder and assume more wealth than similarly talented individuals who worked 40-45 hours a week.

3--There's always going to be some absolute grinders who don't have the natural talent cited in #1, but due to the fact they'll work themselves just shy of having a stroke, will achieve as much or more than the individuals with more talent that those cited in #2.

I'll leave you with this cite from the research above:

"Another finding is that incomes rose only for those with advanced degrees and with weekly hours in excess of 40. We attribute this to the natural talent needed to make a computer deliver exceptional value and to the relative ease with which long hours can be chosen when working over the Internet"

Work-life balance is cool.

But work-life choices are everywhere.

My advice to my sons is to rack up the hours and advance as much as you can in the first 10 years of your career, then make some choices on work-life balance after you've kicked a little ass of the people listed in #2. You might be able to downshift by the time you're 35 and have a family if you do it right.

Don't assume because everyone agrees that work-life balance is good that everyone will opt in,
 or that everyone is limited to 40 hours as productivity and performance is measured.

Littlefinger: "Chaos is a ladder."

The crazy talented/driven people described in #1: "The fascination with work-life balance makes me ever more special."

Good luck with the balance, folks.


Budget Season: Do You Have Any Ideal on Labor Costs By Project/Service?

It's budget season for a lot of us, and in addition to revenue projections, one American pastime is alive and well in the budget process, even in 2020.

Sandbagging!

You know it's true. If you're a leader in the field, you're attempting to load up the expense side of your budget as much as possible, often times because you may have no control F35of the revenue targets that are handed to you.  You NEED that expense side to be as high as possible so you can slash it as needed in an effort to meet your EBITDA or Net Income number, even if you miss the crazy revenue target.

Games people play. Right or wrong, you just can't stop them.

If expense loading is a game in budget season, guess what the favorite parlor game of all is during this time?

Sandbagging the headcount budget!

In most businesses, headcount is the biggest fixed (or is it unfixed) cost. The bigger the headcount budget, the bigger the pile of sand that can be used to make earnings if you miss revenue.

Which begs the following question:

Do You Have Any Ideal on Labor Costs By Project/Service at your Company?

While most of would say yes, that's a yes that we "kind of know" but can't give you "actual math".

I'm reminded of this fact by a conversation I had over the weekend. My son's a freshman in college and a Aerospace Engineering student. He started going down a rabbit hole of what it took to build an American Combat Aircraft.  As you might expect, numbers release are limited, but then he found this gem of an article on the production of America's latest generation fighter jet, the F-35:

The U.S. Government Accountability Office, better known as the GAO, has released a new report on the status of the F-35 program overall. One of the most interesting tidbits in the report was metrics on how many man hours of labor it takes to manufacture each type of F-35 and how those numbers have changed over time.

The chart below shows exactly how many labor hours are poured into constructing each F-35 variant on average. With the A model unsurprisingly being the lowest at 41,541 hours in 2017, the more complex B model taking 57,152 hours, and the carrier-capable C model coming in at 60,121 hours. 

Then, they shared this chart, which shows how production labor costs have dropped over time with the F-35:

F35

Using the standard 2,000 hours in a work year, that shows the highest value version of the F-35(c) actually takes 30 man years - just to deliver the airframe.  And it used to 50+ years!  Using either number, you can safely say it takes the equivalent of a worker's entire career/prime of career to deliver a F-35c.  Crazy.

With those numbers in mind, you don't have labor and headcount problems, you have labor and headcount concerns.

The bigger point here for the budget season?  It's the fact that the smart finance pro in front of you - the one who is going to make the final decision on whether to cut the fat out of your headcount budget - is not only evaluating the sand in your numbers, he or she is asking for the numbers behind the numbers. The smart Finance pro asks questions about your assumptions and wants to know that you're a good steward of the headcount received.

All things being equal, they'll cut someone else's headcount numbers instead of yours - IF you can articulate how responsible you've been with the resources provided and how you're doing more with the same headcount.

Showing improvement in production costs over time like the F-35 program (you can do this even if you're delivering service rather than product) is good backup to have during budget season.

Good luck with the final budget meetings with Finance. May your sand continue to flow.