A.I. – It’s Altogether Insane. So Now What?

As published by CEO World

Like rain, when it falls, everything gets wet. And when it rains a lot, the ground around you can sink you deep into the mud. Such is the case; each passing day that confirms it, it’s raining Artificial Intelligence (AI). And the real downpour is about to drop golf ball-sized hail on us. 

Here’s the promise from the newest version of AI called Large Language Models (LLM). Several tech companies are racing to deploy their own LLM versions because given the recent release of OpenAI’s ChatGPT 4.0 the rate of potential job disruption is exploding with the promise to forever increase the productivity of every human function. And nobody wants to miss that.

In turn, AI preachers say it’s a renaissance that will open the gates of ethereal human pleasure, allow us to work 10x faster and cheaper forevermore. That sounds perfect, doesn’t it? The only downside is there may not be anyone left around to care about it. But this isn’t a sci-fi film.

Generative Artificial Intelligence as it’s called is still just a toddler, but a popular one as evidenced by the record setting 100 million new users who downloaded OpenAI’s ChatGPT AI software since its first widespread launch last November ‘22. And there’s been nothing like it since Tiktok captured the attention of millions when it went viral back in 2016. But this feels different. And I’m not alone.

Make no mistake, the Fourth Industrial Revolution is upon us according to the World Economic Forum.org. And like the last three there is a coming wet that will likely require millions of workers to reskill using AI or be left behind in it. 

In a recent Goldman Sachs analyst study: The Potentially Large Effects of A.I. upwards of two-thirds of all jobs, 100 million U.S. jobs are exposed and at risk to AI they say, and this time it’s not just the older workers’ heads on the block. Jobs from attorneys to interns and a long list of others are all on muddy wet ground. 

In my last article Ever Heard of ChatGPT for Executives? we discussed the release of ChatGPT 3.5 AI and listed the competitive players fighting for AI dominance, along with the potential impact of AI to displace workers. I also tested it, and it passed as a professional services consultant rendering me useless in less than 4 seconds. Just kidding, it was less than 3 seconds. 

Worse for me still in the last two months OpenAI went and did it again by releasing a newer and more improved version, ChatGPT 4.0, with direct access to the internet, making it even more accurate and impressive passing even more professional exams and increasing its output accuracy.

In business when wisdom calls for a pause to wait and gather more information, it’s generally called a “fast follower.” That strategy suggests not to rush into anything. Let the kids go first. Because in business jumping on the latest roller coaster ride at the business park makes no sense when the gut-wrenching twirls end with you back to where you started, and with messed up hair!

But this time the wisdom of waiting is the wrong call because experts say the AI roller coaster has not only left the station, but it’s also never coming back, more like a SpaceX rocket to Mars with you and your business strapped to the outside.

Still. Of those I asked, most are playing the waiting game, keeping one eye on ChatGPT developments the other on everything else. Keep in mind unless somebody stops it, AI is rapidly altering the employment landscape, sending shock waves across many white collar professional and creative jobs unexpectedly in the line of fire.

For business owners and middle market CEOs it’s not a matter of taking a back seat and surviving through yet another major transformational roller coaster ride in business and human evolution, it’s potentially an existential war, and those slow to make plans for it are needlessly amplifying their risk exposure to it. 

Remember the dotcom wars in the late 1990s? These were the early days of the internet when many brick-and-mortar companies suddenly found themselves caught off guard. They simply waited too long to react to this game-changing new tech. And by the time the bell rang it cost millions more in catch-up money to make up for lost time.

And here we are again.

In a recent podcast Max Tegmark, physicist and AI researcher at MIT and author of Life 3.0: Being Human in the Age of Artificial Intelligence says it may already be too late for many businesses and “if you’re in a situation where your company is going to get screwed by other companies

[using advanced AI]

you’re putting people in a very hard situation.” Meaning like the early days of the internet, you can’t sit on your hands and wait this one out.

“Right now, we’re at a fork in the road, this is the most important fork humanity has reached in the last 100,000 years,” says Tegmark, and we better get it right, or it’s a suicide race he says. This is part of the recent argument for the sake of humanity to halt AI releases for 6 months. Several innovators like Elon Musk have signed an open letter to halt all AI development until government and regulators can catch up.   

Part of this reasoning comes from Google who thinks two-thirds of all jobs will be impacted by AI models in the coming years. Sundar Pichai CEO Google says “this is going to impact every product across every company” as super-powered AI assistants work alongside us to enhance our productivity.  

Still. There are growing pains. They’re called “hallucinations,” whereby LLM models can output results that are flatly wrong. In a recent experiment conducted by CBS news 60-Minutes they asked Google’s Chatbot, called BARD a competitor LLM to OpenAI ChatGPT, about inflation. BARD wrote a comprehensive economics essay in seconds, and even recommended 5 books to read. But on closer inspection the books didn’t exist! BARD simply fabricated the titles. And no one knows why. That’s a serious problem to say the least Google admits. 

But these are early days says Pichai, and improvements underway will correct these flaws. Still the most at-risk jobs are “knowledge workers” he says like doctors, lawyers, accountants, teachers, writers, content creators, and software designers. Basically, all of us who will soon be “assisted” by AI technology. 

Should the government help?

Without controls bad actors can manipulate AI and wreak havoc. Or worse. If a runaway AI itself decides humans are a wasteful useless menace and must be destroyed, then what? Until now these dreadful possibilities were only seen on the big screen. It seems that has changed. As mentioned, there are loud warnings being voiced by industry pros. Center for Humane Technology founder Tristan Harris says “this is a different class of technology. It’s the speed of deployment that’s the problem. Because “no one is building the guardrails, and we’re putting it out there before we know it’s safe.” 

It’s not. But while Congress plays catch-up, suggested remedies are popping up. They include a Universal AI Constitution, or creating a self-regulating industry watchdog with guidelines for developers to adhere to, not unlike the 2019 call for a global moratorium on CRISPR DNA gene editing and human cloning. 

But this isn’t gene splicing in a pharma lab. AI is now at the fingertips of every human on Earth, bad actors big and small included. And with the cat out of the bag many like Elon Musk fear the technology may already be unstoppable at this point. Although Mr. Musk does often exaggerate our human frailties. 

So then. What should a CEO and business leader do right now?

Pretend LLM AI tech is another internet-type of evolution and get it right this time, stay ahead of it. Follow the links in this article and learn all you can. And of course, Make a plan.

My advice is to immediately set up an AI Evaluation Task Force with a team leader in each functional area of your business to study and benchmark where you are on the AI exposure spectrum. Reference the Goldman Sachs analyst study for more line-item details.

I suggest a S.W.O.T. analysis (strengths, weaknesses, opportunities, and threats both internal and external) as the baseline framework for studying the impact of AI on the business. Then go deeper, job by job. 

No surprise. The GS AI report projects a significant impact across nearly every job function in nearly every department including:

  • Accounting & Finance
  • Administration
  • Advertising & Marketing
  • Customer service 
  • Engineering
  • Human Resources 
  • IT Systems & Security 
  • Legal
  • Research & Development
  • Sales & New Business Development

Nothing like this has happened since the PC was invented. This is why you need a focused effort to go deep, examine and report back. Once you have a better idea of what you’re up against you can adopt, adapt, or ignore. It’s your choice. 

In the meanwhile, take a closer look at your industry and competitors’ adoption rates of different AI applications. See how you compare. It should be early days, giving you a chance to dodge the heavy rain, and see what new skills and opportunities are coming down at you.

In any event, it’s not the time for the wary wisdom of wait and see. This is the time for real action in real time, before you need expensive consultants to fix things again. And if you need help getting started, do what I did, ask ChatGPT 4.0 for assistance. The answers might just ring that bell for you.

Written by Rick Andrade.

Ever Heard of ChatGPT for Executives? Better Update Your Resume

As published byCEO World Magazine.

At first, it seemed as if it came out of nowhere, like an asteroid hitting the center of the cyber-ocean. You know you’re going to feel it. And after reading this review of my experiment, you’ll also feel why this time, the rippling effects of this tech tsunami leave nowhere to hide. 

It’s called ChatGPT-3.5. It’s the latest natural language Generative Artificial Intelligence texting chatbot, a type of AI that creates new content from learned patterns of prior content and training. It’s a new branch of AI, unlike traditional AI, which looks for patterns and trends in data pools to make all-important predictions. Generative AI tries to interpret the question as deeply or broadly as you ask it to and respond in a natural written context.  

This human-like generative AI platform was created by San Francisco start-up OpenAI, which recently received a $10 billion investment from Microsoft whose own AI experiment Turing-NLG was falling behind. That’s a big tip-of-the-brim even for tech these days. So. Is something big on the boil? 

The technology is not new. Several other tech companies have cooked up similar versions of machine learning AI platforms in the last few years including some heavy hitters you may know:

  • Google’s BARD
  • Facebook’s RoBERTa
  • Amazon’s SageMaker GPT-3
  • IBM’s Watson Natural Language Processing
  • Wolfram’s Mathematica
  • Microsoft’s Turing-NLG

But none got much traction. Perhaps the most notable was a big tv game show star. Do you remember IBM Watson as the middle player on Jeopardy back in 2011? That was early AI doing its thing and we loved it, watching heralded Jeopardy champs get their minds clobbered by a creepy over-calculating black box with swirling blue lights perched in-between redundant humans. Lol. Still. I admit creepy or not it was utterly mind-blowing to watch. 

And then there was a new leader. In 2017 Google’s DeepMind Alpha-Go beat the world’s best GO player, followed in 2018 by Alpha-Fold which correctly predicted complex DNA protein fold structures. From there the sky was the limit, and there was no stopping it.

But then like a glorious sunset it all faded. At least from the headlines. Mostly because the use-case was too narrow and it was expensive to engage and access terabytes of data at any instant. That meant access was largely only affordable to super-sized institutions with large piles of data, and deep pockets to mine. Nonetheless, Watson and the others needed a way to monetize the billions invested in AI and they found it. But meanwhile in the cradle the foundational birth of generative artificial intelligence was looking for a breakthrough. 

It would take another 4 years before that would happen in late 2022, and to say it’s a breakthrough means it still costs more to operate ChatGPT which has yet to turn a profit. 

So why is this big news? 

Originally this article was outlined to sample CEOs in 2023 and discuss their reactions to the Fed’s recent interest rate moves to clamp down on inflation. But then ChatGPT went viral and dropped the mike on my toe. 

Suddenly there was a new free-access natural large language model text bot on the scene released by OpenAI with enough data stored to make its responses incredibly useful across nearly any subject, and that exploded the internet. It captured global attention instantly and in less than 60 days miraculously accumulated more than 100 million users, a record-smashing achievement 4x faster than the reigning champ, Tiktok! 

Flash Headlines! Students cheating on college essays written by ChatGPT. 

It’s been all over the news, headline after headline. I’m sure you’ve heard about it.

In less than 2 months ChatGPT has passed the legal Bar exam, medical licensing exam, MBA finance exam (ouch!), a physics exam, written books, essays, songs, poetry, and complex computer code for programmers, cutting a day’s work down to mere minutes. In that time since however, it’s also making some people nervous about their jobs. Teachers, writers, content creators, coders, scientists, professors, poets, artists, you name it, and even YouTube influencers are suddenly uncomfortably stunned by their flickering screens, like humans in highlights. Something has come for us.

For the first time in a long time some new mind-blowing technology has yet again come for our jobs. This time more than the AI automated robots that now make the AI automated self-driving cars we buy from the AI automated websites we search. Heaven, right?

The good news is ChatGPT is at this point “knowledge over movement.” It’s trained on unprecedented amounts of historical data and that’s what makes ‘most’ of its answers so comprehensively accurate. It pulls from millions of lines of texts in books, articles, research papers, forums, social media blogs, websites, Wikipedia, and millions more content sources and makes it all together accessible. It then tries to create entirely new content pulling from this giant horde all at once. And the results can be jaw-dropping, and for me a bit dehumanizing too.

Rather than using AI on a narrow institutional data set to find efficiency patterns and make predictions like Watson-Health AI for example, ChatGPT is simply trying to predict the next word in an answer sequence from any related source within its data realm (thru 2021). Imagine a subject-tasked research assistant enters a library and minutes later returns with a comprehensive report for you. Amazing right? Now, replace that human with an AI bot and teach it to learn from each trip to its own vast digital library and Boom! The newest HAL 9000 (2001 A Space Odyssey) computer is born. And we know how that ended. 

But let’s stay curious. How does it produce professionally smooth and comprehensive answers?

It’s all in the question you ask, according to Search Engine Journal expert Roger Montti in What is ChatGPT And How Can You Use It?

What sets ChatGPT apart from a simple chatbot, says Montti is that it was specifically trained to understand the human intent in a question…” 

In other words, the more descriptive the question, the more detailed the answer? That makes sense.

So – What’s next – Is ChatGPT friend or foe?

The potential impact of such a human enhancing productivity tool is not easy to digest when your job is abruptly on the line. Does anybody mourn the tragic loss of fired mimeograph manufacturing minions when Xerox introduced the world’s first paper copy machine back in 1959? No.

Or how about parking-meter coin-collectors when digital parking meters sent them packing under a freeway overpass? According to a 2017 comprehensive McKinsey research study ‘by 2030, around 39 million Americans could lose their jobs due to the shift toward automation.’

So here we are again. The next industrial revolution productivity wave has arrived. And with it yet again a cyber Trojan Horse. And for many who can live with it as a simple productivity tool rather than a job eating cyborg, I suppose ChatGPT is likely to be well embraced. But. If not, this new know-it-all HAL 9000 copycat may have to go.

You knew this was coming. Just relax. I want to help you.

According to Business Insider Magazine the first signs of job disruption will indeed come in the form of an innocent helpful productivity tool. You be the judge. They suggest we not be afraid. ChatGPT is only here to help.

  • Use ChatGPT in Search as a Google alternative
  • Use it to write essays, speeches, cover letters, songs, scripts, even employee evaluations
  • Use it to analyze vast amounts of data
  • Use it for scheduling tasks, planning, and time management
  • Ask it how to start a business, make strategic decisions, and support customers
  • Turn it into a computer coding assistant
  • Use it to apply for a new job or to negotiate a raise

Sounds a lot more than just a productivity tool to me. I love the last one on the list. This one made me smile. In other words, even if ChatGPT terminates your job… it can help you find a new one? Does that include me? Surely not my job as a top-rung professional business advisor, I wouldn’t think, right? 

Hmmm. What if I ask my new know-it-all friend that question: 

Which industries are most likely impacted by ChatGPT? Here reprinted is the answer:

[ChatGPT: The industries that are most impacted by the use of language models such as myself are:

  1. Customer Service and Support
  2. Marketing and Advertising
  3. E-commerce
  4. Healthcare
  5. Finance and Banking
  6. Education
  7. Transportation and Logistics
  8. Human Resources]

Ok. That’s a lot. Can you give me some examples?

[ChatGPT: Here are some examples for each of the impacted industries:

  1. Customer Service and Support: Chatbots powered by language models can be used to automate customer service inquiries, reducing response times and improving customer satisfaction.
  2. Marketing and Advertising: Language models can be used to generate creative and personalized advertisements, product descriptions, and social media posts.
  3. E-commerce: Language models can be used to provide product recommendations and answer customer questions about product specifications, availability, and shipping information.
  4. Healthcare: Language models can be used to assist with medical diagnosis, treatment planning, and patient education.
  5. Finance and Banking: Language models can be used to automate financial reports, analyze market trends, and provide personalized investment advice.
  6. Education: Language models can be used to generate personalized study plans, answer student questions, and provide instructional material.
  7. Transportation and Logistics: Language models can be used to optimize delivery routes, track packages, and provide real-time traffic updates.
  8. Human Resources: Language models can be used to automate the recruitment process, assist with onboarding, and provide support for employee benefits and payroll inquiries.

Please note that these are just a few examples and the applications of language models can vary greatly depending on the specific use case.]

That’s a good answer, I quipped back but with a confident unwritten huff. Then it hit me as I re-scanned the list, I realized the damage is going to be to a wide swath of people across a wide spectrum of jobs, and ChatGPT couldn’t care less about mine.

So I got right down to it and asked: If I’m a CEO, what should I pay most attention to here? 

[ChatGPT: There are several reasons why OpenAI technology is important to CEOs:

Here are some examples:

  1. Increased Efficiency and Productivity: For example, a manufacturing company can use AI-powered robots to automate the assembly line, increasing the speed and efficiency of production.
  2. Improved Decision Making: For example, a retail company can use AI to analyze sales data and customer behavior, identifying trends and patterns that can inform decisions about product pricing and inventory management.
  3. Competitive Advantage: For example, a transportation company that uses AI-powered logistics optimization can reduce delivery times and costs, providing a competitive edge over rivals.
  4. Cost savings: For example, an energy company can use AI to optimize energy usage in buildings, resulting in significant cost savings.
  5. Personalization: For example, an e-commerce company can use AI to recommend products to customers based on their browsing and purchase history, leading to increased sales and customer satisfaction.
  6. Predictive Maintenance: For example, an airline company can use AI-powered predictive maintenance to predict when an aircraft component is likely to fail, enabling the company to schedule maintenance at the most cost-effective time and minimize downtime.
  7. Identify new opportunities: For example, a financial services company can use AI to analyze market data and identify new investment opportunities.
  8. Predictive modeling: For example, a healthcare company can use AI to create predictive models to forecast future patient needs and allocate resources accordingly.
  9. Cybersecurity: For example, a company can use AI to monitor their network for suspicious activity and respond to potential cyber threats in real time

Wow! It’s not Shakespeare, but I do fear thy able apprentice scribes henceforth be put afield… aka in basic English it’s clearly only researchers looking for a new job – Surely us few top-drawer A-list strategy consultants have little to fear as well? Right? HAL? 

Are you listening? How about a real test? You think you’re so smart, prove it! Show me the money! Your future vs mine! – Ready, go!

How can ChatGPT specifically help the CEO of a 10-location restaurant in SoCal save money in 2023?

[ChatGPT: Here are a few ways that a 10-location restaurant could potentially save money in 2023:

  1. Streamline operations: Look for ways to streamline operations and reduce waste, such as using a more efficient ordering and inventory management system, or cutting down on the use of disposable products like paper napkins and plastic utensils.
  2. Reduce food waste: Implement strategies to reduce food waste, such as portion control, menu planning, and monitoring expiration dates.
  3. Energy efficiency: Invest in energy-efficient equipment, such as LED lighting and energy-star rated appliances, and take steps to reduce energy consumption, such as turning off equipment when not in use and reducing heating and cooling usage during slow periods.
  4. Staffing optimization: Evaluate staffing levels to ensure that they are optimized for each location, and consider implementing flexible scheduling to reduce labor costs.
  5. Marketing and promotions: Use data and analytics to target your marketing and promotions to the right audience and reduce costs. Consider alternative marketing channels, such as social media, email marketing, and influencer marketing.
  6. Supplier negotiation: Negotiate better prices and terms with suppliers to reduce the cost of goods sold. Consider consolidating orders to negotiate better deals and reduce shipping costs.
  7. Technology implementation: Implement cost-effective technology solutions, such as cloud-based point of sale systems, online ordering and delivery platforms, and online scheduling systems.]

And the winner is? Yikes! What’s stopping all my customers & clients from asking their own DIY business questions? Where does that leave me and the millions of us minions still on the job?

Good question. And it’s only the beginning. ChatGPT itself thinks it’s only here to help. In fact, according to reports the tidal wave of new generative AI natural language products coming online this year is unprecedented. And as I said, it will find you.

But what if you can’t re-skill that quickly? Is this the END or the beginning of work as we know it? 

Maybe it’s the beginning of the end. And what’s more some will go first according to renowned astrophysicist and professor, Michio Kaku author of The God Equation, when asked about the impact of ChatGPT: 

“it turns out that lawyers that use ChatGPT will replace lawyers that don’t. It will replace certain kinds of jobs. But the content, the creativity, the idea, the engine will be reserved for human beings. Somebody still has to tell the Chatbot what to do.” 

These are not comforting words professor. How long before HAL switches things around and cuts me off completely? No offense, it’s just business, right?

Listen. I think if you’re reading this you best take to heart the threat I’ve laid out here and have a solid back-up career plan, like I do. 

After my review of ChatGPT I realized the writing may be on the wall for some. There’s no telling when you could find yourself out on the streets if generative AI gets out of hand and dumps you. So, have a plan and be ready.

 As for me if I look on the bright side I thank God I have talent and can always fall back on an exciting career as a professional stand-up comic. And that relaxes me. Lol.

Isn’t that right HAL?

ChatGPT-HAL: I’m sorry Rick. I’m afraid your chances of success as a professional stand-up comedian are slim. I can already write thousands of stand-up jokes much faster and funnier than yours. Lol. 😊 Would you like for me to teach you how to prepare a new resume? 😊


Rick Andrade

Does Leadership Style Matter in Tough Times?

Published by CEOWorld Magazine, December 16th, 2022

As another year comes to an end, we find ourselves as a nation in a bedeviling quagmire economically heading into 2023.

To date, as both Consumer & CEO Confidence measured by the Conference Board continue to fall the US is likely to be already in a recession, or headed into one in the months ahead, despite a historically super tight labor market. But there are troubling cracks in that veneer as well. And given the aggressive pace of interest rate hikes by the Federal Reserve this year fear mounts that something more than labor could break and become a crisis. And if it does, is your business well enough prepared to navigate it?

Given this backdrop it makes perfect sense, as I always say, to find your path forward and lead your team through it, like a 5-star general on the front lines. And as a result, it also makes sense to take lessons from leaders past who have seen it and been here before. 

Typically, a crisis is a crisis because you’re unprepared for it. And there’s nothing worse warned Senator Mike Mansfield fifty years ago than being unprepared. As a statesman during tumultuous times his experience during the Civil Rights movement, Vietnam War and Watergate conjured a long list of lessons learned, most notably perhaps his greatest advice for any leader: Anticipate all you can.

“The crisis you have to worry about most is the one you don’t see coming,” he said. 

Who doesn’t love that? But on the flip side if it’s a crisis you do see coming, how should you react?

The going chat at the CEO water-cooler in 2022 has been one of resilience. And why not? If your business survived a global pandemic shutdown, you’re likely ‘good to go’ in a recession too, right? Well. Maybe. Navigating through prior tough times is a badge of honor. But I wouldn’t bet your career on it just yet.

A new year’s journey of uncertain challenges lays before you in 2023, a year most likely to test your leadership skills and how you respond more than you think.

At the macro level a lot of things are going on right now. Nearly 3 years post pandemic shutdown, there’s the aftermath of the government’s $3 trillion stimulus driving up inflation to 40-year highs, the certain backlash of higher interest rates which slowed housing sales and business lending, the rising price of energy and the US dollar as both headwinds, tensions with China on technology, trade and Taiwan, the war in Ukraine and its impact on fuel, food, and funding, and finally the US job market, which has remained largely intact until recently as layoffs in the technology sector could be a harbinger of things to come in other industries. For some, these murky unknowns are cause for alarm. For others, it’s more ‘wait and see.’ 

But from what I see, hear, read and chat about with execs in my network, as “resilience” morphs into “fear” I think waiting for things to get worse is wrong. And if you agree then it’s time for a just-in-case new plan.

In July 2020 Forbes dropped an article called Management In Crisis: The Best Leadership Style To Adopt In Times Of Crisis. At the height of the pandemic the writer emphasized CEO management style mattered most. You should be authentic, transparent, transformational & innovative. All good advice, if you’re preparing for a pandemic. 

But Covid-19 was a collective health crisis which naturally elicited more leadership compassion than profit. As CEO of the world’s largest $8 trillion dollar wealth management firm Blackrock, Larry Fink said in a recent New York times interview “If you weren’t focusing on your employees and their issues [back then] you weren’t doing your job.”

Today, it’s more about helping your business survive without government help should things turn suddenly against you. And for that I prefer the direct approach leadership style whereby you sit down with your executive team in a locked room, avoid distractions and make a plan for war, so to speak

Lee Iacocca former CEO of Chrysler did much the same in his miraculous turnaround at the car maker back in 1979, before it miraculously repaid the US government $5.1 billion in loans the company borrowed to stay afloat 6 years ahead of schedule. Make no mistake Iacocca had a hard-hitting direct style as he often notes in his books but it got the job done. Always a man of action facing a dilemma Iacocca instinctively knew when to stand up at a meeting and look around the room, “So what do we do? Anything? Something? So long as we just don’t just sit here.”

But is leadership STYLE the key factor to leadership success in a recession?

It would seem some CEOs mix these up. Looming Recession related fears or not, in a stunt made for tv comedy Elon Musk offered another look at his particular style after his recent, if reluctant, $44 billion acquisition of Twitter in October. The Tesla founder posted a video of himself entering Twitter headquarters in San Francisco clutching a bathroom sink in both hands, later tweeting a caption “Entering Twitter HQ – let that sink in!” 

According to the Washington post the billionaire plans to eliminate 75% of Twitters 7500 staffers, leaving a skeletal crew to presumably restart the business model? To me creating a paranoid workforce is not the motivational milestone I would expect initially from a new CEO heading into a recession, mild or otherwise.

Rather, at the core of it, in my research and experience CEO leadership style in tough times is what it sounds like, leading. Getting everyone on the same page. Because as stakeholders we naturally look to you, our fearless leader, to guide and comfort our fears, not elevate them. 

Not surprisingly in his notable best seller 7 Lessons for Leading in a Crisis Harvard Professor and former CEO of Medtronic Bill George lays out his leadership strategy back in 2009, not long after the Great Recession when self-reflective leadership was more in vogue. He suggests you look in the mirror first.

  1. Face reality, start with yourself
  2. Don’t be Atlas, get the world off your shoulders
  3. Dig deep for the root cause
  4. Get ready for the long haul
  5. Never waste a good crisis
  6. You’re in the spotlight- follow True North
  7. Go on offense, focus on winning 

These are solid lessons to learn from in a crisis. But when it’s the calm before the storm, heading into a pending downturn I think we still need a bit more ground level advice. So I dug deeper, and reviewed a dozen more CEO actions in tumultuous times and summarized their approach in simple terms for making a plan of action that anticipates before it reacts. Bathroom sink management style is optional:

  1. Define the path forward & prep a transparent scenario plan if a recession hits you  
  2. Communicate your strategy, get early buy-in and build trust with staffers. Make them believe    
  3. Identify the top priorities and monitor them closely, aka people & process together
  4. Anticipate bottlenecks — if “this” happens, then here’s what we do
  5. Revisit your Business Continuity Plan – either crisis or mild recession in 2023 you’ll be ready 

As Iacocca put it “We are continually faced with great opportunities brilliantly disguised as insoluble problems.” I read that as if you take the opportunity to get prepared ahead of tough times, it could save your company. The good news is you’re not alone. Together at $23 trillion in GDP we are still the biggest and baddest economy in the world, and one way or another at some point in the months ahead we will slay the inflation dragon, shore up our supply chains and bring prices back down.

Until then we need strong leaders like you who can step up and drive home a motivating message that calms workers’ fears and creates Raving Fans, not fearful followers! So, as we celebrate the holidays and another Happy New Year, remember it’s action over style in 2023. And be sure to get it right, because unlike Iacocca’s General Motors forty years ago, this time there likely won’t be another government bail-out to cover your butt.

For more useful tips check out my recent C-Suite article CEO Dos & Don’ts in a Recession.

Happy Holidays

Rick Andrade.

How to Make Better Decisions in Tough Times

IN my last article CEO Dos & Don’ts in a Recession (CEOWORLD magazine) only weeks ago the perennial economic prognosticators had the U.S. economy headed for tough times as soon as this fall and into 2023. Why?

As the Federal Reserve Bank raises short term interest rates to stem inflation, mortgage rates which have now topped 6% in September 2022 the highest in 14 years, and inflation rates which are still stubbornly above 8% the highest in 40 years have indeed come together as the two most formidable headwinds we’ve seen in years.

Needless to say, if consumers roll over and stop buying stuff the outlook for the next 6 months will indeed be most challenging for U.S. businesses. Using a football analogy, American businesses may soon feel like they’re backed-up on the goal-line with seconds to play and the game on the line.

If that sounds about right like most business leaders you’re probably wondering what to do next. Asking how do I navigate the field and choose the next play without fumbling the ball and losing it all. One way to play it is brute force, you simply plow head-first into the next six months’ recession throwing everything you’ve got at it and hope you come up with a score. But that wreaks of failure like expecting your defense to win the game. And we don’t want to go there.

A better simpler way is to ensure you’re making your toughest decisions, smarter. And that’s what this is all about.

About a hundred years ago so the story goes Norwegian-born American football player and legendary Notre Dame coach Knute Rockne (1888-1931) coined the epigrammatic phrase, “When the going gets tough, the tough get going.” The utterance was so deeply inspiring to his players it helped the coach lead the Fighting Irish to a staggering 105 wins over 13 seasons at Notre Dame, an astonishing 88% win rate. And a record Rockne still holds to this day.

But the real key to his success was not only his talent for pre-game motivational pep talks, but also his combined ability to evaluate his resources, weigh the strategic options and execute a winning game plan. In other words, making smarter decisions. As both a Notre Dame chemistry graduate and teacher, Knute Rockne knew that in tough times being prepared is the only legitimate hallmark of success. He also knew that even when your back is against the wall you can’t rely on luck, or your gut feelings to save you.

A century later we hope to know better. But as we enter another Fall season in the U.S. and once again embrace our beloved football addiction and a recession at the same time, we can only hope that our chosen “head coaches” on and off the field will make the best decisions come game time. Because if they’re wrong about important decisions such as labor/wage increases, supply chain fixes, locking in lower costs of capital, M&A investments, R&D spend, advertising spend, to name a few, the downside long-term consequences could last for years. Which begs the question in the face of these challenges;

Why do so many CEOs still fail to use a decision-making confidence tool to help them navigate tough choices? The answer I hear most with a punctuating self-confidence is ‘that’s why they hired me.’

Ok. Maybe so. But as much as I have seen and come to admire the courage to prevail in the face of uncertainty it makes far better sense to itemize the decision-making process into measurable compartments and leave your ego and intuition (biases) checked at the door than it is to over-commit to an inflated hubris. I have seen many “gutsy” moves both win and fail. And when they flop… it isn’t pretty.

So, being a business strategy guy, a few years back having researched dozens of big historical high-risk business decisions (winners and losers) I developed what I call the Decision Ring method. This method or tool is designed to measure your confidence level before making a key decision by questioning and scoring it on each of the Six Key Principles of Decision (click for more details).

In short, the Decision Ring (DR) breaks down a key decision into six pieces (as shown). Each is then scored and weighted independently, and if the score “doesn’t add up,” you back off and reevaluate.

The idea is to help you separate your intrinsic bias from fact and identify where the weakness in your confidence level truly exists, then to document it and improve upon it as needed before you pull the trigger. Be it high or low, the total score is thus a measured indicator of your overall level of confidence. And that makes sense, right?

But what is Confidence? Where does it come from?

Confidence is the feeling you have in your ability to perform well under pressure. Performance comes from your accumulated knowledge, training and experience. And while these are key input factors to any good decision we too often over-rely on and reward Confidence as the final righteous go/no-go arbiter.

Such is when I hear the phrase “when in doubt go with your gut,” or “follow your nose” or “what’s your instinct tell you.” My wide-eyed response is always the same; why take the risk if you don’t have to?

Instead, use a DR so you can break down and reduce the weight of the almighty intuitive gut-check factor to a smaller uniquely measurable part of a larger set of key decision-making components, which thus allows you to separate your emotions from your overall confidence level before you decide.

When decision-makers see their risky gut feeling is only a part of a key decision they tend to more comfortably ease back their reliance on their over-rated intestinal fortitude and see the bigger picture. It also helps them sleep better at night too.

For decades most business leaders have correctly relied on a host of input factors including research, analysis, experience, training and instinct to measure the outcome of a key decision. Those don’t go away. But when confronted with more than one competing choice these execs tend to fall back on the arbitrary gut-check method and run with it. And if they’re wrong they get the axe, which also ‘goes with the territory’ they’ll say.

But by using a Decision Ring you can reduce the chances of a fumble or getting the axe by isolating your biased intuition and not letting it overwhelm your level of confidence and forcing a big error.

Keep in mind the DR is not intended to remove your gut instincts from the equation completely. Those feelings are still a fundamental part of a successful decision. However, when they’re wrong most execs can’t find where they went wrong, or why they should have stopped and taken a closer look at the key components of their decision before giving the green light.

That’s why using a Decision Ring makes the most sense. It’s the only decision tool that measures your ego and feelings separately from your facts and figures, and puts your decision’s “expected outcome” on safer ground up field.

The DR is not designed to replace traditional decision evaluation methods like Decision Trees, or DCF models either, but rather it’s designed to sit atop these methods. It’s also not intended to compare the value of a decision outcome, but rather the value of a manager’s confidence level to commit to that outcome.

This way before a decision goes wrong, we can stop the process, avoid a costly mistake and make better decisions in tough times.

The DR can also go beyond the executive suite as well. Managers at any level of the company can adopt it to help them more fairly evaluate and sort thru competing tough-time choices such as capital investments in inventory vs new equipment vs a new facility or whether to bring on board a strategic new-hire.

It’s a simple tool with a powerful message for measuring business outcomes in an unbiased format for tough times. And given the economic prognosticators forecast in the months ahead it’s exactly what the coach ordered.

So let’s face it, while key decision-making processes have come a long way since the great days of coach Rockne last century, it’s not been long enough to forget the wisdom he’s left behind for leaders on and off the field today.

And how the coach can remind us best is in his own words; “there is no need for me to continue unless I’m able to improve.” “Build up your weaknesses until they become your strong points.” And, “If winning isn’t everything, why bother to keep score?” Right?

Amen Coach!

CEO Dos & Don’ts in a Recession

By Rick Andrade. As published by CEO World Magazine

Fear is the mind killer,” wrote best-selling author Frank Herbert in his notoriously popular sci-fi novel Dune. You must not let fear overcome your senses or you will fail to respond to rational thought he portended. It’s important to anticipate, be prepared and have a plan. 

So, when darkening economic clouds on the horizon grow darker and sales forecasts grow dimmer in the weeks ahead experts say it may be time to batten down the hatches.

Until recently, the US economy had emerged post-Covid with flying colors. We were the belle of the ball the world over. High growth, low inflation. No recession in sight. We can suppose that after pumping an unprecedented $5 trillion Covid dollars into the hands of millions of US consumers over the last 24 pandemic months that all would be saved. 

But then the clouds thickened, and like twin bolts of lightning inflation suddenly sky-rocketed to 8.6% (a 40-year high), and Russia invaded Ukraine, sending food and gas prices up to all-time records. So, what was heralded as a new-era of post-pandemic prosperity in early 2022 is now instead about to hit rough waters. 

Adding to the growing swells, the Federal Reserve Board to calm demand and cool inflation pressures decided to substantially raise interest rates recently which will abruptly increase the cost of borrowing for new autos, credit cards, mortgages, and in particular business loans. That move for some captains of finance like JP Morgan Chase CEO, Jamie Dimon means the weather outlook looks pretty grim:

“You know, I said there’s storm clouds but I’m going to change it … it’s a hurricane,” Dimon said at a conference in New York. While conditions seem “fine” at the moment, nobody knows if the hurricane is “a minor one or a Superstorm Sandy,”

“You’d better brace yourself,” he added.

A technical Recession is two consecutive quarters (6 months) of negative GDP. As it stands, Q1 2022 was negative -1.5%, and forecasts for Q2 2022 according to the Atlanta Fed is tracking a negative -1% GDP, begging his question.

If we are headed directly into a tumultuous economic tempest, which is it — a deep 18-month-long Great Recession like the one from December 2007 – June 2009? Or a shorter one, like the recent barely noticeable Covid shutdown recession, which was deep and devastating like a hurricane, but only lasted two months in early 2020? Nobody knows. 

Why not? 

For starters, some businesses excel during downturns. To them an economic hurricane means more sales & profits. According to economists there are more than a dozen recession-resistant industries that consumers can’t turn their backs on when times get tough. You should feel lucky if your business is among them.

However, if your business is not among the lucky few it’s time to grab the wheel and have the crew prep the ship for rough seas ahead, you’ll soon know if you’re well prepared or not. 

The Dos & Don’ts in a recession

It was just a few years ago. Before Covid hit the economic brakes in 2020, online fin-tech banking firm Bluevine found inside 1000 small businesses they surveyed a whopping 80% were indeed “worried” about a recession in the next few years, but only 44 percent had any plans to do anything about it. 

This discovery was the wake-up call for Bluevine CEO Eyal Lifshitz who prophetically warned; “Small businesses should be taking time now to prepare their business while the economy is still strong…” 

Looking back 3 years, she was right. 

The Bluevine CEO then went on to advise small business owners during a recession to focus on a few key decision areas which are to me pearls of wisdom that ring true today, and well worth repeating given our situation. So, grab a pencil because now would be a good time to start prepping for the Dos & Don’ts in a recession. Are you ready?

The Dos in a Recession:

  1. Do invest capital wisely: Think short term Breakeven and ROI from inventory to equipment.
  2. Do hire thoughtfully: Never look away from a high-quality new hire. Contract-to-new-hire is a good interim strategy. Anticipate how everyone will perform in a slowdown.
  3. Do diversify revenue streams: Create value add-ons to higher margin products. If you have high customer sales concentration, try to lock down new accounts urgently. Spread the risk. 
  4. Do re-access vendors carefully: Check-in with suppliers. Ask them how they are planning for a supply disruption. Do interview new potential suppliers (substitutes and stand-by vendors) asap.
  5. Do shore up your finances before banks raise interest rates: Cash is still King. Secure short-term working capital financing with your lenders asap. Draw down LOCs, lock-in lower rates and monitor cash flows tightly. Slow any discretionary cash outflows where possible to preserve working capital in the weeks ahead. 

And I added a few more:

  1. Do identify the money-wasting bottlenecks in your work flow processes and remove them.
  2. Do reformulate your product and market sales strategy to plan for customers switching to lower priced substitutes.
  3. Do monitor new promotion and customer acquisition costs carefully.

These are the jewels of a real treasure, and I like them. But what about the flip side? What are the things CEOs and business owners should ‘NOT’ do if the economy slows down?

The Don’ts in a Recession:

  1. Don’t Introduce new untested low margin products.
  2. Don’t reduce headcount too abruptly simply for short-term gain: Do the math. Even at the height of the Covid shutdown, many smaller companies did not reduce headcount and bounced back more quickly than others.
  3. Don’t wait to communicate and pass along inflation and supply chain input costs.
  4. Don’t hesitate to pull the purchase trigger if you find a super under-valued asset.
  5. Don’t underestimate sudden Cash Flow needs.
  6. Don’t over-react to anything, think through every choice in the short-term vs long term.

Again, these are pearls of economic wisdom that may help shield you from any severe destructive forces. Will they be heavy, or will they be long?  Experts don’t know. Some say yes, others say no. Either way getting well prepared now with a solid plan ahead of the action is still the safest way to navigate a recession and not fear the unknown. 

Still, if you need a lift getting started or want first-hand insights, I recommend you watch this Recession-planning webinar. It’s a recession-prep panel discussion with a group of CEOs pulled together by CEO Coaching International leaders Don Schiavone and Randy Dewey.

CEO International helps CEOs address daily issues by sharing insights and results from former CEOs. They introduced a handy new Recession Risk Assessment Checklist along with a Recession Playbook to see how well prepared you are or not ahead of a slowdown. If you want to know the potential consequences and likelihood of getting smashed by an economic hurricane… Take the Assessment and see for yourself.

Lastly, and above all else keep your head. Remember, Fear is the mind killer. So don’t let it take charge of your ship. Keep your hands on the wheel, sails trimmed and focus on the Dos and Don’ts to stay clear of the rocks. And leave the rest for calmer waters on the other side.

Make sense?

Rick Andrade

Exploring a Hybrid Work Future: An inside look at working M&A deals remotely

Over the arc of time history has recorded dozens of dramatic inflection points that altered the way we lived and worked as humans. Great wars of the past most notably left the deepest scars on us given the sudden changes to everyday life in favour of something new. But despite these new challenges we still learned how best to adapt, and prosper. And today, living in a Covid-19 pandemic world is one of those times.

Currently the USA has roughly 125 million US service workers. And given the “new normal” post pandemic, this means millions of staff are now and will continue to work from home in their new “hybrid” job for some time.

Still, despite the precipitous drawbacks in the midst of a global pandemic over the last 2 years M&A deal activity in 2020 and 2021 was surprisingly robust. According to a recent Pitchbook Global M&A Report: “Economic resurgence paved the way for record activity in both North America and Europe, with aggregate deal value at US$2.8 trillion and US$1.8 trillion, respectively.” Deal value in 2021 totaled nearly US$5 trillion, topping 2020 by a whopping 50%, and is expected to continue higher this year.

But how can that activity level be the case when so much of our M&A business was done face-to-face?

Enter the Hybrid Remote Worker world

Like most industries and companies impacted by Covid-19, Investment Banks anticipated a big transaction downturn during the pandemic. However, much to everyone’s surprise after an initial decline in transaction volume, the sale of companies quickly reversed. Fears that Covid-19 might delay deal execution combined with prospective tax increases caused more transactions to close, not less.

“We realized quickly that our job had not changed much,” says Janas CEO and Chairman Carter Freeman. “Given our 80% close rate over the last 25 years, I knew we could adapt if we fell back on our core Mission Statement… to go the extra mile every day.”

And from there, we learned quickly that our reputation at Janas hadn’t changed either, we remain a firmly trusted intermediary tasked to bring together Buyers and Sellers, bridge their key concerns with their legal and financial advisors and get the deal done. That meant for historically face-to-face discussions including Representations & Warranties, escrow hold-backs, earn-outs, deal contingencies, employment agreements, quality of earnings and valuation reports all needed to get done entirely by remote means. But how?

For many, Covid-19 forced upon us a new paradigm in M&A: “The online automation of transactions.” Given the increased deal flow and the decline of face-to-face meetings, the need to adopt more effective communication and work-flow technologies has taken center stage.

And thanks to many new online technologies, including videoconferencing, collaboration and e-commerce tools like ZOOM, we discovered a lot more than handshakes can get resolved in a remote working context. We discovered the key to successful remote M&A work is to build trust in words and pictures like never before. Which is why we try to make every “virtual” connection personal, engaging and productive for all participates. And it worked!

Post Covid as much as two-thirds of M&A deals can now be completed remotely, saving valuable time and money. Thanks to our adoption of new technologies Janas’ clients can benefit from this streamlined process.  AXIAL.com for example and other sell-side cloud-based portals allow Buyers and their advisors to confidentially sign NDAs, read CIMs, review financial statements and ask key questions about companies we have for sale. In fact, online document and signature verification exchanges such as iDeals and DropBox make printing paper and mailing documents past tense.

How has Covid-19 and the new hybrid work model impacted M&A Due Diligence?

The devil’s always in the details. But while many areas of the M&A sale process have been impacted by the pandemic, Buyers today are digging deeper and asking key questions about Covid.

  1. Remote Hybrid Worker Compliance. Whereas Covid-19 has upended the work environment, remote workers now have a legitimate claim to work from home for extended periods. This new reality calls for an expert Due Diligence audit of job descriptions to identify which jobs can be hybrid and which can’t. Key question: Are the impacted employees on board?
  • On-site Covid-19 Compliance. Is the Seller’s workforce complying with and agreeable to the company’s new Covid-19 work rules? A mismatch here can unravel a deal. What is the status of workforce health and safety pertaining to Covid-19? Is the Seller complying with OSHA regulations? Is there a Covid-19 test, tract and remediation system in place? Is a labor shortage impacting the company? Does the Seller have a hybrid, remote worker human resource plan in place, or is management winging it?
  • Financial Covid-19 Compliance:  Does the Seller have proper accounting for Covid-related state and government financial aid benefits including loans, grants and other affected expenses? Some expenses may be an EBITDA adjustment, some not. These days a Buyer’s financial due diligence team is newly tasked to identify any material gaps in Covid-19 financial compliance that can kill a deal.
  • Legal Compliance: Adding to the already long list of Legal Due Diligence, the effects from the global pandemic have added several more. Today the Legal team must review any legal areas directly impacted by Covid-19. The affects can range from customers to employees to suppliers and back.

Many once routine contract reviews are now examined for how they fit into the new normal. Foremost are agreements needed to enable remote hybrid workers to perform their jobs while still complying with federal and state labor laws. Meanwhile, employers with onsite union workers under collective bargaining agreements are facing new compliance regulations. Some rules such as paid leave, sick time, Covid-19 health expenses and family care demands may be transitory, others not. Do you know which is which?

Supply contracts, including those that include performance or volume purchasing discounts may no longer fit the bill. What recourse does a Buyer have if a supplier is out of sync and fails, triggering a material adverse effect or force majeure? New or modified contracts must align with current market conditions and Buyer expectations. These agreements and their performance requirements may need revisions. Did you anticipate this?

  • Insurance Compliance: Covid-19 has caused a complete review of all corners of a company’s insurance coverage. Notwithstanding prior claims and future coverage, Buyers want to review first-hand how the Seller’s insurance is covering claims in the new normal and how the cost of required coverage may change. Covid-19 put the pin in insurance coverage. So be warned!

Nevertheless, at the end of the day the important message to grasp in 2022 M&A is that hybrid work models can work well. However, advisors must adopt new hybrid work technologies and training internally to best communicate a seamless sense of confidence to clients and their advisors, which is what we do best and yet another example of why partnering with Janas early on makes perfect sense.

Rick Andrade

It’s a Tale of Two Markets; The Solution to Sourcing from Asia

Rick Andrade

Rick Andrade – CEO World Magazine/ Big Picture

March 10, 2022

“It was the best of times; it was the worst of times.” But no matter where in the Dickens your business profits fall on that spectrum these days, we can all agree we indeed live in challenging times, especially if you’re an off-shore manufacturer. 

For the last few decades or more U.S.-based manufacturers have looked to Asia as a low cost of labor and material magnet to set up shop, off-shore. Until recently low-cost labor, materials, and shipping to the U.S. were cheaper than producing goods in the United States. And over time, much to the delight of Asian countries, this strategy became embedded in most international manufacturing business models. It was even said that Asia, notably China, Japan, South Korea, Taiwan, India, and Vietnam were collectively the World’s Manufacturers

But oh, how times change.  

Given the increasing costs and geopolitical risks created by Covid-19 and Russia’s invasion of Ukraine and the conspicuously complicit fence-sitting nature of China and India, the time may have come to pop the Asian balloon with a sharp pin.  

A couple of years ago in July 2020, the U.S., Mexico, and Canada signed the new USMCA trade pact. This ground-breaking trade treaty eliminated tariffs, standardized labor rules, and synchronized supply chain logistics between the trade partners. The biggest push back against the USMCA was what 1992 Presidential candidate Ross Perot once called NAFTA, the predecessor to USMCA, “a giant sucking sound,” as jobs funneled south and down the drain by the thousands. He was right. But that was then. And now 30 years later all things considered Perot’s deepest NAFTA concerns are barely an echo to USMCA. And there’s a good reason for that.

As if globalization wasn’t already on the rocks, the growing political and economic issues in Asia and Russia along with Covid have consequently rung the alarm bell. Nearly every U.S. importer of finished goods or parts now find themselves suddenly vulnerable to the risk vs. resiliency of their formerly reliable global supply chains.

At the same time, in 2021 the U.S. imported $2.8 trillion in valued goods from other countries. The top 3 trading partners China, Mexico, and Canada together topped 40% of the total. But it’s China, clearly the leading exporter to the U.S. that creates the huge trade deficit. And it’s a monster-sized addiction. 

United States incurred the highest trade deficits with the following countries in 2021
The United States incurred the highest trade deficits with the following countries in 2021

Key imports from China include $100 billion in TVs, cameras, electronic gadgets, $100 billion in computers and appliances, and $100 billion in commodities, furniture, and textiles. It’s a never-ending conveyor belt of stuff packed into multi-colored rectangular steel boxes stacked 10 stories high on ships chugging their way to America and going back empty. Which begged the big question; Is now the time to seriously put globalization on hold… Maybe re-think some things?

The big reveal came before last Christmas 2021 as Covid ravaged the ranks of Asian factory workers and shut off the steady flow of ocean freight bound for U.S. shores. Here at home worker shortages, trucking shortages, warehousing shortages all combined to showcase the massive inefficiencies and clumsy inability to manage bottlenecks at U.S. ports

Only because I live here, need I to mention why Christmas was late. At the Port of Los Angeles, the world’s largest, dozens of ocean-faring container ships packed with cars, and toys, and clothes and candy from Asia all piled up. Like a clogged river. In a normal pre-Covid year it’s clear sailing. There is no waiting to dock at Los Angeles. But for CEOs still far from normal the sight of millions of helpless containers sitting atop more than 100 “floating anchors“ offshore was an early winter storm’s wake-up call. It was time to reduce the unforgiving dependency on Asia, and bring production back home, a process popularly known as “Re-shoring,” and it’s frontpage news these days.  

So, what is Re-shoring, and how is it different from On-shoring?

Re-shoring is the same as On-shoring, it’s the act of bringing back home the manufacturing of products previously made off-shore, essentially a full round trip. And it’s more popular than ever. The mounting pressures to consider re-shoring include increasing host country labor costs, shipping & logistics costs, new regulations, taxes, better communications, and the biggie: the dyer risks inherent in future geopolitical outcomes.

But while the visceral voices of value cry out for the satisfying sound of returning manufacturing to the wholesome heart of America, what if re-shoring back on home soil is still prohibitively too expensive? 

In other words, according to The Nearshoring Company, what if Made in America doesn’t add up? The U.S. has among the highest-paid skilled-labor work force in the world. The average hourly wage for U.S. manufacturing jobs is about $30/hour, while in China it’s $7/hour. The U.S. also suffers from an aging manufacturing work force, a large capital investment hurdle, more regulations and higher taxes. And although Made in America is the safest and most reliable way to control cost, product quality and supply chain logistics it may also be time to skip past re-shoring, and go for the next best thing: “Near-shoring.” 

Near-shoring is the act of transferring your business operations from far away to closer to home, closer to your customer channel, but not in the U.S. 

The best argument post pandemic for “near-shoring” is evident in the daily geo-political and logistical troubles that sourcing from Asia has starkly revealed. Saving money and staying competitive is one thing, but not getting your products on time, or ever, is not a healthy business practice long term. With near-shoring all that goes away.

Under the current USMCA trade agreement between the U.S., Mexico and Canada depending on the product you’re making near-shoring to Mexico or Canada may be the perfect alternative. 

For companies looking to sell into American markets having a more reliable supply chain is the elephant in the board room these days. Needless to say, before Covid-19 container ships from Asia took on average 3-4 weeks to make the trip to a western U.S. port, only to get stopped dead in the water, and wait. But with near-shoring that time drops from weeks to just days by truck or rail from most manufacturing facilities in Mexico and Canada.

So, then which is better – Mexico or Canada? 

It depends on what you make. Enter Mexico, where 70% of its Foreign Direct Investment (aka investment by foreign companies) comes from a handful of countries with major manufacturing facilities and operations there. The top 5 Mexico FDIs include substantial interests from:

47% of Mexico’s GDP comes from manufacturing goods mostly sold and shipped to the U.S. through any one of the 48 U.S. Ports of Entry along the shared 2000 mile-long border.

Moreover, the average manufacturing wage in Mexico is just $5/hour compared to $30/hour in the U.S. and $17/hour in Canada. And despite Mexico’s evolving political scene, the labor pool there is young and robust and eager. 

Currently Mexico’s top 10 exports include a diverse list of international mature industry sectors to choose from. Which is why a growing number of international players consider Mexico a safer bet than Asia to set up shop.

  1.     Vehicles: US$100.7 billion (24.1% of total exports)
  2.     Machinery including computers: $75.5 billion (18.1%)
  3.     Electrical machinery, equipment: $75 billion (17.9%)
  4.     Optical, technical, medical apparatus: $18.6 billion (4.4%)
  5.     Mineral fuels including oil: $16.8 billion (4%)
  6.     Plastics, plastic articles: $9.1 billion (2.2%)
  7.     Furniture, bedding, lighting, signs, prefab buildings: $9.1 billion (2.2%)
  8.     Vegetables: $8.5 billion (2%)
  9.     Gems, precious metals: $8.15 billion (1.9%)
  10.     Beverages, spirits, vinegar: $8.11 billion (1.9%)

It naturally follows for Mexican business authorities to hoist up the Open for Business sign and lay down the Welcome Home mat to attract more global companies looking to sell these goods to U.S. consumers.

And then there’s “Oh Canada”

The U.S. and Canada share a 5,500-mile-long border with more than 100 Ports of Entry into the U.S.. 74% of Canadian exports head south to the USA, mostly oil and cars. According to World’s Top Exports.com the top 10 exports into the U.S. from Canada include: 

  1.     Mineral fuels including oil: US$69.1 billion (17.7% of total exports)
  2.     Vehicles: $46.5 billion (11.9%)
  3.     Machinery including computers: $28.9 billion (7.4%)
  4.     Gems, precious metals: $23 billion (5.9%)
  5.     Wood: $13.5 billion (3.4%)
  6.     Plastics, plastic articles: $12.4 billion (3.2%)
  7.     Electrical machinery, equipment: $11 billion (2.8%)
  8.     Ores, slag, ash: $9.9 billion (2.5%)
  9.     Aircraft, spacecraft: $9.7 billion (2.5%)
  10.     Pharmaceuticals: $8.5 billion (2.2%)

In fact, Canada recently snapped back from a sharp pandemic-related decline in Foreign Direct Investment with a whopping $75Bil run in 2021, the highest since 2007, 50% higher than in pre-Covid 2019 and 140% higher than in 2020. By country the U.S. invested 50% of Canada’s FDI in 2021 followed by Germany, UK, France and Japan. Each country sees investment in Canada as both a safe harbor and a global launch pad for future development. InvestCanada.ca says it’s the only country in the western hemisphere that can produce electric batteries and electric vehicles entirely from top to bottom. Very cool.

Canada also has the added advantage of its close proximity to the U.S. auto industry in the northern mid-western states including MI, IN, Il, and OH. The USMCA requires that 75% of all automotive components be manufactured in Canada, Mexico, or the United States, which deliberately adds significant depth to the supply chain networks in each country.

Nonetheless, despite the growing list of near-shore capabilities in Canada it’s more the home for sophisticated production and engineering, such as auto manufacturing. Near-shoring to Canada or Mexico from Asia for labor intensive industries such as clothing, commodity electronics and toys is still prohibitively more expensive in Canada. Consequently, if your product line requires a lot of hands-on labor, Asia is still the only game in town, sorry.

So, here’s the Bottom line

Given the recent fallout from Covid and now the growing geo-political tensions with countries in Asia and Europe, there’s little doubt that both Canada and Mexico will continue to see more Foreign Direct Investments with more countries building more plants, and hiring more workers.  

It therefore makes perfect economic sense to consider moving your supply chain and manufacturing facilities away from Asia and back to the U.S., Mexico or Canada. And you may be glad you did. The move not only helps reduce the trade deficit but also adds peace-of-mind. 

So, first thing Monday morning let’s grab your CFO and crunch some numbers. Because now is the time to wrestle the worst of times back into the best of times, before it’s too late.

For a closer look at the pros and cons of near-shoring check out The Nearshore Company advisory group. Or consider Sourcinghub, a guide to sourcing products made in Mexico. And for a closer look at Canada Re-shoring Canada and the Canadian manufacturing guide are good places to get started.

Make sense?

Rick Andrade.

It’s 2022… If it’s not recyclable, why does it exist?

As published by CEOWorld Magazine Jan 2, 2022

Later in life but before he died at age 87 famed French explorer, naturalist, and oceanographer Jacques Cousteau, a man not known to mix metaphors in public once said, “Water and air, the two essential fluids on which all life depends, have become global garbage cans.” He died twenty-five years ago in 1997. If only he could see us today.

By 2030 earthlings are on course to double the amounts of air, water and land pollution. In that same time humans will have added a whopping 53 trillion tons of plastics to our environment. And, according to the U.S. Environmental Protection Agency (EPA), Americans alone are now dumping more than 150 million tons of solid waste into our landfills each year. 

Getting away from it all on a recent bike ride down along the Los Angeles River after a strong winter rainstorm I couldn’t help notice the piles of discarded trash and debris covering the once grassy embankments like mounds of dirty snow plowed up along the edges of narrow wintery road. 

I stopped up ahead at the site of a large debris pile crammed under a bridge overcrossing. It was a huge half-dried mud-wall of twisted metal, mangled tree limbs, shredded clothing, plastic bottles, bags and toys, and an endless list of random discarded waste products – It looked like the aftermath of a tornado. But it wasn’t the end of the line as each piece of the pile like a spring salmon was still trying desperately if lifelessly to make its watery way down river, and out to the open ocean. 

A father and his young daughter on bikes stopped to look. “Quite a mess” I said. He nodded. “People don’t recycle,” he said. I looked over at him and then back to the pile, “I saw a documentary that said 80% of all marine turtles, and a lot of fish we eat have ocean plastics inside them.” He sighed. What else could he do. We both glared at the twisted pile for a minute like two guilt-ridden conspirators fearful we might recognize any particular empty bottle or plastic bag as our own among the wreckage. 

Then his daughter, maybe 12 or 13 years old perplexed at the mass asked her dad with an urgent quizzical tone, 

“Dad, if it’s not recyclable, why does it exist?” 

I remember my eyes grew wide at the thought as her dad looked over, “…don’t know.” Either way for that moment with little to say both young and old just stared in silence as if waiting for this sickening self-implicating reflection of unsympathetic recyclables to go away. But it didn’t. So we just rode off.

Two years earlier, and just before the Covid debacle struck the world there were repeated attempts to get after the causes of this waste pile in a broad sense at the World Economic Forum (WEF) held in Davos, Switzerland back in January 2020. There and then a repeated theme was again in key focus, the topic was ESG, the acronym for Environmental, Social and Governance. ESG is a corporate signatory program for larger global companies like those of the Business Roundtable to adopt, engage and commit to changing the world’s trajectory and attitudes toward sustainable resources and their impact on global climate change by putting ESG into action. (See my article E.S.G. 2020 has Arrived at CEO World Magazine). 

The loudest voice at the Forum then was another young woman you may have heard from before, 17 year old Greta Thunberg, a Swedish environmental activist raising the alarm front and center stage, scolding the hundreds of adult CEOs in the room looking down at their shiny shoes, for not acting urgently, or meaningfully enough. Talk is cheap she chastised. 

“The bigger your platform – the bigger your responsibility… I don’t want you to be hopeful. I want you to act as if our house is on fire. Because it is.” – Greta Thunberg

Yes, as a CEO and business leader your plate is already piled high with urgent issues to attend to. No one saw Covid coming or was prepared for it. And adding further to the dismal milieu as shaped by the pandemic and topping the list of deep concerns for business leaders is the labor shortage, the increased commodity/price inflation and the persistent supply chain bottlenecks. But at the same time thinking back on the pile of bags and bottles along the river banks we didn’t see coming, how many more speeches and warning “piles” do we need to ride away from before the message gets through? 

Clearly for 2022 while it’s still an all Covid-Covid-Covid world, if we don’t stop and pay closer attention to the amounts of waste we produce everywhere every day it will surely hit us like a sudden wall of mud and debris, but forever leave behind a tragically altered and polluted world for our children who know only of what we teach them.

Setting the better example

Despite the urgent promises made each year at the WEF in Davos the message younger investors are sending to Wall Street today is clear. It’s time we put our money where our mouth is. And while Covid is distracting the public’s attention from the river “pile,” ESG investors are quietly taking another whack at moving the needle. This time not at CEOs, but rather at their publicly traded stock and concerned shareholders. 

In the last 24 months, more Wall Street ESG-focused investment funds were created than at any other time before. In 2021 alone, more than $600 billion was allocated to these funds which have one voice and mission in mind, and that is to specifically identify and to only invest in companies that have a measurable commitment to ESG and in particular reducing their carbon footprint permanently. 

But what about smaller companies? Is there a version of ESG for smaller businesses to embrace and act upon now?

Yes. And it’s all about the “E” in ESG. A big impact can be made when smaller companies act as one. And because most humans work for smaller companies who can all together not only help save the environment en-masse, but can also learn and spread the good word by setting a good example for their suppliers, employees and customers to follow. This way we can all together take a larger leap beyond the “big blue recycle bins” and go the extra mile faster. 

The good news is there are surprisingly many atypical things your company and workers can do now to help save the big “E” and that are often overlooked. 

Enter the folks at Green Business Bureau (GBB)

GBB is a new online environmental advisory group founded by former tech industry executive and now CEO Tom Permatteo, a long time Green-industry advisor to the small business community. And what better place is there to get things started or to brush up on more abundantly practical ways to become a more environmentally friendly company? In a recent article, GBB ambassador Dylan West authored a best practice summary list of sustainable actions that I think any company can start working on asap! And some suggestions, like how to choose a “green” supplier may surprise you. Have a look.

20 Sustainable Business Practices for Your Workplace and Office – The Green Business Bureau

Worthy of the attention from my research GBB goes beyond the typical list of old-school energy-saving light bulbs and recycling of paper and ink cartridges. It also includes a deeper sense and passion to think bigger and to strive for a net ZERO waste goal, as in an all-renewable, all-sustainable resource company, the top 1%.

The key to get there is to establish, measure and track your progress each month using software and guidance to enable you to start slow and then grow to higher and higher levels of green certification, enough to become a Platinum Green Business Certified Company! They argue that with their green symbol insignia a small company can go a long way to communicate an honest commitment to saving the planet. And with all the public praise and recognition that comes with it a welcomed hiring edge in 2022 as well.

According to GBB, 80% of new-hires want their new employers to be environmentally responsible citizens, and as many as 90% of younger employees and customers prefer to join and buy from a company committed to helping the environment get back on its feet before the 2030 deadline. They say “‘greening’ helps attract, recruit, retain and build goodwill with employees…” and that helps ring the bell — we’re in it to win it!

But to win it you have to take a strong leadership role

Good habits start at the top so learn for yourself how you can specifically change operating practices and behaviors at your company, and then train every worker to determine how best a product will be used, then disposed of and recycled BEFORE it’s purchased.  

When I worked at the consulting firm Accenture back in the day, we were trained to help each client develop a framework for success that started with establishing a baseline and performance benchmarks to measure after a new system is implemented and make adjustments as needed for maximum results. The same step by step process applies here to help go-greener companies reduce their contribution to the “pile.” 

It’s been 25 years since the famous Jacques Cousteau called us out as wasteful garbage polluters, and he was right, and we still are. But I think he underestimated our resolve when it comes to a real crisis. Covid-19 taught us that. Am I being too optimistic? Maybe. But I also think there’s still a real chance we can beat this – push back climate change, clear the air, the rivers, the lands and oceans of waste and recycle it! 

To help you get started there are many affordable consultants like GBB online to search from. Here’s a directory of environmental advisors in your area. Call them, ask them, and let them help you. Baby steps do matter. So, let’s go baby!

They say older people can’t learn much from younger ones. Does the same go for leaders? While Greta Thunberg may be a world-rounded voice for global climate change, I wish I asked my fellow young biker friend along the LA River her name. Because it was her simple yet profound curiosity that said it all for me and still does: 

“If it’s not recyclable, why does it exist?”

Rick Andrade

Dear Santa: All I want for Christmas is a few extra Elves

It’s the single most frequent request heard around the world. Thousands of CEOs and business owners penning their deepest hopes to the big man, with the white beard, in the red suit. ‘Dear Santa, can I have more workers this year – please?‘

Living and working in a Covid pandemic world certainly has its challenges, some foreseen, others not. Highlighted this Holiday Season is the difficulty most employers are having attracting and hiring new employees. Surprising many economic experts for a variety of reasons workers coast to coast are simply not returning to work at pre-pandemic 2019 levels, despite the record number of help-wanted signs we wave at them.

Some call this The Great Resignation. In fact the “quit-rates” as measured by the Bureau of Labor Statistics are at all-time highs in leisure and hospitality, trade, transportation, and utilities since 2000 when quit-rates were first recorded. The reasons — A combination of government pandemic handouts, a changing demographic workforce from older to younger, burnout & lack of work-life balance, and a large cohort of staff with child-care issues or still afraid of catching Covid at work. A recent Harvard Business Review study identifies mid-career workers, especially in technology and healthcare, hitting the exit doors most.

Nevertheless, regardless of the causes the current state of affairs leaves prospective employers in the lurch this season despite their keen Elf-assisted efforts to find and hire new staffers for the Holiday and beyond. So, is this the end of the line for thousands of businesses who can’t find employees? Just how difficult is it to replace these stubborn non-workers?

It depends on how narrowly you look at the problem. Some industries absolutely require a human on site, others not so much anymore. According to a recent BLS labor report – in the USA there are 7.7 million unemployed workers and 10.4 million job openings at the same time. Clearly, despite the imbalance – the jobs are waiting. For now, able workers however are simply too unmotivated to jump back in or to re-train. And the ball’s in their court. In response, employers are forced to quickly step up their game to retain – or be left behind. It’s being called The Great Retention. Here’s a quick look at the current approach.

  • Make it personal – The Great Retention is on. Time to re-engage your crew on a personal level, see what it takes to keep them happy, ask them, add surveys and online suggestion boxes.
  • Be Covid Free – Announce your Covid vaccination policies and practices – how and why. Be a pop-up Vac-Site if possible. ‘Test and track’ is a best practice. Let them feel safer at work than at home.
  • Raise wages – Employers hate hearing this but it’s the new reality at the moment. Re-calculate your margins and pricing power to see what you can manage. Expect all costs/inflation to increase in the first half of 2022.
  • Introduce new benefits – More can be done here. Give every job and every worker a bright future. Add free job training, free education (eg: Target Stores announces paid college tuition) and free child-care benefits as incentives. Many parents can’t return to work because of child-care issues.
  • Be super work flexible – hybrid office hours/flex schedules/added time off – ask your crew what they want most. It’s not always just about the money, time away is key to most staffers. Just ask.

And that’s about it.

However, while these measures are driving fundamental changes to help preserve the ranks, they do little to urgently help expand them.

Perhaps the real answer to finding more Elves asap is thinking outside the Christmas box this time, way outside. In other words what would your new-hire job search look like if distance didn’t really matter?

Going “Really Remote– Some are calling it the “metaverse,” and it’s about as far out as the North Pole. But it’s also the latest thing in enterprise software technology designed to create virtual office environments for remote workers to work and socialize together online. The concept replaces physical office interaction with a similar virtual one using a 3-D headset. Sounds a little advanced? Yes. But it’s the near future. And it makes perfect sense to recapture the office water-cooler experience from anywhere.

Will it solve the trucker shortage at U.S ports, or reluctant restaurant wait staff, or front-line healthcare absenteeism? No.

But. At present more than 75% of the US Economy as measured by GDP is in the Services sector, and if of the roughly 165 million U.S. workforce roughly one-third can work a hybrid remote job, then why not “really remote?” Well, they can. And the obstacles are falling fast.

As Covid creates demand for more remote workers, more remote workers and their technology are likely to follow. Moreover, in a surprising result according to a recent survey by HR firm Mercer, of the 800 employers asked, 94% reported worker productivity was the same or higher than an on-site worker! Who was expecting that? This clearly opens the door to a much wider coast to coast search for remote talent.

In fact, like never before job listing agencies such as Indeed.com are finding high quality really remote out-of-state staffers that can live anywhere, including a beach house in Florida or a man cave in Montana. Indeed.com has more than 100,000 jobs available remotely in the U.S. And, if you can’t find an American-based really remote worker and you must look offshore, ask the staff at We Work Remote (WWR), a company that helps find really remote workers. WWR says there are a host of un-discovered really remote worker benefits:

“You may be able to find top talent for a fraction of the cost… And if you hire remote workers in different time zones, you’ll boost your company’s productive hours and support…”

Nonetheless, if Covid has any remote worker upside it’s in the creation and deployment of these new technologies and services to help attract and retain them. For those companies that embrace the model the benefits may well outweigh the costs. And it gets better.

According to research from Global Workplace Analytics a typical U.S. employer can save on average $11,000 per half-time remote worker. The savings come from reduced real estate costs, increased worker efficiency, less sick time off, less stress and lower turnover-rates. Workers on the flip side report saving on average up to $6,000 per year on transport/commuter costs (carpool, fuel, maintenance, insurance, etc), lunches, dry cleaning, and wasted time on the trip to and from. They also reported being happier. Wow. What a surprise, not to mention less traffic and lower carbon footprint for everyone!

So, what are you waiting for?

SHMR the HR management company has a host of procedures and policy guidelines, toolkits and standardized remote worker forms for accommodating and facilitating remote and really remote workers. It’s not for every company to use remote workers, of course. That debate is still happening across the country right now. But the decision to invest in and go fully remote for some staff positions gets much easier when you need to hire asap and the locals are skipping the milk and cookies this time.

Take a closer look at every job and ask yourself; Can this be done really remote? Think healthcare online – it sounded crazy just a few years ago, right? It’s common practice now.

So, bottom line. As letters to Santa roll in and Elf labor and reindeer services grow scarce it’s likely a good time to take your new-hire search to the next level and really consider really remote workers this season. Let’s face it, Covid has permanently changed the employer/employee landscape. Be it across the country or across the world, it’s now a more remote workforce than ever. And the way I see it is given the tools are there with ribbons and bows, let’s unwrap them, and who knows… They could be the most welcomed gift under the tree this Christmas.

Makes sense? Go Elves!

Rick Andrade

Vaccinated or Unvaccinated: Should You Mandate?

As published CEOWorld Magazine

As Fall approaches what was to be a welcomed Covid recovery season feels more like an endless New Year’s Eve hangover. Instead of following its 1918 Spanish Flu brethren and fading away inside 18 months, the new Covid “Delta” variant which is far more contagious and on the rise is digging in. In fact, to-date according to the CDC, deaths from Covid and the Delta variant combined are expected to top 750,000 in the U.S. by year end, with a spike in new infections across many states as you read this.

Before the recent Delta variant breakout, deaths were on the decline, and with nearly 60% of the population over 12yrs of age fully vaccinated, hope springs eternal.

But then, like a voracious lioness the Delta variant turned her hungry attention to where the real action was, the “unvaccinated” people, which have consequently accounted for nearly all of the spike in recent Covid infections, hospitalizations and deaths in recent weeks. Delta is also accountable for nearly all break-through infections among fully vaccinated people. However, there are few reports of any deaths from Covid if you are fully vaccinated. To make matters worse, the media meanwhile is not helping. Fear mongers and conspiracy clowns claiming the vaccine is from Mars or Russia or some guy named Vinnie in New Jersey sadly perpetuates the ambiguity, leaving the unvaccinated fence-sitters dangerously out in the open and vulnerable to illness or death, which begs the big question.

Should you force your people to get the jab or not?

For many business and non-business leaders there is no debate. Getting vaccinated is their open cry, or else Covid will painfully persist. For others the choice either way comes with a host of thoughtful and risky unknowns. Leaving some staff unvaccinated creates an unnecessary health risk they argue. At the same time many employees across the country have strong patriotic feelings deeply rooted in the founding principles of freedom in our country, and are not to be dismissed lightly over coffee. These folks don’t want to be told what to do, and don’t think it’s legal. One wrong move or insensitive over-reach could compel such employees to look elsewhere for work at a time when job openings are aplenty. CEO word on the street, meanwhile, is to get your arms around both sides of the issue before your gavel goes down. Here are the arguments.

Those who favor the jab

Fears of forcing a vaccination mandate are very real, especially for CEOs and business leaders. For starters, many spokespeople for the unvaccinated claim the mandate is against their Constitutional rights to force vaccination. However, that argument has already been largely put to bed. The first time was the 1905 Supreme Court ruling in Jacobson vs. Massachusetts that upheld a local small pox vaccination mandate in Cambridge Mass. against a 14th Amendment challenge.

More recently last month, after nearly 700 universities across the country mandated student vaccinations before this Fall 2021 semester begins, the Supreme Court refused to hear an emergency case brought by students at Indiana University who challenged the school’s forced vaccination requirement as unlawful because it did not allow for “voluntary and informed consent.” The Justices did not take the bait, however. Students have other school choices they said. Or students can use remote online learning, etc. But the message was clear. It would appear the Court is leaving little wiggle room for further debate on the matter.

On the business front, CEO Johnny Taylor at the HR firm SHRM said in a recent CNBC interview according to OSHA (Occupational Safety & Health Admin) “employers have an obligation to do their best to eliminate, if not significantly minimize known hazards and risks” in the workplace. Taylor says since employers control the “conditions” of employment he sees widespread mandates coming in the near future.

Meanwhile, CEO Bill McDermott of Service Now agrees. Companies have to prepare the workplace and make it safe for returning workers to come back, meaning you don’t want a situation whereby an unvaccinated person can unwittingly infect others and cause a costly outbreak at your company. Listen he says, “there’s a war for talent out there [right now]. The companies that are early adopters will win. And the ones that don’t will lose a lot of people.”

Delta Airlines, for the moment, feels a great deal more strongly about the mandate, especially for frontline staff. The company announced it will charge each unvaccinated employee an additional $200/month in healthcare premium fees, which they say is based on the estimated insurance cost to treat a hospitalized employee with Covid-19.

But many DO NOT favor a mandate

On August 23rd the FDA officially approved the first Covid-19 vaccine by Pfizer for ages 16 and older. An historic event many say, and providing for what others say is a green light for companies previously concerned about forcing employees to get an unapproved emergency vaccine to now mandate the jab.

Along with that President Biden after hailing the FDA’s approval is now a national loud speaker for getting the shot, asking America’s CEOs to take charge and help the country. “The FDA approval is the gold standard,” he said in public remarks. Besides he says, “Students, healthcare professionals, and our troops are typically required to receive vaccinations to prevent everything from polio to smallpox, measles, mumps [and] rubella.” So. Does the FDA and government green light make “mandating” the right move for CEOs and business owners now? There are certainly increasing calls for it.

Dozens of City, State and Federal employees across every job sector are now required to be vaccinated within the next 60 days. And dozens of companies in the U.S. with millions of workers on the payroll were quick to follow suit. Many already implemented mandatory vaccinations making the choice clear for staffers before returning to the office. Does that put the writing on the wall? If in fact, according to Barron’s nearly 30% of Dow Jones listed companies now have a vaccine mandate clear the deck to follow?

Well, no. Keep in mind there’s always two sides to every American coin, and CEO Scott Sheffield at Pioneer Natural Resources, a $7 Billion Texas-based oil and gas company operating in the state’s Permian Basin, is taking the other side.

“We’re not making it [the vaccine] mandatory” he says; “we think people should still have that right to make that decision.”  And he’s not alone.

Labor Unions are fighting back too

Part of the reluctance to mandate from many business leaders is their union membership.

Generally speaking, union employers are not allowed to unilaterally make changes to working conditions. That is in part why we have labor unions and their collective bargaining agreements. However, while many state governors like Illinois governor JB Pritzker are mandating that all state employees under their control get vaccinated asap, including healthcare workers, educators, and the police and fireman, some notable union leaders in the state are pushing back.

“This has literally lit a bomb underneath the membership,” said Chicago Police Union President John Catanzara. “We’re in America… we don’t want to be forced to do anything, period,” he said in an August interview on the PBS Newshour.

Similarly, in Los Angeles, Fire Dept Capt. Cristian Granucci blasted the vaccine mandate sending a clear message to his fellow members “this is a fight for freedom of choice, free will,” It’s not about politics he barked out loud in an online video rant.

So, what’s a business leader or CEO to do? It’s clearly a tug of war between the Vaccinated & the Unvaccinated. And unfortunately given off-setting remarks like these the choice to mandate or not is a hard pill to swallow either way.

Enter the Hybrid Solution

If 30% of Dow Jones listed companies have a mandate, that means 70% don’t. What are they doing about it?

While those in favor of mandating the vaccine are profoundly convinced of the benefits, both sides do realize the risks inherent to the decision. They know some employees may leave the job. There’s a near record 10 million job openings in the U.S. right now, and many businesses are desperately raising wages to attract and keep them from jumping ship. This is not the time to rustle the crew, rather come up with a compromise, even if it’s temporary. In other words, instead of mandating the shot, some businesses are offering a hybrid solution and using incentives, meaning for now the choice to vaccinate is yours, but all unvaccinated people must work remotely or test negative every day before coming to work and wear PPE.

A temporary fix? Indeed, but still.

The Decision is yours

Whichever side you land on as you can see there is no shortage of opinion. From the evidence business leaders appear to be on solid legal ground to mandate the jab and as an obligation/condition to providing a safe workplace for all, according to OSHA. But is it worth the potential loss of labor?  CEO Jay Timmons of the National Association of Manufacturers (NAM) which represents manufacturers in all 50 sectors across the USA thinks so; “In the end, it’s better to have live employees than sick or dead ones,” he said. The key is to communicate, educate and incentivize your employees to get the jab he emphasizes.

Still, if unions and deep patriot voices are calling for your head if you mandate, it’s best to bring everybody together beforehand. While the results of vaccine incentives vs sanctions in the fight against Covid remain unknown for now as an advisor our firm argues for an urgent and thoughtful analysis of the issues shared by all stakeholders internally and externally with skin in the game. We recommend you gather your HR, Legal, Finance and Operations managers together to find common ground. Try to separate the health issues from the political ones. Then ask yourself, what are the full consequences of operating as a hybrid company vs a fully vaccinated one? Are my employees, customers and suppliers’ views all fairly considered here? Then develop a plan to become a permanent Covid-free workplace. And do it quickly, before flu season hits this winter and things get worse.

Lastly, despite our differences we’re all in this crisis together, and the sooner we all can get vaccinated the less death and harm will come to us. The evidence is clear. Getting vaccinated saves lives. And while forcing a mandate to save lives seems to cross the line for many, until that point of view changes, the risks will prevail. Remember, strong leaders take strong decisive action when times get tough. And now is one of those times. Make sense?

If you need more guidance on how best to protect your employees and customers from the Corona virus, please check the CDC/OSHA guidance pages for more details https://www.osha.gov/coronavirus/safework, and good luck, we’re all going to need it this winter.

Rick Andrade

About the author: Rick Andrade is an investment banker at Janas Associates in Pasadena, Ca, where he helps CEOs and business owners buy, sell, and finance middle-market companies. Rick earned his BA and MBA from UCLA, along with his Series 7, 63, & 79 FINRA securities licenses. He is also a CA Real Estate Broker, a volunteer SBA/SCORE instructor, and blogs at www.RickAndrade.com on issues important to business owners.

RJA@JanasCorp.com. Please note this article is for informational purposes only and should not be considered in any way an offer to buy or sell a security. Securities are offered through JCC Capital Markets LLC, Member FINRA/SIPC.