Leaders Lean Forward into Opportunities Ahead
This past Sunday, we watched the news talk shows featuring various governmental leaders from both sides of the aisle explain their positions on sequestration and its implications for the U.S economy. Despite the rhetoric and general mediocrity of the talking heads from Washington, D.C, I am very positive about this country and believe there are great opportunities in this nation.
CEOs understand how to manage their business while continuing to look for new opportunities for market share via products and services. Whether it’s a group of executives in financial services, healthcare, telecom or technology, there’s a prevailing question about the future of this country. We in the private sector are held accountable on a quarterly basis by shareholders who rightfully demand a return on their investment. The consequences for non-performance are felt at the board of director’s level and senior management resulting in probing questions about strategy, innovation and culture.
The one curious question people ask repeatedly is about my take on investing in the public markets. My response for the past two years has been uniformly positive, shocking many of the questioners. CEOs, unlike public officials, are held accountable in regular periods by their board and shareholders. Smart CEOs are financially incented and know how to hit the bottom line. This differs distinctly from the two year horizon of public officials who focus their actions on political gain, which results in little relief for the huge number of underemployed and unemployed people in this country.
Economic growth is predicted to shrink by at least half a percentage point from sequestration and will cost the country about 700,000 jobs. Unemployment, which has steadily declined for the past three years, is expected to stay below 8%. With significant numbers of people out of work, companies feel no incentive to increase wages. This increasing economic divide in America is most certainly related to an increasing educational divide. Joseph Stiglitz, a Nobel Prize-winning economist, is known for his public views on income level being closely linked to educational success.
As Warren Buffet says, don’t confuse the success of the stock market with the state of the economy and employment, as the two often do not align. Despite the Dow Jones hitting its historic highest level this month, the gap between a company’s success and the American workers employed by them, could continue to deteriorate, as federal budget cuts mandated by sequestration begin. Corporations, influenced by greater productivity from technology, faster growth in emerging economies and continued job cuts, will continue to be able to maintain margins and drive productivity.
In life, there are controllable and uncontrollable variables. The reality is that unless you are in a senior leadership position in Congress or the president of the United States, your voice doesn’t count despite what people tell you, and you won’t have any meaningful impact on public policy. Staying focused on the business fundamentals of running your business, will provide the greatest chances for continued success.
David Walker, the seventh comptroller general of the United States and head of the U.S. Government Accountability Office for almost 10 years, compares the present-day U.S. to the Roman Empire in decline, with unsustainable policies and practices and long-term obligations underwater to the tune of $50 trillion. His theme is that we have not had an honest discussion about what we value in our entitlement programs, what they will truly cost and who will pay for them. He says what’s needed from Washington is “leadership rather than laggardship.”
As with any effective criteria-based decision-making business process, his solutions test for leaders includes asking the following questions: Does it make economic sense? Is it socially equitable? Is it culturally acceptable? Does it pass a basic math test? Is it politically feasible? And can it achieve meaningful bipartisan support?
My point of view is pretty consistent. Leaders need to lean forward into the opportunities ahead. They won’t get distracted by the Washington bureaucrats that deaden the brain and your creative thinking. They will continue to build business plans that have accountability and responsibility to shareholders and members.
They know that enthusiasm and attitude are everything in life. They will limit their consumption of the news from predictable media, which provides confusing rhetoric and instead choose to get a deeper understanding of emerging technology trends, their impact on consumers and develop products and services that can be accretive to their shareholders or members. They will develop criteria for talent and aggressively pursue those people who share their values and want to enjoy a better life.
Stuart R. Levine is chairman/CEO of Stuart Levine & Associates. He can be reached at (516) 465-0800 or stuartlevine.com.