Background of my contention – the how and why
I haven’t always been a Cassandra. Honest! I haven’t. Granted, I’m more of a cynic than your average salvation army drummer, but in the past five years, things really have taken a turn for the worse at greater speed than even I thought likely. To be sure, I do ask my friends to provide me with data points that might allow for some sort of positive interpretation but, so far, nobody has come through with anything that stands up to scrutiny. So, till then, I have to assume I am right till proven wrong.
I admit I’ve been predicting doom for some years now and, evidently, have been wrong. So, you may ask, what makes me so sure I am right this time around? The answer is that I am not sure. I never have been nor am I now sure I am right. What I can say, is that the same indicators that told me things were out of whack in the past are indicating that things still are… only more so. So, in my opinion, the question is not whether or not I am sure I am right, rather, at what point does a trend pass the inflection point after which it brings about doom.
Let’s be clear here. Like most anything else, doom is not an event; it is a process. I am not talking here about the sort of natural disaster doom i.e. an asteroid colliding with earth or a devastating tsunami in New York. Here we are concerned with your garden variety daily routine of life, during which, doom is something that builds up as a consequence of the collective effect of human actions. And this time, I think we’re in for it.
I’ll say here and now that we were supposed to be in for it in 2000/2003 but then along came 9/11 and as if by miracle, we were able to re-start inflation again and we went on to enjoy a few years of what was thought to be great prosperity.
Except that it wasn’t.
If you’ve followed me here from Face Book then you will know that my pet peeve is inflation. Inflation induced by necessity through politics and by the inevitability of human behavior.
I’ve predicted doom once before in my life and, of course, been almost right… but otherwise wrong. Here’s where I come from. Like the protagonist in Slum Dog Millionaire, I draw my conclusions from my experience of life and people.
I’m a late bloomer. I had no particular interests at all till fairly late in life. In the 90s whilst working on the opening of the first ever Disneyland park and resort in Europe near Paris, I had my first taste of human psychology; specifically, group psychology. Disney makes for a fascinating environment in which to observe people. As an organization, Disney itself warrants writing a book about but that’ll be for another day. The Disney experience can be traumatic for “cast members” as employees are defined. Few can claim to survive the Disney experience unaffected and so it was for me too. But what Disney illustrates, is that human behavior across societies can vary in style and degree but not in essence. French and Italians may not enjoy the food served at Disney and may complain that wine is not served in the park, but they will still hold on to a piece of garbage for a maximum of ten paces before chucking it; and the single most frequently asked question by the public in the park is still “where are the toilets?” followed by the second most asked question “What time is the 9 O’clock parade?”. [ Disney conducts a bewildering range of studies to predict the behavior of people and their desires. One of the things they found out was that a person will hold on to a piece of trash for about ten paces before discarding it. So Disney places garbage bins every ten paces around the park.] In that respect therefore, when moving into Europe Disney’s marketing and organizational strategy weren’t as off base as the style and delivery of the product. Overall, they still had to contend with a set of human attitudes, expectations and priorities that transcend cultures and time.
Then in 1995 I joined a recruitment firm in London specialized in international hotel and hospitality recruitment. In 1997 I moved to Portfolio International, a larger executive search firm catering to the same industry from London. Despite the fact I lacked the historical context and was largely ignorant of any social science, the seven years I spent in recruitment allowed me to piece together a tapestry of empirical evidence that formed the basis of my first prediction of doom. It is only from 2001 onwards that I began to delve in the academic side of what I was experiencing in real life.
Whereas at Disney I received a fairly good grounding in what makes masses tick, my recruitment days gave me a sense of the wider economic contexts, money flows, wages and social dynamics in the world. Of course, the 90s started with a recession and witnessed the rise of capitalist China, the emergence of capitalist Russia, the end of Gulf War I, the then apparently inexorable rise of the Dow Jones and the advent of a “new era” of productivity, irrational exuberance, the fight for global democracy, a few economic crisis of first order in Mexico in 1994, in Argentina some years later, then in Russia, then in the USA with the implosion of LTCM… in short it was a period of time not devoid of thrill and apprehension. But the interesting thing for me was that through my activity of international recruitment, I was witnessing the social and economic effects of each event first hand. Not only did I have a front row seat to what happens to people and how they behave in a given set of social and economic circumstances but also, I witnessed how governments deal with crisis, how foreign governments and international institutions intervene and how things evolve. Also, living and working in one of the epicenters of world finance that is the City of London and frequenting that symbol of success that is the gastronomic restaurant scene, I could see the effects of world events on the people that often had a hand in shaping them or that, at the very least, were in the front line of the repercussions.
One of the very first things to strike me as odd when I began in recruitment was how much compensation packages in the international hotel industry had decreased over the years. I grew up, studied and worked in different countries in Europe, the Middle East and, briefly, in the US. When I began working in recruitment, I was acutely aware that the traditional, social and economic context of Europe did not allow professional progression at a rate compatible neither with one’s professional merit nor, for that matter, with the rate of growth of the population. I knew for example, that there was only the slimmest of chances to make a career in the private sector in Italy, any sector, and that professional flexibility is precluded by a sclerotic political context that is almost feudal and not geared towards innovation. So I thought that the international market would offer a viable solution for many young men like me.
However, the very first thing I noticed when I began to work in recruitment was that a newly recruited Executive Chef in an international chain hotel in the Middle East would command a far lower compensation package than in the late 70s. Of course there are highly paid executives too in the industry but that is something that happens only after many years of effective and loyal service in a company. In the meantime, starting salaries were nowhere near reasonable in light of the cost of living one would incur when moving a family to a new country and sending children to school. Come to that, since the golden age of the 70s and early 80s, hotel companies seemed to gradually move away from providing perks such as schooling, travel allowances to home country and accommodation to anyone but the General Manager and, to a lesser extent, to other members of the executive team. And yet, hotel companies where expanding at a blistering rate opening dozens of new units throughout the world. It seemed to me that whereas compensation packages enjoyed a directly inverse relationship to the rate of expansion, staff turnover appeared to be directly proportional to it.
That was the beginning of my incapacity to reconcile the outward appearance of wealth and economic prosperity in the West on the back of global wages that were declining nominally and on a relative basis across a number of sectors particularly in areas of primary importance as education and health.
But wonders did not stop there.
I received my first lesson in economic perception when I made the move from the first relatively small recruitment firm to Portfolio International. If you must know, the first firm I joined was called VIP International. I don’t often mention it because although Mr. Bianchin the founder of this firm was quite a personality on the international hotel scene during the 70s and 80s and the name of the firm would have been appropriate then, in the 90s the name “VIP International” in London conjured images of slinky voluptuous ladies clad in form fitting ware more than anything else. Going back to my story; when I moved from VIP International to Portfolio International I thought I was joining a larger firm with more clout. After all, PI was quoted on the stock market and employed what in comparison was an army of consultants. At VIPI we were all of 4 consultants at peak; when I first joined PI in 1997 we must have been a good 15 consultants of whom five worked on the international market and the rest worked on the UK market. Although I enjoyed the work greatly, it became gradually clear that our strategy was dictated by the imperatives of the stock market regardless of intrinsic performance. During my 5 years at PI, we went from a quaint 15 consultants to at one point something in the range of well over 50 employees. Recruitment is an activity that has no entry barrier at all and the industry is saturated with firms large and small some of which don’t last more than a few months in business. Everyday dozens of new recruitment “firms” are launched all hoping to eek a living out of the same clients and the same candidates as everyone else. All that is required is a telephone line and some contacts. Obviously, in such an environment, quantity and speed become much more important than quality and commitment and so it is that, much like the author of Liar’s Poker described, we reached the stage where we had 18 year old “consultants” with no experience working the international market. During this time, our database also increased many folds to the extent that each consultant was handling a database of several thousand names; the same names that all other recruitment firms around the world were also handling.
The epiphany – well, one of the first epiphanies that is.
At the height of activity (notice here I mean activity rather than profitability or efficiency), our CEO David Coubrough decided that we were important enough and successful enough to retain the services of a company that came around a couple of times a week to… wait for it… wipe down our telephones and computer screens. This was not the same company that cleaned the office. This was a service company that wiped phones and pc screens. I know what you are thinking or at least, what you should be thinking. That was the point at which the absurdity of the charade began to dawn on me.
We were now a regiment of consultants generating prodigious amounts of activity but the performance of each individual consultant was diminishing. Compared to the increase in activity and revenue, resource consumption in paper, electricity, telephone, travel, water, office supplies and office rent increased faster. Emphasis was placed on “cold calling” to acquire new clients rather than on cementing existing relationships. And more short sighted still, was the total lack of attention to cultivating candidate relations in the misguided belief that acquiring new clients would then generate new candidates thus totally overlooking the fact that candidates can not only be clients but can become your sales representatives thus decreasing the need for cold calling.
I remember David Coubrough calling us one by one to his office to emphasize the importance of cold calling. I remember his constant droning-on about how much more I would earn in bonus if I made more placements. And I remember his discomfiture as I kept telling him that dangling the bonus carrot in front of me would do nothing to increase my placement rate. My concern was placing someone and having them stay to contract’s end if not renew their contract for many years. I saw no point in placing someone for the sake of chalking-up a placement on the board and then having to do the same job again the following month at no charge because either the candidate or the employer were not happy with the placement. But that was the prevalent practice. Just place people so we can show an increase in the placement rate; we’ll deal with the consequences later.
Of course, I don’t believe the absurdity of the whole exercise was lost on David Coubrough. He knew exactly what he was doing even if the rest of the team didn’t.
But I truly enjoyed the work and thought that it would really be worth it and desirable to bring about qualitative change to boost efficiency. And so I tried to get involved. David Coubrough and the team appeared intellectually receptive.
Warning! The next few paragraphs are partly relevant to the broader discussion and partly a venting exercise on my part for having been screwed out of a few thousand Pound Sterling by people I thought had genuine intentions. For the purpose of the broader discussion you can safely skip the next two paragraphs and go directly to “the moral of the story”.
During the first phase of the global crisis of 2000 long after I had already made my prediction of doom, David Coubrough asked me to help support the company stock price. At the time there was a possibility that I could have a larger role in the international department of the company bringing about the change I thought would be desirable so I accepted. David also promised that he would underwrite any potential loss I may incurr. Although the gesture was unnecessary in light of the strategy he was willing to pursue with me, it was nonetheless appreciated. Two years later in the wake of 9/11 it was clear that the change I thought we needed to effect was not coming about and we decided to part ways. The separation was very amicable and David asked, and I agreed, that I hold on to the company stock and to coordinate with him the eventual sale.
Little did I know that David Coubrough was negotiating the sale of the company and that one fine day he rode off into the sunset leaving me to hang dry with my shares and not a word of acknowledgment. That was the point at which I began to understand why David Coubrough was so adamant about increasing activity. My loss although not total was in the range of 20K Pound Sterling. Even worse, after he’d gone, I proceeded to get screwed for another 3000 UK Pounds by the new CEO Lesley Reynolds whom disowned any agreement I may have had with her predecessor and former boss.
The moral of the story –
Although a minor quoted company, we now know that the attitude at PI is in fact pervasive in the Western inspired political and business worlds. Inflation is the one vital dynamic in the absence of which government and the political process would be greatly reduced and, at times, paralyzed.
What mattered here was not individual performance or efficiency. What mattered here was overall financial churning. What mattered was total placements and total company turnover regardless of the success rate of each placement and/or the amount of extra placements that would have to be carried out just to substitute prior placements. In this light, the added amount of work was absolute gold because on one hand the company could show increased turnover and increased activity thus employing more (redundant) people thus giving the appearance of being busy thus giving an appearance of clout and size. An amusing anecdote I remember in this regard occurred when our largest shareholding company sent one of their officers around to see what we were doing and how we were working. Knowing that an officer from our controlling shareholder would be spending an afternoon walking around our offices, Lesley Reynolds gave us strict instructions to call each other from external lines in repeated fashion so as to keep the phones ringing.
What we were doing, was inducing inflation in our company’s turnover. The reasons we were doing that are the same as the reasons why politicians need and want to induce inflation in the economy.