How’s business? That’s a question I hear a lot these days. Not so much as in asking about magazine publishing (going just fine, thank you), but as in, “Do you think the economy is getting better?”
Why is anyone even thinking about this question anymore? Should success be so falling-off-a-log easy that there’s no risk? I don’t think so.
Let’s look at the economics: The Great Recession met its technical end almost six years ago. On Wall Street, we’re experiencing the fourth-longest bull market in history. The dollar is at an all-time high against the euro. Unemployment in the U.S. is running half the rate of most of Western Europe.
In Virginia, unemployment in December was 4.8 percent, well below the U.S. rate of 5.6 percent for the month. Nearby states all had higher unemployment: North Carolina, 5.4 percent; Maryland, 5.5 percent; West Virginia 5.9 percent; and Tennessee; 6.6 percent.
The Port of Virginia, a bellwether of our economy, posted six months of consecutive profits in the second half of last year and is setting records for container volumes in 2015.
If you don’t think things are better, just what exactly are you expecting?
The lingering suspension of belief in a positive business climate has at least two probable causes. First, the depth and length of the recession forced painful cuts, putting many people out of work, as well as causing the closing or consolidation of many companies.
A new generation of middle- and top-level managers has risen to prominence on the basis of their ability to cut expenses with little or no orientation toward building revenue. Today, this generation of leaders, promoted for their skepticism rather than their optimism, is at the helm.
Secondly, we are in a protracted period of negativity in our political arena. Despite much evidence to the contrary, people associate the state of our politics with the state of our economy.
Ironically, there is likely a negative correlation between the politics and business. How about that big recession during the Reagan years or the boom cycle during the Clinton administration? Both were caused, not by politics, but by economic cycles longer than the time either president spent in office.
Unfortunately, economic truths are frequently overwritten by a revisionist history concocted by those seeking increased political clout.
This political grandstanding disproportionately affects Virginia because of our historic dependence on government spending.
There are few better examples of a state whose attitude — at best quietly cautious, at worst outright negative — toward federal initiatives belies its dependence on such spending programs for prosperity. Thirteen of the commonwealth’s top 20 employers are in the public sector or are public-sector contractors. Sequestration has hit Virginia hard.
Still, despite these unproductive headwinds, business is better.
Not long ago, I had the pleasure of speaking in Manassas at the Prince William Chamber of Commerce’s 2015 Excellence in Business Awards. The requested topic: “The Future of Business Excellence in Virginia.” I thought to myself, “Now, that’s a pretty big topic!” Here are a few thoughts recycled from that evening’s remarks:
Virginia’s prosperity as a result of federal spending dates back to the New Deal of the 1930s. Not surprisingly, the business model for government contract work is similar to winning military conflicts — define the mission, build the capabilities and execute on command. It is no wonder that many retired military officers are successful executives in government contracting companies.
Diversifying into the private sector demands a new set of capabilities. Creating a brand and marketing it successfully requires longer-term investments than bidding on pre-set contract requirements. To thrive in the private economy, a company must establish itself outside of the bidding process. Great marketing is more than an affordable luxury; it is mission critical.
Being successful in the private sector also requires the assumption of more risk. It’s not enough to simply say, “We have the capability to build your product, give us the contract and we’ll get the job done.”
In the private sector, a company takes all the risk, building its product first and entering the market carrying all the cost on its own balance sheet — without a defined customer demand or the safety net of government contract payments.
The equation for success going forward also depends heavily on people. It takes innovative talent to create high-quality products that go beyond giving the customers just what they asked for or contracted to receive. Attracting talent necessitates clear and authentic leadership values; these always start to the top.
So, if you are uncertain about how business is going don’t be fooled or distracted by politics. Take a look around. Lots of companies are getting these things right, and yours just might be one of them.