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CEOs Voting With Their Feet

Dell’s decision to double its workforce in India to 20,000 people and Wal-Mart’s plan to hire 150,000 people in China are part of a massive shift in hiring patterns.

Two announcements in the news carry tremendous significance for everyone from American CEOs down to lowly cashiers in the checkout lane. Dell’s decision to double its workforce in India to 20,000 people and Wal-Mart’s plan to hire 150,000 people in China are part of a massive shift in hiring patterns. It will reshape the American economy.

Andy Grove used to talk about “inflection points,” meaning a period of time when sweeping change becomes apparent.

The Dell and Wal-Mart announcements are such an inflection point. CEOs Michael Dell and Lee Scott see China’s economy continuing to grow at 8 to 10 percent a year and India’s economy growing at about 8 percent. The American economy will grow at less than half those rates this year.

They see huge populations in China, India and other emerging markets. They see lower cost structures for doing nearly everything. They see younger populations forming families, spurring yet more growth. They see highly educated, motivated work forces hungry for new jobs.

At home, they see high health care and pension costs, a difficult regulatory environment, nasty litigation woes, reduced spending on R&D and a poorly educated workforce who have a sense of self-entitlement. Complete drift in Washington suggests that very few of these problems are going to be fixed any time soon.

So these CEOs are voting with their feet and going offshore to hire.

In some senses, it’s only natural that they would create employment patterns that reflect the reality of the world’s population-only 6 percent of the world are Americans.

But there are big implications:

–Any CEO who supplies goods or services to the major multinationals had also better learn to operate in India, China and elsewhere if they want to keep the business.

–Economists who think they understand the linkage between economic growth and employment had better go back to the old drawing board. The jobs just may not be created here.

–Young people who are educating themselves must have a language and/or some cultural skills to survive in this new world order.  If you can’t operate in a complex cultural environment, you’re toast.

–Governments that want to slow down the speed at which U.S. companies go offshore to hire still have time-but they need to get serious about attacking structural problems in the U.S. economy.

What is your opinion? Email me at bholstein@chiefexecutive.net


Response to: CEOs Voting With Their Feet

I think it is a damn shame. Our politicians focus on creating entitlement programs to buy votes and we the voters do nothing. We just will not face the more serious issues facing this country. Our education system is a shambles, the welfare system grows, lawsuits continue to sap our attention and funds, we are being overrun with illegal immigrants who consume and contribute very little, yes, Global warming is real!! WOW, I am getting angry, depressed, overwhelmed and really don’t know how to help force meaningful change.

J.C. Smith


Response to: CEOs Voting With Their Feet

Here in the US if we would forecast 8% growth the Fed would ram the interest rate faster than we could blink to sniffle it !!

Kurt Bostrom, VP, H.O. Bostrom


Response to: CEOs Voting With Their Feet 

While I understand your premise, I think it is not as true for Wal-Mart as it is for Dell. Dell may, in fact, be “offshoring” some work that could be done in the US by Americans. Wal-Mart, on the other hand, is merely hiring local retail workers (and a cadre of in-country managers) to operate new stores where there would be no reasonable expectation of using US workers. In fact Wal-Mart’s use of local employees to operate a vastly expanded foreign operation should bring additional income to Wal-Mart stockholders, executives and some managers in the US that would not otherwise be generated.

If the Wal-Mart move is truly significant, then why wasn’t this an issue when McDonalds (and other retail outlets, frequently fast food) began to see a saturation point with US locations and started to open oversees outlets across the world? That pattern has been going on for years. Moving call centers and some manufacturing to Ireland and India is fundamentally different than opening retail or even wholesale operations to new markets. And it is not a new trend – China and other third-world countries have been making many of our goods for decades.

I think a clarification is in order.

Rob Givens, President/CEO, Mazuma Credit Union


Response to: CEOs Voting With Their Feet 

The concept of establishing business centers ‘off-shore’ is not at all new. Afterall, there has been an increasing use in acquiring ‘outsourcing’ services for many years. [With varing degrees of success and acceptance, we may add].

 

Question? What happens to the tax liabilities of those manufacturing overseas?

With several manufacturers in the United States, in trouble, witness General Motors and Ford laying 60,000 people off and others not far behind, quite obviously, the tax revenue to the Federal Governmentwill be reduced. Will Congress reduce spending? Not at all! Who will the greedy people in Washington look to for the shortfall? You are familar with one of them, you shave him daily!

 

Guess what. Offshore manufacturing will have a similar result!!

 

First there was NAFTA. Then GATT and WTO. Last fall Congress passed yet another one. Next is FTAA. This one will really be a knife in the backs of the economy (and the labor force of America). Why? Because it is being formulated to move capital ‘out of’ the United States! What will be done with the capital? Factories will be constructed. People will work in those factories. People from the United States will not be hired to work in these factories. (They probably would not move there if given an opportunity).  People from Central and South America will be hired. Jobs WILL be lost!

 

 

The United States business basis will become even more of a paper economy and less of a manufacturing economy. Not to say who will pick up the tax burden.

 

Respectfully ,

Robert A. Kegel, P.E., RAK/plf


 

Response to: CEOs Voting With Their Feet 

 

Every time a job goes overseas, someone here at home gets closer to having to learn to say, “Want fries with that?”… in Chinese.

 

Unlike Denmark, which conscientiously provides training and new opportunities to the unemployed, America does not. Despite the Administration’s public acknowledgment that American prosperity will depend on the education of our young people, there are no incentives — public or private –to ensure that we’ll have a competitively educated workforce. In fact, the new budget cuts educational funding by billions. And as more and

more manufacturing and service assets are offshored to countries that could, on a whim,

decide to nationalize every manufacturing facility owned or maintained by Western

companies, the United States’ position becomes increasingly precarious.

 

At the rate corporations are going, they will turn domestic labor into service employees who, like their third-world predecessors, will rely on tourism to survive. The nation that once emptied in Summer as the vacationing middle class flocked to Europe and other foreign destinations will now stay home to serve the newly affluent Asian population.

 

Like the budget deficit, which will be another administration’s and another generation’s

problem, American business is looking at the next quarter, instead of the next quarter century. The only recourse Americans may have is to refuse to buy from companies whose customer service personnel are barely understandable, respond to improvements in Detroit with a ’70s-style “Buy American” campaign, and persuade Congress (as unlikely as that is) to represent the voters, instead of the businesses that line their campaign coffers.

 

While some here may be persuaded to learn Chinese or Hindi, the cultural divide will exclude them as more and more economic power and technological innovation accumulates organically in Bangalore or Guangzhou… and as more and more of their

manufacturing output is consumed domestically. As that occurs, laid off American workers, whose jobs have reappeared in Asia, will have less and less buying power until, as Asian living standards rise, it again becomes economically feasible to manufacture products in the States for the U.S. domestic market.

 

As long as domestic manufacturers invest in offshore labor and U.S. tax dollars are sunk into the cesspit of overseas wars (instead of being invested at home), all chief executives — from the White House on down — will be perceived as self-serving, insensitive, and out of touch. And if Congress continues to kowtow to businesses that invest overseas instead of at home, it will come to be known, in a very real sense, as the Un-American Activities Committee.

 

Peter Altschuler, President, Wordsworth & Company LLC


Response to: CEOs Voting With Their Feet 

 

Excellent, excellent article…. right on the money. I love the part about, “At home, they see high health care and pension costs, a difficult regulatory environment, nasty litigation woes, reduced spending on R&D and a poorly educated workforce who have a sense of self-entitlement. Complete drift in Washington suggests that very few of these problems are going to be fixed any time soon.” You could not have summed up the domestic situation any better. Americans need to get hungry again and learn the “value of a dollar”. The Chinese and Indians (and many other nationalities) know the benefit of education and hard work. Unfortunately, most Americans see life as an entitlement and not as a gift from God that must be used properly to better themselves and the world in which they live.

 

Kevin, CEO wanna-be


Response to: CEOs Voting With Their Feet 

 

I live and work in India and this article is damm interesting.

I would like to present an interesting angle to this debate.  Currently, I work with a company based in India which works for US companies looking to reduce their costs by outsourcing work. Our company has been competing on costs during Year 1 and 2 of our existance and slowly but surely companies were working with us for our technical competance from Year 3. Year 4 we moved up further up the value chain and are offering services as good as companies in the US.

Year 5 we are competing head to head for all kinds of work. Year 5 we also realized that in order to grow faster we need to become like an American company. We have now 4 US employees on our rolls. Previously, our company would have our design staff visit the US for business now that is no longer enough. Now we are hiring Americans to do this work for Americans. This is only at the high end design related work but the process has started.

Make no mistake, some percentage of our total staff will be Americans in a few years.

All Indian software companies will grow in this direction and compete, we will go the same way till there is a level playing field in terms of costs. US Inc. will have 10,000 staff (lower pay) in India and India Inc will have 2000 high end staff (higher pay) in the US. The salaries in India are rising at a tremendous pace. It is not uncommon for highly skilled and experienced staff getting salaries equivalent of US staff. India is not some low cost center any more. If any of you have this impression, you need to SERIOUSLY update yourselves. You are still thinking of the India 4 years back.

Nothing different with China. They will also do this as well.

That is the price of globalization. You are worried about a structuring change in the US economy. Wake up. There is a structural change in the world economy. In 1990 the US was forcing India to open up its markets for American goods but at the same time its markets were open for India goods and services. The US Government cannot reverse this process now.

I know one day that Indian companies will outsource the work that Indians are currently doing to a lower cost country. Nothing different from what the US companies are doing so far.

I am watching my back too. :-) New reality – most places on planet earth will be one market for goods, services, jobs etc.

Anand Timothy


 

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