Gary North's REALITY CHECK
Issue 408 December 28, 2004
DEAD-END JOB OR A STEPPING STONE?
You may be asking yourself this question. If you
aren't, then your son or son-in-law may be.
I argue that no job is a dead end job. There are
dead-end employees. A dead-end job is there to provide a
stepping stone for upward-bound employees and also downward
bound employees.
Most greeters at Wal-Mart are older. For them, the
job is a dead-end job because they are probably retired.
They need extra money. They are dead-end employees. They
know this. So does the general manager who hired them. I
do not see people in their twenties working as Wal-Mart
greeters. The younger ones are on the floor, stacking
things on shelves, and helping customers to locate the
correct aisles. They may also be on the check-out
registers, which used to be called cash registers back when
people bought things for cash.
Some people are content with their dead-end jobs.
They have reached what Lawrence J. Peter called their level
of incompetence. They will not be promoted again. Or
maybe they are at their level of maximum competence,
recognize this, and are not willing to take a promotion.
Because consumers are fickle and always looking for
bargains, they change their buying patterns. They shop.
This puts pressure on companies to keep ahead of consumer
demand, but not too far ahead. Companies are not
guaranteed income. So, they don't offer lifetime
employment. They are ready to fire employees, or shut down
plants, or eliminate entire layers of middle management.
The consumers demand this by their decisions to buy and not
buy.
The question you had better answer is this: Is my job
a dead-end job?
If it is, then the next question is vital: Should I
seek a better job?
If the answer is yes, this raises a third question:
Should I move up or out?
A REAL-WORLD DECISION
Recently, I spoke with a man in his late twenties. He
has a bachelor's degree in computer science, which is not
marketable in the way it was before the dot-com collapse in
March of 2000. He received his degree in December, 1999.
Not good timing!
He is working as a one-man computer team for a small
company in the insurance field. It provides underwriting
services. It deals with retail sellers. It has 35
employees. The company had a policy of not spending money
to update its computer system. It got caught by a
programmer who made the company's software dependent on him
-- a common practice of programmers. The company is paying
the new man to cut the umbilical cord to the old system,
but without spending much money.
The company's retail clients keep asking for upgraded
services, which means upgraded software. The company
refuses, claiming that it has no money to upgrade. The new
program it's using to replace the older one is less
effective than the old one, the man says. But the company
will not have to pay the original programmer the extra
money he was demanding.
From what I can see, it's a dead-end job. The company
itself has some standard marks of looming extinction:
1. Low capital spending
2. Stagnant or shrinking employee base
3. Fails to respond to clients
4. Depends on one man for its software/hardware
operation
5. Pays him a minimal salary
The young man has concluded the same thing.
BREAKING AWAY
His problem is that he needs his entry-level salary.
He was out of work for six months in a new city. He lived
frugally on his savings. He wants to replenish his
savings. This is the correct attitude.
He had worked as a computer repairman before. He was
sent out to fix messed-up systems. He grew tired of
dealing with people whose computers don't perform as they
expected. Computers are quirky. They stop working for
reasons unknown. They are not miracle machines. He found
that the users blamed him for the failures of their old
systems, their own ignorance, and the complexity of
previous undocumented software.
The widespread problem most middle-sized companies
face, he says, is this: proprietary software is unique.
Companies can't locate outsiders who understand their in-
house system's problems. There is too much variation.
So, they become dependent on in-house programmers.
Then these programmers demand raises or else quit. They
have the companies over the barrel. Escape is not easy.
So, the young man wants to break away from his mid-
sized company. At the same time, hundreds of local mid-
sized companies may want to break away from 100% dependence
on an in-house programmer. Is there an opportunity here?
A SOLUTION AT A PRICE
I tried to give the young man advice on how to set up
his own company. What mid-sized companies and some small
companies need is a preventive maintenance program that is
provided by an outside firm of computer geeks. The geeks'
provide preliminary information about looming problems. If
they can analyze what's wrong, they can recommend high-
price specialists to come in on a part-time basis to fix
the problem. For this, a company pays the geeks a monthly
retainer fee of $500 to $1,000. A computer analyst comes
in once a month for half a day to check things out, get rid
of viruses, worms, etc., and give a warning of trouble
brewing. But such geek service companies don't seem to
exist. Is this an opportunity? Or is there some
fundamental barrier to entry?
The young man told me this:
"A company can buy a server for under $1,000.
But they don't. It's too risky. If the server
goes down, the company may go down. So, they buy
redundancy: levels of back-up. They spend
$10,000, not $1,000. But then they become
dependent on one in-house technician to run the
system. It's crazy."
I told him that with this explanation, he had the
makings of a direct-mail ad. He should tell this story of
reduced-risk back-up for hardware but no back-up for
technicians to run this hardware.
Computerized companies face a real-world problem.
Anyone who has experienced a computer snafu knows. On
Christmas weekend, Conair, a subsidiary of Delta Airlines,
had its computer go down. Over 30,000 passengers were
stranded. The disaster became the main weekend news story
on the networks -- the worst advertising possible. Delta
was already in financial trouble. This will make things
worse.
Delta is big. The industry is dependent on computers.
But to the extent that a company is dependent on computers,
it ought to spend money to buy back-up. This includes
back-up programmers. The more proprietary the software,
the more a firm needs back-up programmers who understand
the system's code.
As corporate loyalty has declined, companies have
become more dependent on machines and technicians to run
them. A programmer can quit for better pay. What happens
to the company in the interim? It may take a new
programmer six months to become familiar with even the
basics of the system.
I told the young man that a good ad might convince 20
companies to pay him $500 to $1,000 a month to serve as an
early warning system. The problem is, he says, the
enormous diversity of the proprietary systems. One service
company can't supply the repairs.
What is needed, I said, is an intermediary service
company that can supply routine procedures for several
companies on a monthly basis, with a list of independent
specialists for emergency repairs. The service company
could get a finder's fee for the specialist's contract --
say 20%. Maybe only 10%. But something.
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PAYING TO RELIEVE FEAR
Basically, a service company is like an insurance
policy: it is there in a crisis. Most people won't pay a
service fee for preventive maintenance in most areas of
their lives. It would be too expensive. There are a few
exceptions. Local motor oil-changing companies sell what
is in effect preventive maintenance. Going to the dentist
is another. But how often do we go to a dentist? We
usually avoid it until a tooth starts hurting.
If a company refuses to hire in-house back-up computer
personnel, then it had better outsource this service. In
every area in which a system failure could bankrupt the
company, it had better have fail-safe procedures, either
in-house or outsourced.
Consider your employer's vulnerability to a system
failure. Does it have back-up? If it depends for its
existence on one person in the IT department, does it treat
that person with deference and money? It had better do
this, because its survival depends on this man.
I, for one, would want a back-up person who knows the
entire system. This subordinate must be paid well, just as
a company pays lots of extra money for hardware back-up --
or had better.
You may think that you are immune from such failures.
You may have great faith that your boss has considered all
this and has taken steps to protect the company and
therefore your job. But unless you verify this for
yourself, you are staking your financial future on faith,
which is defined in the New Testament as "the substance of
things hoped for, the evidence of things unseen" (Hebrews
11:1). I recommend against exercising this much faith. A
few discreet inquiries as to the state of the company's
back-up systems is in order.
If your employer is cutting costs by refusing to
insure against a major breakdown, then he is rolling the
dice. As your employer, he is rolling your dice, too. To
the extent that your lifestyle is dependent on your job,
your employer's decision to be penny-wise is pound-foolish.
The refusal of top management to spend money
systematically to upgrade technology, which includes the
technical staff to maintain the technology, is an indicator
of short-term thinking. It's management on a wing and a
prayer. It is indicative of a deeper problem: the failure
to develop a long-term marketing strategy.
The young man I counselled is working for a company
that displays this weakness. In my view, he would be
unwise to consider this company as anything more than a
port in a storm. But if that's true for its employees,
it's equally true of its clients. The clients should start
looking for alternative suppliers of the service.
That's why you need to investigate the condition of
your employer. If things are excessively uncertain for the
employees, the same is true for the clients. If the
clients depart for greener pastures, you will be forced to
do the same.
That's why it's important for you to find out the
condition of your company. It's self-interested behavior
to investigate the degree of risk that your employer is
willing to take, because he is accepting this degree of
risk on your behalf. If you are a crewman on a ship, you
had better be ready to jump ship if the crucial systems
don't have back-up.
THE STORY OF DAN ROGERS
I heard about Dan Rogers when I read "Blind Man's
Bluff" (1999), a history of the use of America's nuclear
submarines in Cold War espionage. The book includes a
chapter on the sinking of the Scorpion in 1968, one of the
two worst disasters in American submarine history.
Dan Rogers was an electrical technician's mate on the
Scorpion. He began to have doubts about its safety. He
resigned his post in late 1967. He saw his shipmates off
at Norfolk, on Feb. 15, 1968. They never returned.
In a 1999 Nova show on PBS, they interviewed Rogers.
This interview stands as a warning against exercising
excessive faith in the decisions of senior management.
In 1993, the Navy finally offered a theory of a
defective torpedo, activated on board, which was then
released from the ship, followed it, and sank it. Doubts
about this theory were raised almost from the day the
official report was issued.
NARRATOR: Dan Rogers doesn't believe the torpedo
story either. He transferred off Scorpion just
before her final voyage because he believed
inadequate maintenance made the submarine unsafe.
ROGERS: I really didn't want to be there. I was
really that concerned about the condition of that
boat, especially the material condition of the
boat.
NARRATOR: Eventually, Rogers shared his doubts
with Steve Johnson, an investigative reporter for
the Houston Chronicle. Johnson found letters from
other crew members that showed they too were
concerned about the mechanical condition of the
sub. He tracked down Ross Saxon, whose doubts
about the torpedo theory encouraged him to keep
digging. Then, after years of effort, he
unearthed a critical piece of Scorpion's past.
JOHNSON: I obtained several thousand pages
related to the Scorpion's maintenance history
from the Atlantic submarine fleet. I'd sent out a
half a dozen requests under the Freedom of
Information Act, and it just so happens they
found these documents that they thought had been
destroyed, buried amid thousands of pages, and it
was the day-by-day history of how the Scorpion
was selected in a secret program that drastically
reduced the maintenance that it would have
ordinarily received.
NARRATOR: To save time, the Navy had cut back on
Scorpion's last overhaul. Scorpion was in the
shipyard eight months, though an average overhaul
took twenty-four. They spent just $3 million, a
fraction of the norm. (http://snipurl.com/bm2e)
Rogers had placed his career in jeopardy by requesting
a transfer from the Scorpion. He was publicly breaking
with the senior officers and Navy brass about the safety of
this high-tech showcase. Who was he to make such a
judgment? Answer: the lone survivor.
He won no praise after the disaster. The Navy did not
come to him to get his opinions on the safety of the ship.
Instead, the Navy covered up the story for a quarter
century, then released a misleading report about the cause.
But he survived.
CONCLUSION
If you are in a dead-end job in a competitive company,
you may not care. It may fit your career objectives. But
if you are in a dead-end job in a dead-end company, you had
better start looking for an exit strategy.
***************************
Appendix 108
Testimonial #460 comes from a man in a cottage
industry that is immune from Chinese competition:
locksmithing. I have long recommended locksmithing as a
great small business. People are forever losing keys,
locking themselves out of their cars, and getting divorces.
(Note: the first thing to do when you throw him/her out is
to get the house's door locks changed. I mean that day. I
know a man who didn't. His friends warned him. He
refused. His wife then came to the house with a moving van
when he was at work. She took everything.)
We are a basic service/retail locksmith company
going into our 23rd year. We sell, service, and
install CCTV, safes, vaults, electric locks, high
security key systems of all types, etc., etc. We
also do service work on cars where the owners
have locked their keys inside.
So, the business is much broader than locksmithing as
such. But locksmithing is a front-end service by which the
company gets new customers through the door.
It was here that we discovered a way to increase
our customer base, and their loyalty. Though this
was not the original intent. After opening an
auto, I took a business card and wrote on the
back, 'two keys paid for,' and handed it to my
customer with instructions to come in and get the
freebies. (Almost everyone we give a card to
comes in for their free keys). Once in the store
they would usually begin to look around and see
what we have to offer, and then ask questions. We
expected to make a few additional sales, but we
never expected so vast an expansion of our
customer base, the tremendous amount of good will
generated by word of mouth advertising, and the
near tripling of our bottom line in one year!
Many of these people would engage us to do
security work at their homes and businesses. Two
large early accounts were hotels that were
serviced by a competitor. They and a number of
others are still with us. And it started with a
lowly business card with an offer on the back.
That an inexpensive business card could do so
much was a bit over whelming.
The business card is a useful tool when it is done
well. It is rarely done well. This man found a secret: a
hand-written offer on the back of the card. Second, by
giving the customer more than expected, he created a word-
of-mouth permanent client out of a one-time customer.
When new customers came our way we would inquire
how they came to hear about us. Invariably the
answer was, "so-and-so recommended you".
They didn't see our yellow page adds, nor mention
the radio ads we had from time to time, nor the
coupons from the newspapers. Our next question
was, "why are we wasting all this money
advertising when nobody is reading it?" We
promptly cancelled or let lapse all but a few
essential one liners; no more 1/8 or 1/4 page two
color stuff. The result was a savings of nearly
$10,000.00 a year!
Personal testimony is the best form of advertising.
The business card is easy for the business owner to pass
on. He has just helped the distressed customer. With a
free offer on the card, he knew it would not be thrown
away.
He also uses thank-you cards as part of his marketing.
This works, too, but it must be dome discreetly.
The following may have some of you say, "but
that's so old-fashioned", but after I've have
done work for someone, I'll send a hand written
thank you card addressed to the person that
called. (This is not done each time we do work
for the same people, but twice a year seems about
right). The card creates a pleasant and lasting
impression on the person receiving it, and others
that it might be shown to in the office.
There are a few rules regarding the cards. Note
the words, 'hand written'. This is important.
Taking the time to hand write the note leaves a
more profound impression then a printed one.
We do not send mass produced cookie cutter
cards... ever.
We do not use the company name on the face of the
envelope, it is located on the sealing flap. The
face of the envelope is reserved for the
addressee only.
To me, the company name displayed on the face of
the envelope, or used in the message, is self-
serving, cheap, and carries no import. Cards of
this nature are not 'social oriented' but
'business oriented'. Read promotional. I don't
begrudge anyone advertising in this manner; it
just doesn't seem right. (We all know about the
cookie cutter cards that are mailed around the
holidays-thanx for supporting us and being our
friend here at xxxx).
The wording is simple. i.e.
Carol, Thank you for calling us. It was
a pleasure to be of service.
Sign your name
We have not kept records regarding customer
retention, but we estimate that 75-80% are still
with us. We find that, well, remarkable.
For those of you who intend to imitate him, he offers
this advice:
I'm not plugging any particular paper company,
but I prefer Crane & Co., Triple embossed
Correspondence Cards, Ecru White Kid Finish,
#CC3196. The cost is about $8.00 per 10 cards.
(This is one expense I gladly suffer).
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