Monday, February 9, 2009

Creative Destruction: Executive Job Edition

As we hear of the growing unemployment in the country one thing that I have been noticing lately is that in the large numbers of jobs disappearing during the past few months, the majority of these jobs have been from within the rank and file. It's possible that one more reason we find ourselves in the terrible economic situation we're in is that not enough Director and VP level jobs have been lost in large companies (at least that is until now, since companies are now having to start cutting more across all levels).

The reason I believe this has been an issue is that during the last few years VPs and Directors at most large companies have been very handsomely rewarded for riding out a growing economy that provided positive results overall. This made it easy for them to keep a high paying job that became comfortable for them. In some cases Senior VP's are compensated even higher than the CEOs of the companies they work for, prompting them to stay put and enjoy the ride.

As the economy started deteriorating these same executives made significant cuts in their teams that allowed them to keep their large bonuses. This reduction showed positive short term results, while hamstringing the company in the long run. Now, as the companies are forced to realign once again, we are starting to see some of these execs leaving the company voluntarily or involuntarily.

The key thing to consider is that I have rarely heard of a good executive remaining unemployed for longer than 3-6 months (unless they chose to take a break). In many cases executives with proven track records get hired to lead larger organizations and continue to develop their skills and grow existing businesses. But probably the most important piece that we now require are those other executives who decide to start their own business.

These newly "promoted" CEO's are what we need more off in today's economy. As they develop a new company, they require a new batch of managers and executives to help them run the company. The best place to find them is in their old company or in the large group of recently laid off employees out in the marketplace. As the company grows these new managers and VP's need to build teams below them. This "circle of employment" is what will help us leap out of the current recession.

Companies that have laid off employees from their middle layers will struggle to come out of the downturn, since they will face a serious lack of future leadership. While in turn, companies that have made cuts across the board will generate new businesses from their alumni and continue to provide growth and opportunities within the company, by vacating senior and executive positions alike.

As I look at some of the new legislation coming out of Washington, I hope to see pieces in it that will help small businesses to grow stronger. I also hope that as companies are forced to cut their workforce, more of these cuts will impact the executive suite in turn providing opportunities for new leadership to drive us out of today's mess.

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