Steven's Blog

Labor Shortage is Never a Problem

There are two ways to grow your business. You can do the same thing, only more of it. Or you can increase the value of what you do. At the time that I write this, Japan has an unemployment rate of less than three percent, so the latter is, for many businesses, the best viable option.

CEOs tell me that one of the biggest challenges they have is the inability to grow the business despite ample market demand, simply because they cannot find enough qualified people to hire. That situation is unlikely to change any time soon. Yet that should not really matter for most businesses, because hiring more people in order to do more of the same is only one way to grow. You can also grow a business by increasing the value you deliver to customers, and charging appropriately. However, growth through value-increase does not necessarily require new staff. Instead, you must change the way you do things now and have the courage to abandon current business to make room for the new, even if the current business is profitable.

For example, biotech seed producer MKS-Vilmorin recently ended its commodity farming materials wholesale business, around half of its overall business, even though the materials business was profitable. The company has turned its focus to its core business of seeds, and not just any seeds, but its highest value proprietary seeds. Sales and other support staff who previously supported materials have been redirected to supporting seeds. The business’s results have increased dramatically, even though half the business was abandoned. Staff numbers have remained more or less flat.

However, staffing problems often mask business model problems, for which the only answer is to grow through value-increase or otherwise face demise. For example, a global public relations firm here in Japan has far more of a demand for its services than it is able to provide, like a number of firms of its kind. The firm simply does not have the staff to handle additional work requested by paying customers, and has been unable to hire new staff that has the experience and competence to do the job. Yet they are on the brink of a crisis of their own making without realizing it.

The majority of the firm’s business comes from requests for deliverables from marketing and PR departments of corporations. Because market demand for such deliverables is so high, new entrants are increasing, and creative deliverables in PR are rapidly becoming a commodity. Chargeable fees are beginning to soften.

The leadership of the firm recognizes that the highest value work in PR includes developing and executing PR strategy to achieve business outcomes, not simply fulfilling requests merely for PR deliverables, and would like more of this kind of business. However, the buyers of such high-value services are never operational people in marketing departments, but rather senior executive managers in the business. While the firm’s account managers are adept at order-taking from marketing people, they are uncomfortable with holding consultative business conversations with executive managers and so they avoid proactively targeting such business. They could learn to do so but there is no immediate apparent need. There are plenty of inbound inquiries to keep them busy. And besides, for the CEO, the income stream from the current business is just too attractive to abandon. Unfortunately, it is unlikely to remain so.

The CEO thinks he has a staffing problem. In reality, the business model of his firm faces an existential threat that could not be resolved even if the CEO could grow the current business through hiring. Consulting firms like Accenture have started occupying the higher ground in advertising and PR. Unlike the PR firm’s account managers, consultants are accustomed to business conversations with senior executives. Delivery expertise in PR, marketing, or anything else doesn’t matter when you can subcontract cheaply for them, and the consulting firms do, making an end-run around the PR firms. And that’s not all. What do you imagine will happen in the PR industry when a company like Google realizes that it does not have to settle only for advertising revenue—that it can also serve clients with creative, advisory, and campaign strategy services? PR firms like this one are not long for this world. They will either grow through change or become drastically diminished if not disappear entirely. There is no middle ground.

What about your business? How do you intend to grow it? You don’t need to allow a labor shortage to deter you.

Growing your business by increasing the value of what you do is always an option. Click To Tweet

Sometimes, it is the only option whether you can hire people or not. Don’t subject your business to the whims of the market, labor or otherwise.

Control your own destiny.

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