Advice from a job creator: Bring on the optimism, Obama
This CEO of a small business says the most important thing Obama can do is break the cycle of fear with a message of optimism. Fear works on businesses like winter. They freeze hiring.
Ann Arbor, Mich.
The hottest topic of the 2012 election season is “jobs in large enough numbers to change our economic fortunes.” News commentators, politicians, and authors are all weighing in.
But these people don’t directly create jobs. As the chief executive of a small business, I do. Small business is where most jobs originate in America, and from my position as an entrepreneur and head of a software design company, I’d like to offer this view:
The biggest need now is a national vision and sense of optimism, articulated at the top by the president. Millions of other small-business executives share my view about optimism’s role. That’s because we are familiar with the “fear versus optimism” cycle that affects every business decision, especially hiring.
This cycle not only influences my actions, but perhaps more important, the spending by my customers. Major events like 9/11 and stock market crashes create near universal fear. Spending slows, revenues drop, hiring stops.
When fear rules, we don’t hire
The fear-driven years of 2008 and 2009 were two of the worst in memory. I watched as many customers simply delayed spending. Potential projects were put on hold as my clients waited for their executives to give the go-ahead to issue a purchase order. Some clients were persuaded by discounts; most were not.
Since we launched Menlo Innovations in 2001, we have lived through several “fear driven” cycles – from the bursting of the Internet bubble to the General Motors and Chrysler bankruptcies to the more nebulous threat of terrorism.
We weathered them by creating a salary structure that varies as our fortunes ebb and flow. Salaries are our biggest cost, and flexibility has allowed us to be profitable every year. When times are good, cash flows to all. When times are bad, everyone feels the pain. The good news: We have not had a layoff in our 10-year history. The bad news: When fear rules, we do not hire.
I finally saw optimism break through at the start of the second quarter of 2011. GM had emerged from bankruptcy and was again profitable. The stock market returned to earlier heights. The cash that corporations had been holding (again, fear kept them from investing) started to flow and our business customers called with major software projects.
Within weeks, Menlo Innovations hired several new employees and increased interviewing in anticipation of even more hiring.
Then something unexpected happened. The US government began to manufacture and export major fear through endless, clashing talks about raising the debt ceiling. The “solution” was delivered at the last minute, and it was half-baked. The stock market became schizophrenic. Who was in charge of the fear/optimism cycle? You couldn’t tell. Indecision reared again in the minds of customers.
Washington, meanwhile, is only fanning the fear flames. The blunt tool of economic stimulus through major deficit spending feeds anxiety, especially among those who try to run responsible businesses and provide financial security for our employees and ourselves. We know that ultimately, an economic system that uses deficit spending to pay off debt is unsustainable and this produces a towering anxiety even when we are optimistic. Anxiety doubles when gigantic “solutions” are agreed on at the last second before calamity could strike.
My home state of Michigan lived in high anxiety for many years. Only recently did sanity return. The state legislature passed a balanced budget ahead of time this year, rather than in a customarily contentious last-minute debate. Yes, there were painful sacrifices, and Michigan still has a long way to go. But optimism does not return because there is abundance. Optimism returns when there is realistic hope.
The Michigan model
We see that now in Michigan, where a growing collaboration among state and local government, business, and higher education bodes well. Evidence of thriving entrepreneurship can be found around university towns such as Ann Arbor and Kalamazoo, in Detroit’s Tech Town and in myriad coffee shops in population centers.
Our young people are not waiting for the future, they are creating it. At the University of Michigan alone, student-led business organizations like Mpowered, TEDxUofM, Startup Weekend, 1000 Pitches, and many others foster a spirit of youthful excitement that is contagious. Michigan will be an inspiring model for our nation, a turnaround of epic proportions.
In difficult times, people crave visionary leadership. Without it they descend into fear. CEOs fill this role within companies. Presidents fill it within nations. Yet, just when such leadership by the president – joined by congressional leaders – could inspire the optimism that points to prosperity, the United States seems to be running toward economic calamity.
It is time to collaborate at all levels across government, business, and education. America has a tradition of rising to such occasions. Think of World War II, the space race, and the unified national spirit after 9/11. We do well when we pick a common worthy target that isn’t one another.
And there are plenty of worthy – and job creating – goals to team up on: transportation, high-speed rail, space and aviation, energy, technology, medicine, healthful living, education, and information technology. America doesn’t need higher taxes; it needs more taxpayers.
I try to practice a positive vision and teamwork in and outside my company. It’s not only the right thing to do, it also makes good business sense. In order for Menlo Innovations to succeed, my community, state, and country must succeed.
As a CEO, I volunteer on a wide range of non-profit boards and encourage my staff to do the same. Menlo Innovations partners with a middle school. I bring my business skills to church leadership and support and advise several national agencies. As an employer, Menlo Innovations hires fresh college grads and the jobless, offers well-paid internships, and provides company-paid training.
In short, I actively practice optimism over fear. To break this cycle, the president and leaders on Capitol Hill must do the same.
Richard Sheridan is chief executive officer of Menlo Innovations, a software design firm in Ann Arbor, Mich. You can follow him on Twitter @menloprez.