A Brave New World … of Work

On Thursday, 17 March 2016, I was one of three guest speakers at an evening seminar hosted by Afrimari, titled “A Brave New World”. Afrimari is a network of professionals working in maritime and related industries with a geographical focus on Africa. The event was hosted by the Cass Shipping Society at Cass Business and you can view a write-up here.

My guidelines were to address the audience on “how the current market has impacted if at all the job market for those in maritime, trade and finance” or put differently, “A Brave New World of Work”.

The shipping trade is heavily reliant on the commodities industry, particularly oil & gas, for its business. Accordingly, I took the prolonged depression in oil prices as the starting point for this presentation.

You can view the whole presentation in the PDF document here. Most of it is self-explanatory but I have included some extra guide notes in the text below.

Slide List

Slide 3: Bad News

The upshot of the economic downturn is that “cost control” has risen right to the top of the agenda for almost every business. Human capital is typically a big-ticket item where business costs are concerned so the effect on the job market is a net negative.

 

Slide 12: Crystal Ball Question 1 – How long will prices stay low?

“Energy forecasting is easy. It’s getting it right that’s difficult” (Graham Stein)

For those worrying about job security in the immediate term and in the longer term, I suggested three questions to ask your crystal ball. The longer the price oil remains at a level below a company’s breakeven level, the more pressing will be the company’s need to cut costs and thereby, the more likely it is to cut jobs. Most companies are geared to handle brief loss-making periods, say 3 – 6 months, without having to make significant cost-reductions. However, as the period gets longer, the need to revise costs downwards starts to take root.

 

Slide 13: Crystal Ball Question 2 – Regular vs Fundamental

Regular – not much will change – a few of the less efficient players will get squeezed out of the industry or get acquired by some of their better-run counterparts, headcount numbers will remain at this new lower level until confidence returns after a sustained period of high prices when they will slowly rise right up until the next downturn.

Fundamental – If the oil price may not rise much above $40 – $50 for a very long time, then the industry will need a serious rethink about the prevailing business models. Those who want to remain in oil & gas whether as players or suppliers will have to find ways to significantly reduce their production costs. They will have to find more efficient ways of working including reducing headcounts and extracting more value out of a reduced workforce.

 

Slide 14: Crystal Ball Question 3 – Is your job safe?

Given the length of time oil and commodity prices have remained depress, the odds are that all companies in those and related industries will have reviewed / are currently reviewing / will soon be reviewing their cost structures and looking to make savings in all aspects of their operations, including human capital. Someone, somewhere is going to lose their job. Will it be you? What can you do to mitigate the risk?

 

Slide 17: Credit Crunch Casualties

Perhaps a strange slide to stick in front of a shipping audience but the truth is I know the investment banking industry better than I do the shipping industry. More importantly, these high profile examples were particularly useful in illustrating a point I felt was important: don’t get complacent and think that because you work for a big brand name in your industry that your job and those of your colleagues are guaranteed ad infinitum. If you travelled back to January 2007 and told people the future in store for all the big banks in this slide, you would have be laughed out of town (presuming you avoid being “sectioned”)!

Things change, so be alert.

 

Slide 18: Is your job in danger?

This slide should be easy to understand but I’ll make the points explicitly. Borrowing Andy Grove’s terminology, a Bad Company will be in firefighting mode desperately trying to stay alive. Its executives will be frantically trying to find financing to keep the business afloat for as long as possible. They will be reviewing the entire headcount trying to figure out who they can lose without jeopardising existing projects. They might even be having meetings with corporate brokers trying to negotiate a deal to sell the business to one of the Great companies, a PE firm or other financial investor. You should be seriously working on your plan B.

If the answer is “Good” – the company will survive but the management might deem it prudent to cut costs in non-core areas or trim headcount across the board to create some extra headroom if the low prices are sustained.

It is my observation that Great Companies never take their eye off the ball where costs are concerned. Their operations are lean and their business plans build in cushions in the cost structure and in cash reserves to prepare them for lean times. These companies have already made most of the personnel cuts they’ll need to for a while because, like a conscientious gardener, they do not let the hedge go long without a trimming.

Still, a smart CEO knows that the best time to raise new capital is when the business is doing well and can secure favourable terms from the banks or investors. Similarly, a smart professional knows that the best time to consider career options is when things are going well and you can make decisions from a position of strength. Don’t wait for things to go south before you optimise your career plan.

 

Slide 21: Gird your loins

If your self-assessment tells you that your job falls under one of the categories listed, then these are some of the things I would advise you do. In lean times, companies must be lean – they can’t afford to carry any “passengers”. At times like this, the executives want to hang on to the best people i.e. those they perceive capable of adding value. If that is not how you are perceived, you need to change this quickly or start working on your Exit Strategy.

 

Slide 23: Homework

A few notes on the five points I included here:

1. I’ve addressed already
2. Firms are looking for added value. The bigger your professional network, the more visible you are and the more likely your name is to be brought into conversation when others are looking for new hires or people to enter into strategic partnerships with.
3. Sell Yourself. Most experienced professionals are great at selling their company and its products but often poor at selling themselves. Take some time out to focus on yourself – your career achievements, core competencies – and figure out how to present yourself in the best possible light.
4. You are not a slave to your firm or to your profession. You had an identity before you started this job / this career and you will have an identity when you leave. Maintain that identity while you’re in it. Catch up with the hobbies you’ve neglected, make time to see family & friends, throw some energy into some of your non-work passions. Not only will these make you happier and more productive, they will bring some light into your life amidst the doom and gloom of an industry that’s struggling. For those of an entrepreneurial nature, many corporate successes have been people who turned their passions or hobbies into a business.
5. Like I mentioned earlier, Great Companies build up cash reserves to allow them to get through the lean times without having to compromise themselves too much. Likewise, the more money you have in a savings account or in a highly-liquid asset, the less likely you are to have to compromise in the lean times when you lose your job or decide you’ve had enough of it and you want to take some time out to plan your next move.