If there is one thing the current Credit Crisis has proven about job security it is that a sustainable business model is absolutely essential in order to survive and prosper for the long term. An industry, company or individual career that does not have one is subject to complete collapse anytime the favorable conditions that spawned it begin to change.
For example, a few years ago it looked like giving mortgages to people who could not afford to carry them was a great way to make some fast money. There were lucrative fees to be made by the original lenders as well as the middle men who repackaged the loans. The borrowers did not care about the risk they were taking. They just wanted the money so they could have a nice McMansion just like their friends.
The problem with the model was that it was based on the assumption that home prices would continue to steadily rise indefinitely. As long as prices kept going up nobody cared that the buyers could not make the monthly payments because the buyer could just sell the home back into a hot market, pay off the mortgage and usually come out with a nice profit.
This, however, was not sustainable because the underlying assumption was not correct. Prices did not keep going up indefinitely. In fact, they reversed course and started going down. This made the whole scheme crumble and we are now living through the result.
An individual career works the same way. You must build your career on valid assumptions or it too is subject to collapse. The Bible tells us that God sees the end from the beginning. He does not base His plans on current conditions continuing forever. He looks ahead, knows all the changes that will happen along the way and factors them into His plan. His plans do not fail when something in the environment changes because he foresees the change and constructs a plan that still works in spite of it. This is the best type of security of all.
Obviously, we are not all-knowing the way God is so we cannot do this as well as He can. However, God did give us the ability to reason and to think ahead so we must use that ability to its maximum benefit.
Whether you are building an individual career, running a department of a company or you own your own business the principle is the same. Your job must have a sustainable business model behind it that is either built on correct assumptions that will not change or that has the ability to adapt to whatever changes in the environment might come and continue to prosper in spite of them.
At the individual career level you need to evaluate how stable your line of work is. You also need to look at how stable your industry and your company are. You cannot insure a sustainable career unless you know how reliable these three factors are and unless you have contingency plans in place to deal with any fluctuations that might arise.
This was illustrated rather dramatically during the 1990’s in the field of IT consulting. There was a period of time in the latter half of that decade when an IT consultant could earn twice the income of a permanent employee doing the same work for the same company. In fact, it was not at all unusual for IT consultants to make more money than the project managers who hired them. The sky high rates were driven by the enormous demand generated by the Y2k problem and the dotcom bubble. It seemed almost foolish for programmers to work as permanent employees when such high rates were available so many of them abandoned the traditional career path of climbing the corporate ladder in favor of scoring a high hourly rate as a contractor.
Just like taking out a huge mortgage in this decade was risky so too was contacting in the 90’s risky. Employees usually have some sort of safety net under them made up of a combination of severance pay, unemployment insurance, COBRA health benefits and the like. Contractors had none of that. If a contractor was laid off on a Friday his or her income fell straight to zero by the following Monday.
This did not matter to most of them because just as delinquent borrowers in the recent real estate boom relied on a red hot housing market to bail them out, IT consultants in the 90’s relied on a red hot consulting market to come to their rescue.
It worked like charm for several years. However, once again the underlying assumption of the market always remaining strong was a false one. By the time the year 2000 rolled around the Y2k problem was resolved, the dotcom bubble was bursting and the economy was headed for recession. Contractors who had become accustomed to finding new positions within days of leaving old ones began to see that the work had dried up. This was another example of an unsustainable business model.
Another example of an unsustainable personal business model is the debt financed lifestyle that many families adopted the past several years. People who bought their homes before the housing boom took off began to see an enormous amount of equity accumulate in their homes in a fairly short amount of time. By the time the boom was reaching its peak in 2006-2007, many of these families saw the value of their homes double and their equity stake grow well into six figures.
This led to an unprecedented flood of home equity lending. During the boom years the total amount borrowed on home equity loans and credit lines averaged a staggering 850 billion dollars per year.
Once again, the same problem arose. A family cannot maintain a lifestyle of deficit spending indefinitely. When home prices started to fall and lending standards began to tighten many families found that their lifeline of borrowed money dried up and they were left without sufficient means to pay their monthly expenses and their security was gone.
Another type of unsustainable personal business model involves work habits. During times of prosperity the economy can reach a level of “full employment”. This means that at a given point in time, just about everyone who wants a job has a job. This makes it tough for employers to hire more workers to meet the demands of a growing business because the number of qualified people looking for work is smaller than the number of unfilled job openings.
In this environment, some people get lazy. They feel their job security is assured so there is no need to work hard and be the best at what they do. They might even allow personality conflicts to distract from the work at hand causing trouble for themselves, their coworkers and their managers.
This is a dangerously unsustainable personal business model. These folks might be able to get away with this for several years. However, when the economy goes south and managers are faced with the very hard decision to select people for layoffs the first ones who will make the list are the troublemakers and the poor performers.
Please note, I am not saying that everyone who gets laid off is a problem worker. There are many cases where even very good people lose their job for reasons totally beyond their control. I only mean to say that if there are 10 good workers on a team and 1 troublemaker, the troublemaker runs a very high risk of being let go if the manager is required to choose someone.
In this post we have seen the dangers of having an unsustainable personal business model. In the next post we will look for ways to evaluate your own personal business model to see if it will hold up in the long run.
Stumble it!
Tags: business model, career, job, work
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