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Economix Blog: The Missing Construction Workers

May 3, 2013 by Leave a Comment

While the number of housing starts has surged – nearly doubling in the last two years – employment in residential construction has barely budged. And construction employment tracked down ever so slightly to 5.79 million workers in April, according to the preliminary data.

What gives? Where are the missing construction workers?

Those are questions that economists have been puzzling over for the last year or so, as the housing market has started to normalize, with low inventory and new demand causing prices to rise in markets across the country and builders eagerly breaking ground on new developments from Florida to California.

Over time that should lead to rising employment in the sector, especially given pent-up demand for projects. But not yet. Construction employment is starting to turn up, but from a very low level: There are about as many construction workers now as there were in 1997. And construction employment in the residential sector remains essentially flat, gaining about 2.5 percent in the last year.

There seem to be a few components to the answer. The first is that housing starts tend to tell us where the market for construction workers is going, not where it is right now. So even as starts have surged as builders have begun new projects, the overall number of units under construction remains relatively low – meaning relatively few available jobs. (See Trulia’s chief economist, Jed Kolko, on this point.)

Second, it seems that builders in some markets may be having trouble recruiting skilled workers, as my colleague Catherine Rampell recently reported. That has not yet led to much of a surge in compensation in the sector, as you might expect. But perhaps the businesses are paying workers under the table, or making do with fewer of them, in part by increasing their hours.

Moreover, builders will eventually need to hire employees to work on new projects. (As far as I know, there have not been any great productivity advances in home building in the past few years, and nobody’s outsourcing the work to robots.) That would be a good thing for an economy still desperately in need of jobs, despite the better numbers.

Article source: http://economix.blogs.nytimes.com/2013/05/03/the-missing-construction-workers/?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

The Next Level: An Entrepreneurial Doctor Isn’t Afraid to Shake Things Up

December 5, 2012 by Leave a Comment
The Next Level

Avoiding the pitfalls of fast growth.

Jeff Gallups: Courtesy of the Ear, Nose Throat Institute. Jeff Gallups: “I was booted.”

Dr. Jeffrey M. Gallups is the founder of the Ear, Nose and Throat Institute, which is based in Atlanta and claims to be the largest ear, nose and throat practice in the southeastern United States. Dr. Gallups transformed a traditional practice into an entrepreneurial enterprise that is growing so fast that its revenue has been doubling every 18 months.

That kind of growth was not on his mind when he started his career in 1995. “It is important to understand,” he said, “that I was a typical, solo E.N.T. practitioner from the time I left training. But I had always been a ‘go-getter,’ working every weekend I could during my residency to make additional money. I doubled my salary doing this. I drove a nicer car than my professors. I had momentum even then.”

But his momentum hit a glitch about seven years ago. “I was booted from a large multipractice E.N.T. group because I was way more profitable than others in the group,” Dr. Gallups said, “and I think they were threatened.” He was attracting patients from the other doctors, and the patients wanted to stay with Dr. Gallups. In effect, he was “flipping” his partners’ patients into his own practice — a classic example of how fast-growth entrepreneurs think differently.

Entrepreneurs like Dr. Gallups don’t always make good business partners, which is one reason I agree with the founder of GoDaddy.com, Bob Parsons, who has said that if you really want to grow your business fast, you shouldn’t have partners at all. The reality is that the entrepreneur has to be in charge, but the partners don’t always understand what it takes, and they will often decide to kick out an entrepreneur who tries to do things differently.

A boot and rejection can be a huge blow to the ego and pride. “When colleagues come to your office after hours and ask you bluntly to leave an eight-year established practice, it is difficult to see a bright spot,” Dr. Gallups said. But the boot can also set the entrepreneur loose. “In the end, we would never have attained our current status without going through this process, painful as it was,” he said.

He hung his own shingle and opened for business as a solo ear, nose and throat specialist — one who, by the way, had become a social outcast in the medical community. He had to start from scratch with no patients, no staff and few doctors eager to join him. Because he needed to build revenue from Day 1, he focused on creating one-stop medical shopping under one roof.

He created what he calls ancillaries to maximize revenue per patient. He started with an audiology center. Today, those ancillaries include his own surgery centers, medical labs and allergy centers. In short, he asked why he should send patients to another practice to spend money when he could provide the same service — especially, he said, when “we can do it better and cheaper than the competition.”

Over the years, he also learned how to squeeze costs out of the system and deliver better health care less expensively. For example, he sought out the insurance companies to work out a one co-pay solution for patients even though they might have received multiple treatments under his roof. Unlike the practice that booted him, he constantly tried new things. If it didn’t work, his attitude was, “That’s O.K. We will figure it out and make it work.”

Of course, he was still something of an outcast, and he was still having trouble recruiting doctors to work with him. That led to a very smart move: Dr. Gallups did not try to convince the doctors that he was right and they were wrong. Instead, he asked them what they wanted. And when he found out, he made it happen. The doctors told him they wanted to practice medicine and not worry about the business side or managing their retirement plans.

So he developed processes that allowed his doctors to see patients 100 percent of the time. He also brought in an expert to develop a customized deferred-compensation retirement plan for all doctors who joined the team. A year ago he had eight doctors; today he has 18. Now the doctors are coming to him.

Like any entrepreneur, Dr. Gallups can overreach. He added a beauty and health spa above his surgery center, but it was not part of his core ear, nose and throat expertise, and he ended up losing money and closing it down after 12 months. “I was naïve,” he said. “I added a spa because I found a great person to run it. When they left, we quickly saw all hell break loose. It was not a great business fit from the start.”

Dr Gallups’s vision of one-stop medical shopping works, in part, because patients like it. They like coming back to a familiar physician. They don’t enjoy the extra start-up time and expense of going to a new specialist. With one infrastructure that services several lines of business, he leverages his staff and overhead. As a result, each line of business operates more efficiently than a stand-alone. Along the way, he saves the patient money by charging one co-pay, and he saves the insurance company money by being a single provider and reducing paperwork processing.

Here are the five questions the entrepreneurial doctor asks before entering a new line of business:

1. Can the deal produce positive cash flow in less than three months?

2. Does it have cross-referral possibilities to the other business lines?

3. Is it a win, win, win for the big three — patients, the insurance companies and his business?

4. Is it core to the business?

5. Does the business have the in-house expertise to at least test the new business before making a major investment?

One thing I have noticed about Dr. Gallups and most fast-growth entrepreneurs: they don’t think they know it all. They want to learn. They especially want to learn what the competition is doing. Needless to say, there is a lot going on in the health care industry right now. It is going to be interesting to watch how services change over the next 10 years. One thing I predict is that entrepreneurial doctors like Dr. Gallups will keep finding ways to make care cheaper, better and faster.

Cliff Oxford is the founder of the Oxford Center for Entrepreneurs.

Article source: http://boss.blogs.nytimes.com/2012/12/05/an-entrepreneurial-doctor-isnt-afraid-to-shake-things-up/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

The Next Level: Why Everyone Wants to Fire the Founder

November 8, 2012 by Leave a Comment
The Next Level

Avoiding the pitfalls of fast growth.

With all of Facebook’s struggles since its initial public offering, I suppose it’s not surprising that there were whispers over the summer that Mark Zuckerberg should be replaced as chief executive. But spare me. There is no one on Earth who is as qualified to run Facebook.

While things have started to look up for Facebook of late, this conversation is part of a familiar pattern. Bankers, investors and consultants are often outrageously quick to pull the trigger on founders of fast-growth companies. We all get intoxicated by hyper-growth, and expectations can get out of control, which is why smart, fast-growth entrepreneurs temper those fantasies. But it can be hard when the publicity machines are trying to turn the entrepreneur into some kind of Superman.

It happens all of the time with entrepreneurs who are successful enough to hire experts to help them move their companies to the next level. The problem is that the bankers and consultants often show up right in the middle of the hyper-growth stage and sometimes the next level is where the growth starts to level off into reality.

At this point, the bankers and consultants really can’t help, but they want to stick around and the only way to do that is by firing the guy who hired them and bringing in a white knight to “save” the company. You’ve seen this movie before: the founder steps down and is followed by a carousel of unsuccessful chief executives for years to come. If this kind of talk can happen to a founder like Mark Zuckerberg, who has produced billions of dollars of revenue, it can happen to any founder. But given how poorly the strategy often turns out, it’s tempting to ask why people are so quick to fire the founder.

There are two reasons. First, bankers, investors and consultants often underestimate founders by calling them visionaries or technical geniuses while questioning their skills as executives. But to get a company from start-up to second stage — where it has transitioned to both positive cash flow and increased market share — is extremely demanding. It requires swift execution and creativity. If the founder didn’t have those skills, the company wouldn’t have gotten so far. Often, the founder has to plead with people to make personal sacrifices; it can be very hard for an outsider to walk in and make the same demands.

In addition, bankers, investors and consultants often point to a decline in revenue growth (or in the stock price if the company is public) as a sign that the entrepreneur should depart. But no company — not even Facebook — has financials that only go up. Often, this argument is just a pretext. The fact is, the relationship between founders and financiers is uncomfortable from the start. Entrepreneurs are wheelers and dealers who are always testing limits and trying new things. Bankers and consultants like predictability and stability. More to the point, for them, firing the founder is part of their own exit strategy. Their goal is to flip the company by telling the next investor, “We have proven the concept, and we are now bringing in professional management to take it to next level.”

It does not have to be this way. Keep in mind that most of the people suggesting the replacement of fast-growth entrepreneurs have never built anything themselves. They don’t understand what it takes.

Founders often have more options than the bankers lead them to believe. For example, if the issue is getting financing, a good place to start can be your own customers — and I don’t just mean by selling them something. Lots of established companies are willing to make strategic investments in a smaller company that is performing a vital role for their businesses. Don’t be bashful. Present the idea as if you are giving the company a rare opportunity. And if you are asking for $5 million, make the effort to look and act like you know what to do with $5 million.

It’s also critical to be smart and careful with board seats. Don’t hand them out like water in the good times, and make sure you know how to count. If you have seven seats, you have to have four votes you can count on in tough times. That’s one reason I am a big advocate of keeping one or two people from within the company on the board.

All companies go through ups and downs. The bankers, investors and consultants will always be quick to pull the plug on founders when the first signs of trouble appear. But the person who is most likely to get the business to the next level is the very same person who got it to the current one.

Cliff Oxford is the founder of the Oxford Center for Entrepreneurs.

Article source: http://boss.blogs.nytimes.com/2012/11/06/why-everyone-wants-to-fire-the-founder/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,