It doesn’t take a rocket scientist to interpret the statistics of the present economy—from consumer confidence indices to a record number of bankruptcies and foreclosures, and a skyrocketing unemployment rate—and realize things are not good these days. But, these are not the worst economic times in American history.
It may, however, be the worst journalistically. As we are bombarded with a ceaseless barrage of negativity from the media day in and day out, it is becoming increasingly difficult to keep the faith and see any glimmer of hope on the horizon. It is almost as if people are wishing for a repeat of the Great Depression just to say later they survived it . . . or succumbed to it.
Are the talking heads in the media—and our political leaders, for that matter—obligated to communicate the harsh reality of our present situation or do they have a responsibility to convey what Plato called “noble lies” in order to preserve order and the greater good? Trying to inspire confidence—when it is not founded—is a risky play, because once what you are doing is recognized, trust withers.
So how can decorated-apparel business owners and managers walk the fine line between being an inspiration to their employees and being forthright with the stark facts of running and growing a business? Let’s explore, shall we?
Understanding the D-word
Isn’t it curious that it took economists over a year to acknowledge we were in a recession and mere minutes for the media to suggest we were in for a repeat of the Great Depression? How bad was the Great Depression anyway—given the fact that many of us have only heard about it from our parents and grandparents? The start of the ten-year long, worldwide depression occurred on “Black Thursday”, October 24, 1929—when 12.9 million shares of stock (three times the normal volume) were sold in one day and share prices fell 15 to 20 percent.
By 1933—the height of the depression—unemployment had risen from three to 25 percent. Wages, for those who still had jobs, fell 42 percent. The Gross National Product was cut in half, partly due to deflation of prices that had fallen 10 percent each of the preceding three years. Those statistics sound eerily similar, although on a much smaller scale, to the current state of affairs. But notable differences between today’s situation and the Great Depression pertain to certain decisions made by the Federal Reserve leading up to Black Thursday.
The Fed began raising interest rates in the spring of 1928—instead of lowering them, as has been the case from mid-2007 to the present—and kept raising them through a recession that began in August 1929. This led to the stock market crash in October 1929. When stock prices fell, investors looked to the currency markets. At the time, dollars were backed by gold reserves held by the US government. Speculators began selling dollars for gold—the opposite of what you hear being advertised on television today—which caused a run on the dollar. In 1931, the Federal Reserve, again, raised the Fed Funds rate to try and preserve the value of the dollar, and this further restricted the availability of money for businesses. As a result, more businesses closed their doors, filed for bankruptcy and pushed even more workers toward the unemployment line.
When the Fed did not increase the supply of money to combat deflation, investors withdrew all their dollars from banks, many of which in turn failed, causing more panic. People withdrew what little they had left from the banks, stuffed it under their mattresses, and further decreased the money supply.
So, could a Great Depression happen again? It is unlikely since central banks around the world, including the US Federal Reserve, are much more aware of the importance of maintaining a plentiful and accessible money supply and keeping it in circulation. Still, a depression doesn’t have to be Great—people standing in bread lines, Dust Bowl farmers losing everything and a total collapse of the stock market—to be depressing.
What one business owner did
Even in the depths of the Great Depression, many people and businesses hung on to optimism—not blindly but clear-eyed—and backed it up with action. One of those businesses was Curtis 1000—a printing company founded in 1882 in St. Paul, Minnesota. Initially, the company was known for being a lithographer, embosser and office furnisher.
In 1911, Henry Curtis introduced a lightweight but strong envelope that was widely adopted by bankers and lawyers for mailing bulky items and reams of documents. He coined the phrase “Curtis Fibre” to describe the strength of the envelope. By 1920, over one-quarter of all US banks used his envelopes. In 1929, sales reached $1 million before the stock market crashed. In May 1931, the following item, headed “Getting Ready for the Upturn,” appeared in the company’s employee newsletter:
“Car loadings continue to decline. There is an over-production of oil. Steel is operating at less than 60 percent capacity. Business failures touch a new high. Farmers have little but hope. Retail trade is only fair. Bankers are complaining. Dividends are reduced or passed almost daily. Are we downhearted? Not a bit. Neither are we foolishly optimistic. Every week brings that inevitable improvement nearer.”
Was that enough to harden the will of the employees? Not really. The economic situation in the nation worsened, but the optimism of the folks at Curtis 1000 stiffened. The newsletter of November 1932, under the heading “There Will Be Another Dawn,” read:
“Economists tell us that business has four cycles: prosperity, recession, depression, and revival. Eight of these major business cycles occurred between 1885 and 1927 with as many booms as there were crises. Yet many individuals fail to realize that what they are witnessing now is repetition of what has happened before. Instead of preparing for recovery, they spend their time wailing over today’s woes.
“Stocks, bonds, real estate—everything that is being poured into the market by those whose thoughts are only of the moment—are being purchased by far-sighted investors who have learned that depression is the dawn of revival. And when the dawn finally breaks, those who have viewed the present in the light of the past again will have profited at the expense of those who feel that the sun of prosperity has set forever.”
To their credit, the CEO and top management of Curtis 1000 never gave in to the pessimism. They kept working harder, retrenching when necessary, cutting pay but not jobs, and always believing in brighter tomorrows. Three years later, Curtis 1000 reported “1935 was the best year in all the 53 years of the company’s history.” Today, Curtis 1000—headquartered in Duluth, Georgia—places its label and digital capabilities in the forefront of its value proposition to direct-mail and promotional-products customers, strategic accounts and state-of-the-web solutions at six full-line print, fulfillment, warehouse and distribution centers, coast-to-coast.
What others are doing
Sometimes, bad situations bring out the best in people. There are many inspiring examples of generous gestures made by small business owners to combat the dismal economic news of the day and make a small contribution toward thwarting the rise in unemployment.
Danny Cottrell, owner of a pharmacy in Brewton, Ala., and a health-care store in nearby Atmore, gave $16,000 to his 24 employees—$700 to full-timers and $300 to part-time help. He asked them to donate 15 percent to charity and spend the rest in local stores.
Bob McIntire, owner of a floral shop in Fulton, Missouri, surprises up to three people a week with free bouquets. Local residents submit nominations and reasons why they think their nominee deserves the special attention and Bob’s staff selects the names from the entries. Call it smart marketing, if you will, but Bob says, “In these days of doom and gloom, we’re just trying to brighten up people’s days.”
The Acworth Business Association—in this writer’s Georgia hometown—is kicking off a campaign to help the local schools and stimulate the local economy at the same time. When school children submit receipts from local merchants—who display the “Shop Acworth” logo on their front door, cash registers, websites and vehicles—to their school administrators and PTA officials, the schools with the highest dollar amounts stand to win items from their “wish list” such as copiers and other office equipment, sporting goods for athletic teams, library books and subscriptions, and other things for which the school’s budget doesn’t allow or can’t afford.
In Santa Cruz, California, Councilman Tony Madrigal started a prom-dress drive for young women who couldn’t afford gowns. Local businesses pitched in with free dry cleaning, hair styling and donated dress shoes.
Walid Hejazi, an economics professor at University of Toronto’s Rotman School of Management, says smart business owners “have to be cautiously optimistic. Rather than just maintaining a good outlook, one must be cheerful at times and serious at others, carefully managing the national psyche. Psychology plays a fundamental part in the direction the economy moves in. Announcements give people hope that money’s coming.”
Before you decide to implement your own company’s plan, think through the probable impact and reaction your words will have and inspire. Overly positive messaging can misfire, especially when it’s seen to be out of touch with reality. If you are the type of business owner inclined to say “People are my organization’s most valuable asset,” then nurture that asset as you would a critical piece of shop equipment.
Likewise, excessively candid dialogue with workers can also backfire. I know of a mid-sized, metro-Atlanta company that gathered its workers and bluntly stated, “We can either lay 40 percent of you off right now or reduce everybody’s pay by 12 percent. Which would like us to do?” The employees chose to take pay cuts, but then immediately began looking for other work. In today’s buyer’s-market for talent, that company ended up losing its most productive workers to its competitors. Remember the spirit of your intentions is far more important than the words you use to convey the message. Good luck!
This month’s broad strokes include:
Today’s business pulse is anything but robust, but should reality always trump optimism?
A business stands a better than average chance of surviving recessionary times if it can rally the troops to work smarter, retrench when necessary, be frugal in its spending and trim back its payroll rather than cutting jobs.
Sometimes, bad situations bring out the best in people. Inspiring generosity by small business owners can combat the dismal economic news of the day and make a small dent in thwarting the rise in unemployment.
Rather than just maintaining constant positive outlook, business owners should be cheerful at times and serious at others, and carefully manage the psyche of the organization’s most valuable asset: its employees.