Airlines Are at a Critical Juncture
I was recently booked on a flight that was canceled. I spent an extra night in that city. The cancellation was last-minute, which upset the passengers (me included) because it could have been communicated earlier to allow passengers to pursue alternatives. Instead, we spent the next two hours rebooking and trying to figure out where we’d spend the night. As I watched this, I got the impression that the airline had more flights booked than it could fulfill and was operationally overwhelmed. I’ve since read several articles about how this problem has gotten worse across various airlines this summer. Customers are upset and employees are frustrated.
I have zero airline experience, but it appears that airlines are at a critical juncture. If they don’t get their operations under control, they risk losing customers and employees. It’s hard to operate a business without revenue from customers and people to do the work.
I’m not sure how airlines resolve this, but I’ll be curious to see how it pans out. And I look forward to the day when flights are running on time again.
The Labor Shortage Strikes Again
I’ve used the same home cleaning service for over a decade. They’ve been reliable, and their quality’s been consistent. I’ve been a happy customer. A few months back, the owner told me that the team servicing my home would be transitioning out of the company. They decided to go back to school and become software engineers. I was excited for them and wished them well. The company assigned another team to my home and things went on as normal.
This week, the owner of the company reached out to let me know that he’s been dealing with a worsening labor shortage. It’s gotten to a point where he won’t be able to keep my upcoming cleaning date. He’s hoping to add more team members and be able to service my home in a few weeks, but he has concerns, given the labor market. He’s historically paid his team the highest rates in the industry and has increased their pay recently, but even that isn’t enough to retain people in this market.
I’ve been trying to learn about the problem from the perspectives of various people on the front lines over the last few months (see here and here). Now I’ll have my own firsthand experience as a customer.
From everything I’ve seen and learned so far, I think this problem will get a lot worse. What matters to people has changed drastically. Pay is important, but it’s not the main motivator for a lot of people. Until employers understand what matters to people and incorporate it into hiring and retaining people, they’ll have labor struggles.
The Labor Market from the Vantage Point of a Job Seeker
I went to my local grocery store today and had a great chat with one of the employees. I’ve gone to this store for a long time and built a good rapport with this person. Today he told me it was his last day. I was sad to hear it but happy for him because he’s moving on to a better opportunity. The labor market has been on my mind as of late, so I was interested to hear the details of his situation. A few highlights:
- Multiple opportunities – He’s been evaluating three opportunities: offers from his current employer, one of its competitors, and a company in a different industry.
- Evaluation – He’s evaluating compensation, benefits, and the likelihood of the company setting him up for success in retirement. He has a great understanding of the benefits and retirement details of each employer. He wants to work somewhere he can stay for a while and retire from at some point.
- Frustration – He likes his current employer but is frustrated that new hires with less experience are being paid more than existing employees. He is training these employees, yet their compensation is higher than his. That doesn’t feel fair. He believes employers need to adjust compensation for existing employees to market rate or risk losing them to better opportunities elsewhere.
- Fit – He has a good idea of the type of work that’s best for him based on his experience and the stage of his career. He’s comfortable declining opportunities that don’t align. He’s looking for something that’s a good fit for him and the employer.
- Excitement – He’s genuinely excited and feels like he’s in the driver’s seat of his career (maybe for the first time). He has the chance to work for a company that values his contributions and will set him up for success during and after his time with them.
It’s impossible for a company to be successful without a good team. As a founder, I saw firsthand how others contributed to the success of my company. The current labor dynamic is changing how companies go about building good teams. While anecdotal, today’s interaction gives me the feeling that we’re on the cusp of a change in how some companies approach recruiting.
Exploring What’s Going on with Labor
I spent time talking with a founder friend and with family this weekend about the current labor market for front-line workers. I already knew about businesses having to reduce their hours of operation or capacity due to labor issues. I’ve read about the Great Resignation. But I was still surprised when I listened to firsthand accounts from the customer’s perspective this weekend. It’s anecdotal evidence, but it still got me thinking. I was talking to unrelated parties in different states, yet they were having similar experiences.
I really want to understand this phenomenon better. I’ll be spending some time over the next few weeks learning more from people on the front lines of this issue. My gut tells me that something bigger is happening here that we haven’t fully grasped.
A friend read my post yesterday and asked for my thoughts on shipping companies. At CCAW, we spent a ton of money on shipping over the years, so I learned a lot about this space. UPS and FedEx have their strengths. UPS’s roots are in ground shipping (three to five days’ transit time). FedEx’s core is express and overnight shipping. For many years, these two were the only game in town for nationwide small parcel shipping . . . and then came Amazon.
Amazon has been building out its own logistics and delivery systems for years. It leased planes for an air network, built a large fleet of semitrucks, and partnered with independent contractors who deliver packages to customers’ doorsteps. With these, in combination with its warehouse infrastructure and logistics technology, it has built a formidable shipping operation.
I think Amazon will follow a similar playbook to build its AWS cloud computing business. Its e‑commerce business required substantial cloud computing resources to support its rapid growth. Amazon opted to build this infrastructure and invite other companies to use it too. This meant that Amazon offset some of the costs of the infrastructure with revenue from AWS customers. Fast forward to today, and AWS is one of Amazon’s most profitable business units and a growth engine.
Amazon will likely do something similar with shipping. It will offer shipping options that compete directly with UPS and FedEx. It will be able to offer lower prices because it has other revenue streams (e-commerce, digital advertising, cloud computing, etc.). The more customers it attracts, the more it will build out its offerings. When all’s said and done, its shipping operation could be bigger than UPS’s and FedEx’s.
I’m not sure when this will happen, but I’m confident that it will. And I think the competition will accelerate innovation, which we’ll all benefit from.
Over the last few months, I’ve tried to order various things but haven’t been able to because they’re back-ordered. Talking to retailers and manufacturers, I learned that supply-chain issues are at the root of the problem. I spoke with a friend whose employer manufactures and imports enormous quantities of products from overseas. It’s experiencing supply-chain issues that are affecting its forecast for the rest of the year. It isn’t sure when they’ll be resolved and has begun educating its sales force on its supply chain so they can reset customer expectations.
All this got me thinking. I remember being affected by supply issues at CCAW. As I learned how parts of the supply chain worked in our industry, I always thought there were many opportunities to make it more efficient. There wasn’t enough incentive to change back then, so it stayed the same, which frustrated me.
Today’s pain might be a big enough catalyst to bring about supply-chain change. I’m not sure yet if that’s the case, but I’ll be watching this closely. If the pain continues, we likely will see supply-chain innovation that could have broad implications.
Preparation = Effective Meetings
Lately I’ve been looking for ways to have more efficient meetings. Especially with new entrepreneurs. I’m spending half our time trying to understand what problem they’re solving and how their product or service solves it.
At CCAW, I held weekly one-on-one meetings with direct reports. My days were full, so I kept them to a strict 30 minutes. I spent most of that time peeling back layers and asking questions that would get the other person to reflect on what they wanted to talk about. That meant that the meeting was almost over before I understood what we should be talking about. In the end, the meetings were of little value.
Over time, I started using software to help. The day before each meeting, the software prompted my direct reports to answer these questions:
- What have you accomplished since the last time we met?
- What roadblocks have you encountered since we last met?
- What do you plan to accomplish before our next meeting?
- What are you most worried about today?
If they didn’t answer them, we wouldn’t meet.
This was powerful. Their preparation made our meetings more effective. They could see their previous responses, including what they’d committed to being responsible for. Formulating their answers required reflection and planning and instilled accountability. All of this made our meetings richer.
My own preparation was equally as helpful. I reviewed the answers beforehand. I compared actual accomplishments to planned accomplishments and made a point of discussing gaps. I set expectations and helped my people prioritize. I learned about challenges early and was usually able to address them before they turned into bigger issues. I went into each meeting ready to discuss the things that mattered most to that person and to CCAW’s objectives. The tone of my meetings changed, and people looked forward to them.
Consider preparing for your meetings more effectively and asking or requiring (depending on the context) the other person to do so too. Your meetings will be more productive and helpful.