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As the "new normal" continues to develop two interesting
concepts are developing. When CEOs get fired, they seem to stay fired.
And at least one city in the U.S. has now fired all of its employees, hired
contractors, and nothing awful has happened. What it tells us is that some
people are actually waking up.
According to The New York Times, in the city of Maywood, California, a "poor,
long-troubled and heavily Hispanic city southeast of Los Angeles" did what many
cities are only starting to do. It fired all of its municipal workforce. According
to the report "The school crossing guards were let go. Parking enforcement was
contracted out, City Hall workers dismissed, street maintenance workers made
redundant," and "the public safety duties of the Police Department were handed
over to the Los Angeles County Sheriff’s Department." So what happened? The Times
reports that things actually got better, noting "The apocalypse never arrived.
In fact, it seems this city was so bad at being a city that outsourcing — so
far, at least — is being viewed as an act of municipal genius."
And in fact, at least for the near future, it may be genius. Someone finally
figured out that what they were doing wasn't working and tried something different,
which seems to be working.
To be sure, Maywood is not exactly a model city, and the city doesn't want to
become the prototype for municipal governments. But, there is something worth
noting here. In the past, Maywood was a very bad place. According to The Times: "Four
years ago, in what was probably the high-water mark of acrimony in Maywood, a
deputy city clerk was arrested and accused of soliciting a hit man to kill a
city councilman. The deputy clerk, Hector Duarte (no relation to this scribe),
was concerned that his salary might be reduced or his job eliminated during a
previous round of bad fiscal times; he was sentenced to a year in jail and six
months of anger management counseling."
And here's what's interesting about Maywood. The city covers one square mile,
and has a population estimated between 30 and 50,000 people at any time. And
what was the biggest problem? According to The Times, it was the "police department," which
according to a report from the state attorney general “is one permeated with
sexual innuendo, harassment, vulgarity, discourtesy to members of the public
as well as among officers, and a lack of cultural, racial and ethnic sensitivity
and respect.” And here's the source of much of the city's financial trouble.
According to The Times: "There are $19 million in claims pending against the
police, which made it effectively impossible for the city to get insurance for
any of its employees. If Maywood did not dismiss the municipal work force, officials
said, bankruptcy would have been the only option. The total number of laid-off
employees, including those in the Police Department, was about 60, city officials
said."
The bottom line here? Maywood got the L.A. Sherriff's department to take over
policing the city for half of what it used to spend on the local cops and in
the process saved another $800,000 in insurance premiums for its workers.
This story is clearly developing. But it is very interesting and could have implications
for what other cities do in the future, especially if the economy continues along
the "new normal" path.
Next, if you're a CEO and you lose your job, there is no guarantee that you'll
be back in the saddle anytime soon. According to The Wall Street Journal: "No
one knows how many out-of-work CEOs are looking for corner office suites, but
recruiters say their numbers are growing. Fewer big businesses are switching
bosses these days and mergers and bankruptcies have further reduced their job
prospects. Only 48 companies in the S&P 500 index changed leaders last year,
the lowest level since recruiters Spencer Stuart began tracking it in 2004."
Even former CEOs with big time credentials are out of work. According to The
Journal: "Carlos Gutierrez, a former Kellogg Co. CEO who resigned as U.S. Commerce
secretary early last year, desires to run a public company with at least $14
billion in annual revenue. He says he's spurned feelers about running concerns
that he felt were too small, headquartered abroad or privately owned." And if
you've had trouble in the past, the present is less forgiving than it used to
be. According to The Journal: "Chiefs with controversies on their resumes face
high hurdles. Mike Zafirovski left Nortel Networks Corp. last August amid a dismantling
of the fallen technology giant following a bankruptcy-court filing. He prefers
to lead another large business and has prepared a detailed, two-page chart of
his career financial-feats, according to someone familiar with the matter. Mr.
Zafirovski spent more than three years trying to turn Nortel around, but critics
say he didn't move fast enough. Its bankruptcy hurts his job hunt, according
to recruiters."
It's often lonely at the top, but it seems to be lonelier when you fall from
grace.
Conclusion
The "new normal" is shaking things up and the bottom line seems to be that if
you don't deliver, you're gone. And when you're gone, you're gone for good, unless
you've got something that is worth something to someone else.
That kind of dynamic was usually left for those of us who actually work for a
living. If you didn't deliver, you were gone. You were measured by performance
and results. But CEOs and municipal workers were measured by another set of rules,
which seem to be changing.
We think that this is going to stick around for some time. And we think that
this zero tolerance mood is going to extend into the political arena, which means
that the Democrats could lose a lot of seats in both houses in November. But
here's where things are going to get interesting. If the people that replace
the incumbents don't deliver, unless there is a drastic change down the line,
we think that those folks will be one term Congressfolk.
We'll be on Twitter
some time today before the market closes with some updated comments.
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