Chapter 14

The American Index

TYPES OF ORGANIZATIONS WHERE THIS METRIC IS APPROPRIATE

This analytic is worth considering for any large organization that is a for-profit business. If you are a government organization or a nonprofit, this metric probably does not need to be tracked. However, this measure might also be appropriate for a hospital. I worked with a hospital in San Diego that went to the Philippines twice a year to recruit nurses. Hospitals also buy a lot of supplies from overseas manufacturers and may use foreign companies to perform key services like billing and legal document processing. Basically any large nongovernment employer should think about putting this metric on your balance sheet. An important dimension of performance is to balance the short-term desire for profits and growth with the longer-term concerns of supporting your own country and encouraging a healthy economy.

HOW DOES THIS IMPACT PERFORMANCE?

Doing a good job of supporting your country and community can have a big impact on your image with business and consumer customers. It can also have a big impact on potential employees. As the economy improves, people will get more selective in picking a potential employer. Being a company that is supportive of the U.S. economy is a factor important to many job seekers. Of course, your product or service has a lot to do with your image as well. If you manufacture cigarettes or kids’ cereals loaded with sugar, creating new jobs for Americans may not offset the harm you are doing to society with your product. Supporting your country is also something that could increase your costs. The major reason companies started outsourcing manufacturing, call centers, and other key functions is that those things can be done overseas for a fraction of the cost. Call center workers in India earn a few thousand dollars a year, whereas American workers doing the same job get that much a month. Another reason that some things are not done here in America is that we lack the capacity or skill. Hospitals cannot find enough American nurses to fill their needs, and schools are not graduating enough nurses. Apple claims there is no manufacturer in the United States that can handle the capacity needed to make millions of its products. Thinking about supporting your country is important but so is making a profit. As with any of the analytics in this book, excelling at one thing may cause problems in another area of performance. Now that wages are down in the United States and up in other countries, manufacturing cars and electronics here in the United States might make financial sense.

When companies choose to outsource jobs or functions to other countries, they often don’t think about the side effects of doing so. They look only at the short-term cost savings. I read an article that said that when consumers hear a foreign accent when calling a call center, their stress level automatically goes up a few notches because past experience tells them that the CSR’s name is not really Bill, and that you two are going to have problems communicating. Another common problem is encountering a CSR with excellent communication skills who can’t solve your problem. This experience may make a customer less loyal to your firm, after he or she sees that you don’t care enough about customer service to staff your call center with competent people with good communication skills. Manufacturing overseas sounds good too and usually saves a lot of money in the short term, but there are other costs, such as hiring an agent or representative in the local company to oversee the manufacturer, sending your own people over there, waiting a long time for goods to be shipped, dealing with poor quality, and having the supplier steal your intellectual capital and end up being a competitor. Those are some pretty big costs that often don’t get calculated until it is too late.

COST AND EFFORT TO MEASURE

The cost of measuring the factors that go into this analytic is low, and the amount of effort needed to track it is minimal. If you decide to include perception or opinion measures as part of this analytic, it might cost some money to conduct a survey or some focus groups, but the index is probably better if it just includes hard objective metrics like jobs and money spent on domestic versus foreign suppliers. Tracking down the supply chain may also be a bit of a challenge. It could be that you are buying something from a local distributor, but the product is made somewhere other than the United States. Many GM cars are made in Mexico and other countries, just as some Toyotas are manufactured in Georgetown, Kentucky, by American workers.

HOW DO I MEASURE IT?

The first step in creating an American index is to decide on the factors that will be measured. The broad categories of measures and the specific metrics to consider are:

• Jobs. Ratio of domestic to foreign employees, growth of domestic employees, ratio of part-time to full-time employees.
• Wages. Average compensation, ratio of worker compensation to executive compensation, growth in compensation for workers.
• Suppliers. Money and percentage of costs spent with domestic versus foreign suppliers.
• Image. Opinions or perceptions of customers, potential customers, community, stakeholders.
• Taxes. Total taxes paid versus industry averages and benchmarks.

VARIATIONS

Where this measure gets a little confusing is if you employ a lot of American workers to make a product that does not really help the country. What if you employ 10,000 American workers in factories that make guns or soft drinks? Calculating the type of business you are in probably does not make sense, because I’m sure American gun manufacturers believe that by employing 10,000 people they are doing their part to help the U.S. economy. What you might measure is the percentage of your sales that come from products good for society and the country and products that are bad. For example, a big company like Pepsi sells lots of its sodas but it also sells Dasani water and Gatorade sports drinks. A big company like Nestlé sells Nestlé Crunch candy bars but also sells lots of nutritional products and has a vision of moving the company more into nutrition and wellness:

Nestlé Vision and Values

To be a leading, competitive, Nutrition, Health and Wellness Company delivering improved shareholder value by being a preferred corporate citizen, preferred employer, preferred supplier selling preferred products.

Whether you are selling products or services that are good for your home country is a matter of opinion. Perhaps guns keep down the crime rate, and soft drinks do provide calories and energy, as do candy bars. You might even say a candy bar is nutritious because chocolate contains antioxidants. So as not to muddy up the index, I suggest focusing on tracking objective measures like jobs and use of domestic suppliers.

Other variations might occur if yours is an international firm with employees scattered all over the world. You might be a big employer in the United States and provide lots of good jobs, but you might also have plants and offices in 30 other countries. This is not necessarily bad and should not make your index look negative. The overall purpose of the analytic is to show that your organization is doing what it can to promote U.S. companies, create new jobs, and provide good wages for domestic employees.

FORMULA AND FREQUENCY

A generic straw man American index that you can tailor is as follows:

TARGETS AND BENCHMARKS

This is one metric where you really need industry and competitor data. If 20 percent of your furniture is made in the United States by American workers, you will probably stand out as a shining star among your peers in the industry since almost all furniture is manufactured in China, including the high-end brands like Henredon. If you purchase the vast majority of your raw materials for manufacturing pet food from domestic suppliers, you will stand out in your industry as being very pro-America when many of your competitors’ raw materials come from foreign countries. If you are growing faster than any other retailer and hiring more Americans than any other company, like Walmart, people might forgive you for selling guns and ammo. Targets for metrics like job growth should also be set based on the local economy where you have facilities. Perhaps you have only had 10 percent job growth in the last year, but the area might have a net job loss of 10 percent so that makes your results look pretty good. In any event, targets need to be set based upon what is going on in the economy, your industry, and the geographic areas where you are located.

BENEFITS OF DATA

If you don’t really care about supporting your own country and just care about making as much money as you can, this metric has no value to you. However, even if you don’t care, your customers probably do. As much as people love Apple and its wonderful products, horror stories about Foxconn, its Chinese manufacturer, have tarnished Apple’s image with many Americans. I’m sure that this is a big part of why Apple has agreed to start manufacturing some of its products in the United States in the future. Toyota has always been very supportive of its native country, Japan, but it was also a pioneer in building U.S. plants employing U.S. workers. America is a big market for Toyota, and it makes people feel better buying a Japanese car if they know it was made by American workers—unless you live in Detroit. It is still considered socially unacceptable to drive a non-American car in Detroit, even though many are made here. The benefits of this data are that you can now set a goal and track your progress toward being more supportive of the country where you live. The other benefit of this index is that you can track whether your being more supportive of the American economy makes a difference to your customers. People may feel bad that the jeans they just purchased for $50 are made in a sweatshop in Indonesia, but it does not stop them from buying the jeans. Promoting American jobs and the American economy is just one of many things a well-run organization needs to aspire to in order to be judged as successful.