If Obama does end up as a one-term president, it will probably have a lot to do with unemployment. Recent job numbers are less grim than they have been, but unemployment is still higher than it was for any incumbent reelected since FDR. Having learned the main lesson from Obama’s defeat, President Romney would probably make the creation of jobs his top goal. After all, his battle cry after his wins Tuesday in Michigan and Arizona was “More jobs, less debt, smaller government” — in that order.
Alas, on this front, his consulting background and ability to crunch data would probably do him little good. Or they’d help only indirectly. The goal of a strategy consultant is to make his client more competitive. When this works, it may eventually result in growth for the company and more jobs, but the road to that goal is typically paved with layoffs and cutbacks.
Okay, the empirically inclined might argue, so why doesn’t he look at the economy as a whole, study how it can be made more competitive and then expect jobs to rain down? Consultants and strategy experts do study such questions, sometimes because they have national governments as their clients. Harvard professor Michael Porter, the most renowned academic authority on strategy, has written a rather large book, “The Competitive Advantage of Nations,” on the subject.
The problem, particularly for a freshly inaugurated president eager to get the job machine cranking again, is that most consultant wisdom on how to get economies to create more jobs is slow-acting — and some steps require spending government money. You’re probably already familiar with the litany of consultant-recommended solutions: reduce unnecessary regulation, invest in infrastructure, beat down unions some more, improve education for the workforce. That list, not coincidentally, reads something like candidate Romney’s “Believe in America,” his “plan for jobs and economic growth.”
Savvy consultants also know that the data indicate a sneakier problem with “just get the economy going again” as an answer to unemployment. As you can read, for example, in a 100-pagereport from the McKinsey Global Institute, the link between economic recovery and job creation in the United States has been growing weaker for at least the past 20 years. While employment was harder hit in the most recent recession, the recoveries after the 1990 and 2001 downturns also featured slower rates of job growth than the historical norm. As the report states, “In the years from 2000 to 2007, the United States recorded its weakest employment growth for any comparable period since the Great Depression.” And that was during a Republican administration, one hell-bent on reducing unnecessary regulation and further kneecapping unions.
Let us permit the new president to temporarily shift the jobs portfolio onto the pile marked “Too Hard.” How about instead focusing on a target consultants love: spending and costs? While they usually ask questions such as “How much does it actually cost us to make this product?,” for strategy’s sake they’re willing to lift their gaze to the overall financial welfare of the organization. As in, “How much money are we bringing in, what are we spending it on, and can we continue on this trajectory and be competitive?”
Here, the data would present the new president with a problem. Any honest analyses and projections — and the strategy consulting firms will be at least as honest as the Congressional Budget Office — demonstrate that even with serious cuts in discretionary spending set against a background of reasonable economic growth, there’s no way to significantly shrink the federal deficit without increasing government revenue. That means taxes, whether imposing new ones on energy (gasoline, carbon, electricity), eliminating deductions, letting the Bush tax cuts expire or, well, give us a better idea. It’s a far cry from candidate Romney’s vow to reduce individual taxes by 20 percent across the board.
Social Security, Medicare and Medicaid, representing about 75 percent of all entitlement spending, will pose another inescapable challenge for the analyst in chief. Particularly on rising medical costs, the data scream, “Do something!” Consultants were among the first to hear the screams, in part thanks to corporate clients that recruited them to help address the problem. A rough consensus has evolved among the brains-for-hire about what should be done to fix the system: Introduce more competition among providers, identify best practices and align incentives to promote them, maybe even target areas where expenses are demonstrably out of whack (such as spending on care in the last year of life).
Consultant Romney might well recommend to the chief executive of a client company a comparably radical shake-up: Induce more competition between internal units, determine the outcomes that truly matter, measure and focus on them. But for President Romney, one can hardly imagine Congress clicking its heels and issuing such a diktat, not in the face of powerful constituencies — health-care and insurance companies, hospitals and doctors — each raising the cry: “What? Gore my ox and make the poor beast compete? What are you trying to do, ration health care?”
A weary President Romney might at this point turn to a seemingly more promising candidate for cost reduction: the defense budget. Indeed, he might recall that in the early 1990s, his alma mater, Bain & Co., helped defense giant General Dynamics downsize its way to greater market value. He could take encouragement, too, from the fact that the Defense Department itself has admitted the need to cut costs.
Consultants like to measure their clients’ share of things — market share, share of consciousness captured by competing brands. So how about a quick, back-of-the-envelope calculation of the United States’ share of worldwide defense spending? Let’s see, in 2009, the United States spent somewhere around $650 billion on defending itself. No. 2 in this market was China, with about $100 billion. A little more clawing at the data suggests that in fact, the United States probably spends more on its warlike capabilities than the next 15 or so nations combined. That’s a lot of market share.
Ah, the blue-suited consultant angel on President Romney’s shoulder says, a perfect candidate for some hefty savings. What do you think, maybe $100 billion a year in cuts, or $200 billion? (A lot more than those wimps in the prior administration were considering.) But wait, the jeans-and-blazer-clad candidate devil at his other ear reminds him, didn’t we say it would be foolish and wrong to make cuts in defense? And besides the campaign promises, doesn’t everybody else in our grand old party seem lined up against this one?
Long pause. Hmm, could we take a look at that next PowerPoint deck?
Walter Kiechel is the author of “The Lords of Strategy: The Secret Intellectual History of the New Corporate World.”
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