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Why Job Creators Don't Like Creating Jobs

The bottom line is, well, the bottom line. Job creation will always be secondary to profit and the overall health of a business.
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I've held my tongue as the debate has raged over the impact government policies have on entrepreneurs and job creation.

But that debate has reached a point at which I feel compelled to weigh in. Let's begin by noting something that has largely gone unnoted: No one operates a company with the goal of creating jobs. OK, maybe a few people do. So let me put it another way: No one operates a company with the goal of maximizing labor costs. When you ask an entrepreneur how business is going, the response is never, "Oh, man, I've got 100 employees this year. Last year, I had only 60." If someone wants to brag, he or she is more likely to say, "We increased sales 25 percent--without adding a single employee!" I'm not saying entrepreneurs aren't proud of their role as job creators. Of course they are. It's just that job creation is a byproduct of what they do, not the goal.

At the moment, for example, I am involved with three start-ups. I can rattle off the key numbers--gross margins, average sale, etc.--for each. But I know that they've collectively created 50 jobs over the past 18 months only because I added them up for this column. I got involved with these start-ups because I enjoy helping people launch companies and because, for me, business is fun. To be sure, the potential to earn a return plays a role as well (although at my current stage of life, it's more about keeping score than adding to my income or net worth). Still, this is business, and I want to make as much money as possible.

But I never think about how many jobs the business will create. I care about whether the business can be viable. I care about its growth prospects and profitability. I care about the amount of debt it has and how well it manages its receivables and payables. I care whether customers are happy with its service. Of course, I care about the morale and well-being of its employees. But the absolute number of them concerns me only as it relates to staffing needs. Indeed, I constantly search for ways to maximize the productivity of the people we have, rather than adding to head count.

That's the paradox of job creation that nobody is talking about. It's as if we're afraid to admit that the creation of jobs is intimately linked to the profit motive. The simple fact is, if we want to create more jobs, we need an environment in which entrepreneurs can make money. The more, the better--because reducing the opportunity for profit is a sure-fire recipe for reducing the number of new jobs we'll have to keep our fellow citizens employed.

 

Last updated: Nov 1, 2012

NORM BRODSKY | Columnist

Street Smarts columnist and senior contributing editor Norm Brodsky is a veteran entrepreneur who has founded and expanded six businesses.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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