What Business Should Worry About In 2017: Labor, Trade, Credit Availability

Business leaders should add some items to their worry lists, in addition to the routine personnel, sales and productivity challenges they regularly face. The new administration and the strength of job growth argue for worrying about worker retention and recruitment, the supply chain, credit availability and, for some companies, delayed orders from other companies uncertain about new policies from the Trump administration.

Retention of good employees is becoming more difficult across the economy as unemployment falls and wage rates rise. When a worker does leave, finding a replacement is more challenging now that plenty of other employers are also looking to hire.

Business leaders should immediately assess their voluntary quit rates. Employee departures are most often triggered by unhappiness with the boss, but can also be caused by compensation below market. Companies should assess employee attitudes toward first-level supervisors, who are key to employee retention, as well how competitive their overall compensation is.

When Donald Trump becomes president, the Department of Homeland Security will probably conduct more business audits to look for undocumented immigrants (more accurately called fake-documented workers). Although the federal government does not have the resources to find and deport all undocumented immigrants, it can certainly audit more businesses. For those companies with a high number of immigrant workers, continued operation could be in jeopardy.

Businesses that may have workers using false documents have a couple of options. One is to use E-verify to ensure its employees can work legally. Another approach would be a contingency plan for a number of workers suddenly pulled off the job.

Supply chain disruption. Companies learned in 2011 to assess their supply chain for disruptions from natural disasters, with the earthquake/tsunami in Japan and the floods in Thailand. Now businesses should consider political risk from trade wars as well. The problem is likely to begin with one or two countries, say Mexico or China. It could spread widely to include all countries. My best guess—and this is purely a guess—is that Donald Trump will bargain hard but then reach a deal that avoids a major drop in imports to the U.S.

To prepare for the possibility of a supply disruption, companies should look first at their most critical imported products and determine alternative sources, both domestic and imported from a different country. Product redesign can sometimes eliminate the need for an imported component, but that’s not a very nimble option in most cases.

Credit availability was worsening last year, as I wrote in Bank Loans Harder for Businesses To Get. The new administration will probably try to ease up on bank regulations, but the real action occurs when a bank examiner looks through loan files and finds fault with credit decisions. Those judgment calls are hard to change from Washington DC, so don’t expect easier credit terms anytime soon. That article I wrote has suggestions for dealing with tighter credit.

Delays in Capital Spending could hurt B2B suppliers to construction, business equipment or computers. The reason for delays is uncertainty about how Trump policies would impact companies involved with international trade or that may use undocumented labor. Although outright cancellation of expansion plans will be rare, foot-dragging to see what the new administration’s policies are will be common. Businesses that are depending on capital spending by other companies should be prepared for last-minute delays in projects.

The most important business strategy for 2017 is to not think of policy changes as “Trump Good” or “Trump Bad,” but instead to think in terms of what the policies mean for sales and costs. The votes have been cast and counted, so there’s no sense arguing about who should be in the White House. It’s time to start anticipating how business will need to change in response to the new policies.

Disclosure: Learn about my economics and business consulting. To get my free monthly ...

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