The world has not recovered from the financial wake COVID left behind. Many businesses were not financially prepared to ride out the financial losses COVID forced on everyone. Numerous countries offered emergency funding to businesses, which larger institutions immediately scooped up.
Globally, we attempted several false starts in hopes of establishing economic stability. But each time we false started, the impact fell on small and medium-sized businesses, which lacked the funds to repurchase goods and hire staff. In 2021, we did finally reopen. But as many businesses discovered, the market had changed.
Employees were hard to find, wage expectations increased, and customers were still reluctant to venture out.
This article is written in June 2024 while I'm in Playa Del Carmen, Mexico, where there is a giant economic shift due to "remote workers." The world has changed. But the financial debt still lingers for most small and medium-sized companies. For the new businesses that have established themselves post-COVID, the path to profitability is easier as they started without debt and established themselves based on current consumer behavior. For the companies that were already established, they are returning with existing debt and an old view of customer experience.
Many large companies and tech firms have suffered major layoffs as they adjust to a world that is no longer dependent on their services as they were from 2020 through 2023. Businesses tend to predictively analyze expenses and budgets based on year-over-year data.
But this data was false.
It was an anomaly.
Growth in 2020 was not growth; it was a windfall. Even when data showed sustained growth into 2021 or 2023, that information was based on a fluctuation as a reaction to COVID.
We still have not felt the full force of the economic impact this will have on the global economy.
So, how do we solve this?
I believe that the job market will need to shift again. As businesses wrestle with bringing employees back in-house and banks begin to call in debt, the jobs of tomorrow will need to adapt.
On the low end, people will go back to work. Labor will always be labor. The middle will separate. And the top (C-suite positions) will need to "defer salaries" to ensure longevity.
How Does That Look?
In order for a business to pay down debt and grow, they cannot be top-heavy, which is what you're seeing in the job market as businesses lay off their C-suite.
In 2022 and 2023, we called it "The Great Migration." But that's not where the story ends.
With any migration, there is a return migration. Usually, this return migration is greater in number (more kids, greater safety, different needs). The world's economy isn't looking down the road far enough. We still have not felt the return migration. With this return migration, we will continue to underestimate the unexpected.
In order for businesses to pay off debt and afford a workforce, they will need to cut positions at the top. But here's the catch—they still need the experience from their C-suite suite.
So, how do they get both?
Well, the C-suite needs to "think like a college student." When you went to college, you deferred immediately earning a top-paying salary while you built credibility through education. Then, when you did enter the workforce, you (hopefully) bypassed the labor jobs for roles that required greater strategy and implementation.
I believe that the C-suite will need to readopt this type of thinking in order to sustain positions that businesses desperately need but can't afford. And for the most part, C-suite executives are in a good position to do this. Much like an investor, with enough disposable income to delay returns over time for a greater payout months and years down the road, I believe that C-suite executives will negotiate delayed salaries, at an increase, paid out over time.
Here's How It Works:
1. A salary is negotiated based on comps (example: $200k).
2. A deferred premium is added to the salary (example: 20%).
3. A base salary is negotiated (example: $500 a week).
This would secure a salary with "interest" and an equitable, albeit low, weekly payment.
How Repayment Works:
1. Repayment would begin when either:
A. The business reaches a predetermined revenue marker.
B. The business sustains a revenue of X2-5 full salary.
C. Upon termination, allocated payments based on the remaining balance, time worked, and adjusted pay over a set repayment period.
This would mean that the business could benefit from the knowledge and experience of a C-suite executive but have the time to reestablish their business. And the C-suite executive would ensure repayment over a longer period, even after employment has ended.
All of this could be offset with equity, buy-out packages, and other terms.
But, essentially, this takes behaviors and vehicles found in startups and lending and applies them to high-value employees to help ensure the reestablishment of businesses while "kicking the can down the road."
Now, I know that several C-suite executives will scoff at this, claiming that either they’ve already put in their time or that they are more valuable than that.
But when the market pancakes, these same executives will end up without pay, eating into savings, while (most likely) not adjusting their lifestyle. This "deferred salary" strategy ensures a return on their investment based on their effectiveness.
This also sets up recurring payments for when the market adjusts after the tide returns.
If we go back to that migration example, there is usually a large shift in the initial migration. Then, when the return migration occurs, there is an even larger shift.
But the story does not end there.
When the migration returns, there is typically an abundance of prey. Upon return migration, there is traditionally a killing off of the herd as the numbers reestablish themselves. Then the cycle continues.
In 2020, the world changed. In 2021, we tried to reopen, thinking things would return to normal. There is no "normal." In 2022 and 2023, we went into migration. We lived remote, we had kids, we thought this was our new normal. It's not.
Soon, the weather will turn, and we will need to remigrate with our families, with our new lives, and we will need to get reestablished. In that new period, there will be a killing off of the herd. It's just the cycle of life. When that happens, we will need to be prepared to adjust.
This next phase of our global reset will need to focus on making way for the next generation. For C-suite executives, this could come in the form of "deferred salary arrangements," allowing for stability across the board.
Let me know your thoughts and reactions to this prediction.
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