Posted By Everette Phillips, December 20, 2011 at 1:23 PM, in Category: Next-Generation Leadership and the Changing Workforce
Many of the manufacturing executives and engineers I know have an unusual dedication to their craft and to the companies that employ them. This has historically translated into lengthy careers with the same company or the same peer group of companies. By staying long enough to collect a pension, some staffers could get by without a strong personal finance plan and do fairly well for themselves (in some cases, extremely well).
But there is more turmoil in today’s manufacturing world. Consolidations, contract manufacturing, or offshoring can change our worlds quickly. Some fortunate executives get to protect themselves from these types of shifts with "golden parachutes." However, the rest of us have to sew our own parachutes.
What materials are you using for your parachute? Do you have savings over and above an IRA or 401(k)? Do you have equity in your home? Do you have access to credit?
It is easy to test your parachute under safe conditions by taking a personal finance stress test. Take a look at your savings outside of your IRA or 401(k), make a list of alternative income sources you might have, and make another list of your monthly expenses. (Make sure you factor in annual expenses like insurance or property taxes.) Do not forget to add in new expenses like COBRA or supplemental insurance. Your personal stress test will tell you how long you have to find another job.
At networking events, I meet a lot of people who are in transition. They usually fall into two groups: desperate and comfortably exploring options. Although the news often portrays the unemployment rate at roughly 9%, the good news for manufacturing executives and engineers is that the November 2011 unemployment rate for those over the age of 25 with a college diploma was 4.4%. (If you do not have a high school diploma, the number is 13.2%.) This means that there are jobs, and you will find one if you look.
The challenge is that in November, 7.8 million were still looking for work after 15 weeks and 5.7 million were still looking after 27 weeks. However, that is the entire population of unemployed, of which those with college degrees are a small part.
If you have no parachute or you have sewn a poor one, the real risk you run is underemployment. If you need money to pay the rent or mortgage, you are more likely to take a position that pays less or uses fewer of your skills or leaves you less content than a position you might find with a little more time.
The benefit of sewing a good parachute--of developing and following a personal finance plan--is that you will have more choices in transition. You will especially have more options for entrepreneurial activities. Small and midsize entrepreneurial companies represent a great option if you find yourself in transition, but often the opportunity requires " sweat equity," i.e., the major compensation occurs in the future after sales ramp up or the company is acquired. Before you accept such a position or attempt to start you own company, you need to do a stress test and check out how that parachute you made will hold up. How long can you afford to participate in the entrepreneurial company before you will need to increase your income?
It is the season for resolutions. Make your resolution to take a personal financial stress test and then revise your financial plan accordingly. Set a goal to have enough savings and contingency income to last more than six months. If you can already cover six months, why not shoot for a year?
In today's economy, you need a great deal of luck to get ahead. However, I believe that luck is simply preparation meeting opportunity. A well-executed personal finance plan is part of the preparation that can make you lucky.
Everette Phillips is CEO and president of Global Manufacturing Network, a provider of contract manufacturing, sourcing, and logistics services for products and components with a focus on items with special engineering requirements.
Written by Everette Phillips
Everette's experience includes robotics, advanced manufacturing, supply chain management and international manufacturing. After a career path as a robotics engineer helping automate plants in North America, he became a manager of European Operations for Factory Automation & Robotics in Europe for SEIKO living an expat in Brussels then returning to the US as GM for Advanced Mfg Technologies in North America. Currently, as President of Global Mfg Network, he is involved in coordinating production of highly engineered parts, assemblies and products across a wide range of industries in manufacturing facilities located in Asia and North America and Europe. Everette is a regular speaker and panelist on topics related to manufacturing, international business and technologies such as robotics and advanced manufacturing. He has a BS Bioengineering from Cornell and an MBA from the UCLA Anderson School. Everette serves on the board of Cornell Engineering Alumni Association as a Regional VP and on the Advisory Board for Entrepreneurship@Cornell.