What Goes Around, Comes Around – Especially With a Kitchen Aid
I read an article a month or two ago. Many of my ideas for this blog come from articles I read. I read a lot to keep up with the markets and changes in the economy and consumer behavior and the like. Plus a smattering of modern behavioral economics and psychology.
Over the course of a week or two, several ideas pop into my head regarding blog topic. Some make it here right away. Some make it months later. Some never make it.
Anyway, I was reading a fantastic article about workers at the Kitchen Aid factory in Ohio. While they have a lot of inventions and contraptions, what Kitchen Aid is best known for is the century-old stand mixer that revolutionized home cooking.
Kitchen Aid began as an offshoot of the Hobart Manufacturing Corporation. Hobart began adding electric motors to manual-crank industrial kitchen machines right around 1910.
Hobart’s big hit was a massive industrial mixer. It would mix upwards of 50lbs of flour and other ingredients into any sort of dough or concoction you needed. From bakeries to restaurants to hotels – everyone wanted a Hobart.
By 1919, Hobart figured out how to “miniaturize” its mixer to a counter-top home model. Its new division was named Kitchen Aid because their mixer was seen as. . . well, a kitchen aid. I inherited an older Kitchen Aid from my wife’s aunt. On the back, it still says Manufactured by the Hobart Corporation.
Today, the Kitchen Aid brand is owned by Whirlpool. But it still makes mixers and other appliances in their Greenville, OH factory as well as other factories across the United States and across the globe.
What caught my attention in reading this article about Kitchen Aid was their approach to employee retention. In many ways, they are very old-school in how they treat employees.
Back in the old days – pre-1990 or so, it was almost a foregone conclusion that you would work for one employer for life. It was like being a Red Sox fan. Win or lose, you were a Red Sox fan and good times or bad, you were an IBM or New England Telephone or Honeywell employee.
The upside was that your employer looked out for you. They gave you a pension. And they provided you with full-service health insurance. They even reimbursed you for education expenses so you could climb the corporate ladder.
The downside was that you could hit a glass ceiling. You could get stuck in a division or a job where you were languishing. Even a velvet-lined prison can feel like a prison.
Around 1990, the business world began to change. Generation X employees wanted something different than previous generations of workers. They didn’t fear applying for a new job in a new company. Their main desire was to maximize their income. Benefits were secondary. A retirement pension was many decades away. Health insurance for a 20-something was dirt cheap. They wanted more money in their paycheck today!
At the same time, employers were beginning to worry about the costs of employment. Salary was one thing. But health insurance was getting expensive. Worse – it was difficult to forecast future health insurance premiums.
Pension payments were a huge unknown on a corporate balance sheet. Not only did a company have to ensure it was making adequate contributions and that the investments were performing correctly – they could do everything right and wind up with a massive shortfall simply because retirees were living longer than anticipated.
If only employees just wanted a salary and nothing more.
It was as if the Gen-X employees were in the right place at the right time. They pushed for better jobs with fewer benefits. Employers, looking to cut costs and to eliminate unknown future costs, followed up by cutting benefits and expanding salaries. It appeared to be a match made in Heaven.
Today the trend has expanded to its fullest potential. There is very little employee loyalty. Benefits at companies have been slashed. Heck, we don’t even hire the way we did 30 years ago. Long gone are the days of looking for a job in the newspaper. Today everything – from the job posting to your resume to usually your first interview with a potential employer – is done online.
How does this all affect investing? Just because most employers are not making huge pension contributions does not mean they aren’t spending resources. Finding, vetting and hiring a new employee is expensive.
For employees, multiple jobs in a no-pension environment means that multiple times in your career, you will be waiting to meet 401(k) eligibility. Six different jobs over 40 years (which is not unreasonable today) means three to six years of missed 401(k) contributions.
Looking at future trends in employment and retirement, I’d have to say that we are facing a potential retirement savings crisis in the next 30 years. This will likely cause a rubber band effect – a desire by both employers and employees to move back to that pre-Millennial model of the paternal company and the faithful employee.
In addition, without lifetime employees, companies face potential problems as well. Without company loyalty, can we really expect good employees to stick around to bring a troubled company back from the brink? I don’t believe many employers have considered this issue in the long term.
Of course, some employers, like Kitchen Aid, haven’t really changed all that much – and it shows. They realized that good employees increase their bottom line. They provide as many benefits as they can. And they encourage promotion from within. Not only do they help pay for higher education, they cultivate employees. It isn’t uncommon for a line worker to end up running the floor or managing a department.
Where do I see us in the future? I believe that this “now” mentality by companies and employees will continue in the short run. Then I suspect you’ll see employees desiring more stability. And companies will see the benefits of cultivating life-long employees. Employment, like all trends, is cyclical. Just like the paddle on your Kitchen Aid mixer.
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