Thursday, July 11, 2013

SMB’s after ObamaCare: The New Sub-economy of 49’ers, Outsourcing, Automation, and Part-Timers

What should small and mid-sized businesses do to survive the Patient Protection and Affordable Care Act?   What lessons have we learned from the delayed Employer Mandate?

Thanks.  SMB’s can thank someone in the Obama Administration for raising the white flag and acknowledging the need to delay the “Employer Mandate” by a year until January 1, 2015.  (Of course, the statute does not permit any deferral of any mandates, so the delayed Employer Mandate raises constitutional issues.) 

Workforce Containment.   SMB’s can redefine their mission in a new microeconomy driven by enterprises having 49 or fewer “full-time” employees (the New 49’s).  These 49’s enterprises can avoid the complexity, costs and distractions by forcing more part-time employment (i.e., under 30 hours per week).   That means SMB’s will likely be training and keeping only those employees who will drive sustainable growth, and marginalize all the rest into part-time status, forcing part-timers to buy their health insurance on an exchange (yet to be established) or pay the penalty tax.

Boosting Outsourcing.  SMB’s should look for niches where a company of 49’ers could provide outsourced “back office” or “technical” support to other companies of 49’ers.   Any small business function can  be outsourced, such as payroll service providers, collection companies, technology suppliers, lease administration, insurance administration, HR administration, anything that a small business needs.   This will boost the “business services” economy.   Outsourcers might hire the involuntary part-timers, if needed, or just use more SaaS “web-enabled” tools for administration.  

Management of Projects and the Services Supply Chain.   SMB’s need to develop skills in partnering with others.  Such skills will allow strategic alliances to form.  The integration of a microeconomy of “49’er enterprises “ will involve project management training and tools so that unrelated companies can work as a team competing with larger enterprises.

Globalizing the SMB Workforce.    Under ObamaCare, SMB’s have been invited to globalize their workforces.  If the cost of “unnecessary” health insurance coverage is excessive, SMB’s can set up offshore offices, which can help both increase revenues and reduce costs.  Too bad this could come at the expense of local employment in the US.

Automation.   Automation can reduce labor.  The Affordable Care Act just made robots and software more affordable, comparatively. 

Web-Based Teams.   To cover greater territory, teams can be split into modules and assembled across the country.  Big services firms use webinars and videoconferencing.  SMB’s can survive with more geographical dispersion of staff (particularly in sales) while retaining core skills that can be deployed instantly without transportation.

Optimization by Shifting Societal Costs.  The resulting outsourcing, offshoring, part-timing, de-scaling and horizontal integration will have a societal cost.   But, until the law is changed, this is what the law encourages.  Nimble entrepreneurs will fill new niches, and savvy family businesses and new ventures will avoid hiring unless it drives core business revenue.  Everyone will be more specialized to remain small, nimble and niched.