Economic inflation is running at the highest level in over a generation, but should this concern you as a manager? YES, most definitely. Ignore inflation and you might be ignoring the greatest motivational tool of a lifetime.

A typical definition of inflation is when too much money is chasing too few goods causing prices to rise. A more colorful, and accurate analogy, is like a racoon that steals potato chips from your garden party before hiding: you don’t get any chips and instead have a nuisance mammal getting morbidly obese in the attic of your new custom home. We’ve all experienced inflation lately with the price of common everyday items like gasoline, eggs, artisanal bespoke hemorrhoid creams, plywood or rent rising dramatically over the last year. Thankfully the United States Federal Reserve bank is coming to the rescue. The “Fed”, as it is known, is chartered with maximizing employment and controlling inflation at an arbitrarily chosen 2% per year. By focusing on the later, controlling inflation, the Fed is also your new BFF.

Remember the quiet quitting scare last year? Of course you do, but for those that don’t, here’s a quick refresher: employees were flush with cash left over from the doldrums of the pandemic, and retirement accounts were swollen like a dead racoon in a hot Houston attic. Disgruntled employees quiet quit as an act of rebellion like a sulky teenager applies a temporary tattoo, it was never meant to last, just get your attention. Fast forward barely even a year and the situation has changed: hundreds of thousands of well paid tech employees have been laid off, prices of everything have skyrocketed and 401ks have popped like that bloated raccoon in Texas, spraying shattered hopes, and putrefied raccoon flesh, all over the virginal white plush carpet of your dreams. All thanks to the Fed.

Time to send Fed Chair Jerome Powell an edible arrangement because he just handed you a gift box full of employee motivation. Graciously accept the silver platter pilled high with carrots and sticks and get everybody back where they belong: in the office and grateful to be working for you. Let’s serve up some managerial crudités (and don’t worry about the raccoon, it’s gone to join the choir invisible, it is an ex-racoon).

Start with a carrot

Casually mention in your weekly staff meeting (you are still holding weekly staff meetings right?) some of the companies laying off large number of employees. Facebook, Google, perennial layoff master IBM or this year’s downsized darling, Twitter. Be sure to follow up by saying this isn’t meant to scare anyone because there are no plans for layoffs, at least none you can talk about, so we should all be thankful we have jobs! What better encouragement is there than knowing you’re still employeed, at least for now.

Bring our a little stick

Then again if this INFLATION keeps up, you never know what management might be forced to do, so now is a good time to keep our heads down and out noses to the grind stone.

Time for another carrot

Look on the bright side of the drop in the market, everybody gets to buy stocks on sale.

Stick

Do you have a corporate intranet? Be sure your company stock price and the three big indexes are prominently displayed. Why? Every time someone logs on they’ll be reminded that those dreams of early retirement are being consumed like so many maggots chomping away on rotting raccoon.

Finally end with the BIG carrot

Believe it or not, now is the best time to hand out raises. What? Raises. Why? Because they cost less than ever. How? Through the magic of inflation and profit margins! Let’s use the fictional Cogswell Cogs Company from the 1960’s TV show The Jetsons as an example. When Cogswell Cogs calculates profit margin, how much they want to make on each cog sold, it’s calculated as a percentage of the cost of goods sold, the COGS, for each cog. For ease of math assume a normal 26.3% profit margin on each cog with a cog COGS of $34.27. In 2022 that meant each cog sold for $43.28 yielding a profit of $9.01 each. Due to 10% year-over-year inflation, in 2023 that same cog cost $37.697 to produce. At the same 26.3% margin they sold for $47.611, creating a profit of $9.91 for each cog at a cog COGS of $37.769. For those that are bad at math $9.91 is more than $9.08. Inflation means you are making MORE on each cog. Time to pass that good fortune on to your employees in the form of raises. If an employee was given a 4% raise last year you can easily afford to offer a 5% raise WHILE SAVING MONEY!

Thank you Jerome! Thank you Fed! Thank you WINflation!!!