5 Questions with Steve Paulone: Economic effects of harsh winter

1. Record-breaking snow and cold have hit many U.S. cities recently, as the month of February has caused major headaches for businesses. In one of the hardest hit cities, Boston, MA, the effects of the past month have been“economically devastating”, with each snow day reportedly costing the state economy $265 million. Are there ways businesses can spare themselves from such an enormous economical hit?

Businesses can spare themselves from the long-term economic costs of bad weather to a certain extent by innovating or changing the way they do business. One possibility would be shifting to an internet strategy to reach customers outside the area affected by poor weather. Look at Post University for an example; when our business was 100 percent on-ground we would have to alter our entire calendar structure to give our students the proper education, and classroom interaction would suffer. Now that we have an online delivery option we can move along without skipping a beat – we shift from ground to virtual delivery.

 Frozen pond and snowy scene in New York City

Snow has impacted many Northeast cities this winter, including New York City.

2. Between snow days, weather forcing individuals to work from home and longer commutes to and from the office, employee productivity has also suffered in February. What are some ways to maintain productivity amidst the spell of winter weather?

Once again the virtual office has replaced the physical office. During one recent snow day our campus was closed but my team and I held our weekly meeting, taught our classes and managed our paperwork. You could say we were more productive since we did not waste commute time or time in meetings.

3. Do the harsh winters in many areas of the U.S., and their economic impacts, come into consideration when corporations decide where to locate their offices? Should it?

I would say that this is not a direct consideration but should be part of an overall risk analysis when contemplating where to locate an operation. Many companies move to locations near the markets that they sell to. Others move to be close to suppliers of important subsystems or to be close to materials and other resources needed. Currently, businesses even move for tax incentives and where talent may be located. Talent may be avoiding places where snow and ice are prevalent, so by that reasoning companies may follow. Weather cannot be avoided – if it were a major consideration then Hawaii and Tahiti would be overrun with business operations.

4. Should other companies, who do business with corporations in hard hit cities like Boston and Chicago, change their approach to timelines and expectations over the winter months, or should expectations, remain the same?

Even companies who had no business in Boston were affected by the weather in Boston. Our current hub and spoke airplane system always suffers no matter where there is bad weather, since connecting flights then get missed even in areas far from the inclement weather. This impacts business travel, movement of supplies and deliveries to customers all over the world. In these days of lean inventory and inventory management, I am sure it will lead to all kinds of shortages. The bright spot is we recover quickly and before you know it everything is back to normal.

5. As we enter March, and attempt to put the losses of February behind us, what are some ways to make up for this loss of time and money heading into the spring months?

In Economics, we refer to the concepts of sunk costs and opportunity costs. The business missed as a result of bad weather should be viewed as a sunk cost, and we should move on; it should have no impact on our operations going forward. The opportunity costs, or the costs of alternatives, could not be pursued because of the weather and may open up our thoughts to other opportunities. We should move our business and operation to a more virtual presence. We should build more operations in favorable climates. Or possibly the best yet: work virtually and live in Hawaii – what could be better?

 

Stephen Paulone, Ph.D. is the Director of Graduate Business Programs offered through the Malcolm Baldrige School of Business at Post University. He has more than 25 years of experience in manufacturing, marketing, and finance, and has held such positions as marketing manager, manager of new product development, marketing program manager and finance director. 

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