You have to wonder sometimes about the state of American business. Across the board, companies consistently make the same decisions.
Time after time.
Company after company.
Same old, same old.
Companies react to recession and/or a downturn in profits in almost a predictable manner. First, the companies freeze salaries and/or change compensation plans, then they lay off staff and attempt to cut costs across the board. Next comes adjustments in pricing for the product followed by outsourcing.
Sounds like a solid business plan, does it not?
I suppose it works to some degree, although I haven’t seen the success very often. I’m the first to admit I may not be a business insider or knowledgeable in many so-called “business methods,” but I have always thought that if you produce a good product, more times than not, the company will be successful.
I know this is probably something of fairy tale along the lines of Snow White or the Lion King, but it’s what I believe. However, in today’s world of exorbitant executive salaries and corporate raiders, the product, as well as the common worker, has been overlooked, undervalued and, ultimately, replaced.
Krispy Kreme is a perfect example. The have the best product — in this case donuts — yet can not seem to get a foothold in their doughnut war with Dunkin Donuts. From way down here at the bottom, the problem seems crystal clear. Maybe me and my simplistic mind are attempting to oversimplify the issue, but it’s managed poorly.
No, I take that back. They are managed extremely poorly. High salaries for people that never touch a doughnut are the first problem. The second is probably a broken business model that they refuse to change.
We see companies reduce employees, which undoubtedly reduces the value of the product which, in turn, reduces the company’s overall value. You would think that sitting in the four walls of a board room (or any room where such decisions are made), these people would make sound business decisions.
Downsizing can, of course, bring short-term profits, an expert says, because trimming labor costs boosts the bottom line.
“A lot of this is done for short-term profitability, or to send a signal to the market that a CEO is taking strong action to try to reassure shareholders,” Wayne Cascio, a management professor at the University of Colorado in Denver, said. “And what happens is No. 1, they tend to cut out some of the very things that made them successful in the first place, for example research and development.”
However, in my experience, decisions are often made for very different reasons. Personal feelings often play into who stays and who goes. Self preservation far too often lends a hand into the decision-making process. You would think someone would see that cutting one person with the salary equivalent of 5, 10 or 20 average employees makes far more sense (especially if the one person doesn’t do much), but this never seems to be the case.
I get the “clean up the balance sheet” approach to business. Those people just want to renovate and flip. It’s much more like Monopoly money to those people. If that is your job, corporate raider so to speak, then it is different. However, for many companies, this is not the case.
Lip service is given about “how we want to put out a better product,” but in reality all they want to do is keep their own golden throne intact. I get it. Over the years, I have witnessed these changes several times and in several different industries.
Perhaps the most painful thing to see (besides, of course, the many lives torn apart by sudden unemployment) is the lack of flexibility at the top of these companies; refusing to change practices that clearly do not work. Relying on business models or structures that are extremely top heavy (if you have more titles or high-end salaries than you have bottom line employees, it’s a good bet the company is top heavy) and broken.
And refusing to reinvest in the infrastructure of the company, allowing it to age exponentially and become antiquated. However, you can best believe upper management bonuses and “reimbursements” get paid.
Many times, if proactive action had been taken, jobs would not have been lost. Most of the time, we are not talking about some fictitious bubble that burst, we are talking about mismanagement.
Let me put it another way. The fantastic thing about sports is if you do not win there are immediate consequences to those running the show. Complacent upper management leads to near-sighted decisions, which leads to doom. For those people, I ask: “When did Noah build the Ark? BEFORE the rain.”
In the world of business? Not so much. Poor decisions and retroactive actions are made, resulting in dwindling profits and market share, yet the same people will be called “Boss” day after day, year after year.
Really, who wants to fire their golfing buddy or their wife’s best friend’s husband? The time has come in American business when we should get back to the basics.
We need to start from the ground up and reaffirm our fortitude. There is no “easy button.” Talk is cheap. We need boots on the ground, not another “plan” that looks a lot like the “plan” we had before that didn’t work. Maybe it will take these antiquated concepts and models to burn to the ground before another will be born.
However, it seems that this is really and old concept. Workers matter. The product matters. And the rest will take care of itself.
Richard Clark is the universal desk chief of Halifax ENC. You can reach him at 910-219-8452 or at Richard.Clark@jdnews.com. Follow him on Twitter at kpaws22.