SENALOSA

Cost cutting and job reduction programs have always been popular in downturns, but they have taken on increased prominence during this most recent and extremely severe recession. Beyond the alarming number of jobs lost, what is most distressing for many people is that a significant number of those positions won’t return when conditions improve. Economists suggest that of the 8.4 million American jobs that disappeared during the current recession -a full 25% - will not be returning. In fact, as financial results begin to improve, the cuts keep on coming. As of this writing, about 95% of the companies in the Standard and Poor’s 500-stock index have provided fourth quarter (2009) results, and the majority beat forecasts. Among them was United Parcel Service (UPS), the world’s largest package handler by volume. On the day they projected better than expected earnings, they also announced the elimination of almost 2,000 management and administrative jobs.

Organizations have become addicted to the seductive, and undoubtedly effective (in the short term anyway) strategy of cost cutting, basking in this leaner corporate look borne out of job cuts, capacity reduction, and streamlined production methods. For many the exercise is often described as ‘trimming the fat,’ looking for the low hanging organizational fruit that can be plucked, leading to instant gratification for shareholders through improved bottom line results. I have absolutely nothing against weeding out inefficiency in an organization and constantly striving for better performance. What I do question are some of the areas leaders consider appropriate for trimming.

Just today I read an article quoting a business owner who was forced to make job cuts during the recession in an effort to streamline operations and shield the company from the worst of the downturn’s effects. This person’s strategy when trimming the fat was to permanently eliminate jobs that didn’t generate profits, such as research. And that’s when the hair on the back of my neck stood up.

As leaders – and we’re all leaders of something, whether a company, department, or our own careers – we need to be judicious when it comes to how we’ll create value both in the short and long terms. Cutting something like research, which represents an obvious long wave of value creation is an easy lever to pull and will provide an instant jolt to the bottom line. But what of the medium and long-term when conditions inevitably improve? How do you plan to outwit, outthink, and outperform your competition? You can’t cost cut your way to perpetual success, eventually such a strategy can and will be copied by your competition, driving down margins throughout the industry and forcing every player in the market to drive relentlessly towards that last shred of market share.

Research suggests that 75% of value created by organizations today is intangible in nature; created through such things as innovation, databases of rich customer information, and cultures capable of innovation and change, to name just a few. We all have to manage our bottom lines, it’s imperative, but we must also be cognizant of driving future financial success and that will only be achieved from providing greater value for customers than our competition - value that will be generated through current investments in intangibles such as research, training, and professional development.

Conducting a thorough audit of your operations is always a prudent action , especially in turbulent times, but never forget that you’re in business for the long term and that translates to managing accordingly. Keep in mind that the research position you cut today, or the training program you defer, might have been the one that provided your team with the stunning spark of insight it needed to change your industry forever. Balance in all things is what we should strive towards.

Notes:

-“Firms Map Routes to Recovery” by Clare Ansberry, Wall Street Journal (Kindle Edition), March 2, 2010.

-“Entrepreneurs Prefer to Keep Staffs Lean” by Sarah E. Heedleman, Wall Street Journal (Kindle Edition), March 2, 2010.

-The statistic regarding value creation is drawn from research done by the Brookings Institution

There was a good article in the Wall Street Journal today titled "How Understanding the Why of Decisions Matters." In it the author notes the importance of involving people in decisions to increase their buy-in and support for the issue at hand. Noting that it's not always possible to involve every employee in a decision, however, he goes on to suggest that the next best thing is to make employees feel as if they were involved by clearly communicating the "why" and "how' of a decision.

While this may seem like common sense, in practice many executive teams fail to follow this simple advice, often to their detriment. Some executives may feel too busy or overwhelmed to take the time to share every facet of a decision with employees, thinking in the end the conclusions should be obvious. This is definitely not the case. When it comes to the Balanced Scorecard all employees will be wondering first and foremost, why? Why the Balanced Scorecard and why now? The executive team may have taken considerable time and effort answering this question, examining the dynamics of the market, their place in it, and ultimately determining that a strategy execution tool is critical. However, until that is clearly communicated to an often skeptical and change-weary employee base it's just another corporate office rule to be blindly followed.

If you're looking for a more straightforward reason to share decisions with employees look no further than the most flourishing vegetation in any organization - the grapevine. If you don't take the time and energy to provide a concise and convincing answer to "why" you're pursuing a particular course you can be sure the more creative of your teams are more than willing to fill the void, and let's just say they're probably not going to be quoting the company line. Remember, first "why", then "what." 

Standing in line for a flight last week I overheard two people behind me talking about recent job experiences. It didn't take long for either to note some pretty significant weaknesses with their previous employers. Of course the usual suspects were bandied about: pay, benefits, and working conditions, but for one of them it was the people running the ship that caused him to make the leap to greener pastures. As he put it, "They didn't know what they were doing....there was no leadership, literally. They called themselves "Leadegment," leadership and management. Any time you have to make up a word you know how Dilbertesque the situation is!"

As a consultant for the past 10 years or so, and a long-time corporate employee before that I thought I'd heard it all, but "Leadegment!" Never before, and I hope never again! I'm sure this... what should I call them, leadership/management team had their hearts in the right place when they concocted this unique moniker, but to their employees it was probably seen as just the latest in a long series of smoke and mirrors attempts to keep them utterly confused.

Today more than ever I believe all of us want less confusion and more clarity - in messages, in language and in behavior. Business in the 21st century is complicated enough without re-writing the management dictionary. The same applies to your Balanced Scorecard efforts. When creating Strategy Maps of objectives and Balanced Scorecards of measures keep the thesaurus under lock and key and focus on plain and simple language everyone in your organization can understand and act on. If you don't, I might just have to inform your leadegment!

Thanks very much for visiting my new site, which just hit the net this past weekend.

In my books and consulting work I focus on clarity and simplicity, cutting through the clutter to provide the information busy people need. Those attributes were exactly what I had in mind when I re-created the website. I hope you'll find the new and improved Senalosa site clear and easy to navigate, while still providing the content you need to learn more about performance management and the Balanced Scorecard.

My hope for this Blog page is to provide insights and commentaries on all things "performance" related. And of course, I hope you'll participate as well, providing your thoughts and letting me know what you'd like to see here, elsewhere on the site, and in my published works.

Thanks again for visiting, and I hope to hear from you soon.