“Across the board.”
Good companies should be restructuring themselves all the time — whether or not they call it “restructuring.” The best companies, in fact, can usually avoid large-scale, make-an-announcement restructuring because they’re constantly reshaping and retooling every aspect of their business for the better.
But whether a company is great or mediocre or poor, the harsh measures adopted in hard times shouldn’t be applied across the board.
Partly I’m following the lead of Steve Yastrow from the Tom Peters blog:
If your company declares, “We are cutting all salespeople’s travel by 25 percent,” or “Every department will cut staff by ten percent,” lift your eyebrows superciliously, and say, “That’s pretty stupid.”
Making across the board cuts is like going to the bank and asking for five inches of money. A ten dollar bill and a one dollar bill take up the same amount of space, but their value is not equal. Your company does many things, and making across the board cuts ignores that each of these things has its own value.
And partly I’m thinking about an exchange from this morning on Twitter. (It’s in reverse order.)
If you’re the CEO and you’ve been running a company for five years, it’s unseemly to take a bonus in the same year you lay off lots of people. Doesn’t matter if you’ve earned it — much less if you think you’ve earned it — it still looks bad, and sets a bad tone for your employees, your customers, and your shareholders.
But if you’re a sales VP reviewing the work of your #1 sales manager, or a CTO reviewing the work of your #1 lab director, don’t get stingy with the bonuses or other perks just because times are tough. That sales manager — if they’re really that good — is easily worth the performance bonus, and you’d be cutting off your nose to spite your face to short them on it. Ditto with the lab director who’s driving your company’s future direction by pumping out world-class R&D.
So why do I have a picture of a salad here?
If your doctor tells you that you need to lose weight and control your cholesterol, you don’t reduce your intake of foods across the board. You get smart about it. You might reduce your intake of pastries by 95% while increasing your intake of salad by 50%.
Not the world’s most groundbreaking analogy, I grant you — but for a concept this simple, it’s amazing how many companies don’t get it.
~
Photo by catsper.
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The salad analogy is great! I’m going to start using that with clients. I’ve seen far too many, “we’re going to cut all of our consultants” attitudes. Like Hitchhiker’s Guide to the Galaxy tells us in big, friendly letters, “Don’t Panic.”
Steve Yastrow has an interesting newsletter and teleseminar about how to succeed in this economy without making across the board cuts. Here’s a link:
http://yastrow.com/nlarchive/09-readiness-test_12-16-08.html
Amanda — “Don’t panic,” indeed!
Too often, we want easy answers, and “across the board” is easy. It’s much harder — though much more valuable and relevant — to go through everything item by item, *weighing* each on an the basic of its utility.
Thanks for the Yastrow link — looks great.
An amusing little analogy – we’ll see it has sticking powers :) !
Two things: 1) most executives were caught flat-footed and ill-prepared by this downturn despite numerous warning signs and 2) (two recent McK and Booz surveys) most are still too shell-shocked (~60%) to begin adaptation. Resilience in a crisis is their job definition and it’s not clear they’re justifying their salaries, let alone their bonuses !
For a checklist starter point on evaluation the adapting from the roadkill consider this:
http://llinlithgow.com/bizzX/2009/01/survivor_search_for_the_next_b.html
If not as an investor then in evaluating how your employer is handling things – because your future does indeed rest on it !
Thanks for that, Dave — I like the points you make about Wal-Mart in that post, and I like your reference to *behavior* change, which is the real trick to business leadership.