Redundancy or better planning?

[Andy Boddice]

It never fails to amaze us that CEO’s and MD’s allow their FD’s to dictate the future scale of workforce size when times get tough.

Making parts of the workforce redundant when trading conditions take a downturn is a nonsense when there is clear evidence from passed recessions that redundancy doesn’t solve the inherent problems within the organisation.

Indeed all redundancy does is leave a smaller body of people - usually quite demoralised and fearful for their own jobs - to manage the same amount of business leading to increased stress, illness, absenteeism and for those with marketable skills - an excuse to get out - and quickly.

Furthermore, as it is the ‘more expensive’ staff members that are made redundant - usually middle management and the older members of the workforce - the very skills that are needed to help the organisation when its most needed are lost.

The subsequent widening gap between the senior management level and the rest of the organisation is rarely filled. The results of which we see quite regularly are decreased levels of communication throughout the business, an inability to successfully translate strategic direction into operational or tactical activity, loss of turnover, and reduction in customer satisfaction.

Wouldn’t it be better for all concerned if better planning within the business took precedence to ensure sustainability over time? In our experience we have seen leaderships ignore clear and robust evidence provided by their staff and senior management colleagues to the detriment of staff and shareholders alike as the forecast outcomes became reality.

With better business, market, sector, and economic modelling - which isn’t rocket science even to small businesses - combined with better management processes, building on a clear understanding of what the core purpose of the organisation is, can and should stop the nonsense we are seeing again as workforces are cut throughout the UK.

Organisational sustainability is the key point here. Core values and core purpose are retained under all trading circumstances, whether boom or bust. Business plans and operating activities are the elements which have to change to navigate a safe course through troubled waters.

We see little evidence of vision-guided and values-based decision making from leaders and managers alike being used at the moment to help sustain organisations. What we do see is the familiar scenario being played out - “How do we cut costs quickly as we’re in trouble”? Clearly we are not or have not learned from previous recessions. Planning is still too short term and knee jerk. Senior management are not managing to sustain the business or organisation.

Lets start getting more people to play the long game and get better planning into the board rooms now!

[Steve Reeves]

Great post Andy

of course you're absolutely right.

It seems to me we've reached the end of the road with the capitalist system as we know it.

All of the decisions resulting in the behaviour you describe come from our drive to return more for less.

Private equity firms, fund managers, C level execs have all made enormous amounts out of driving short term profits and the cost of long term value, and we've sat and watched.

Now it turns out they we're driving value for us at all, just cooking the books so they could get the bonuses while we ordinary customers and investors we're going to get the burnt toast.

It's not obvious to me just how this will change in the future but I'm sure it will.

Governments will have to lead us back to a new sense of community and responsibility, with regulation I suspect.

Steve

[Andy Boddice]

Thanks Steve.

Its a real bug-bear of mine and has been for some time. Having been in the situation more than once of being employed to turn around an ailing business...to successfully build it back into profitability, increase its market share, double the share price in under three years and then get 'the elbow' along with the really good and committed group of people who made it happen is just untenable in my view. All done at the stroke of an accountants pen because we didn't agree with the CEO's forecast for the following year! WE were proved right by the way!!!!

Your correct about the advisory and supply side having driven short-termism, mostly as a consequence of, or at the least at the behest of the City analysts and the cohorts of traders. Only the major shareholding (pension) groups are really culpable in supporting the process for so long.

The big disappointment in all of this though were the other shareholders. A group of organisations or individuals who quite happily stood by and took the half yearly earnings cheque and quietly stood by as the sort of practices we describe took place. What happened to shareholder revolt or at least holding the Board to rigorous and detailed questioning over decision making and/or future direction?

Call me old fashioned - even cynical - but I've been around long enough to know when people can or can't do a job. I still cannot believe that a 38 year old was given license at one of the UK's oldest banks...Sorry the guy didn't have the life experience irrespective of how well qualified he was. Along with many others in the same boat - top of the pile, big salary - he'll walk away with a large wad in his back pocket and probably be employed within months as a senior Board Director somewhere else. Frustrating.

Regulation will come down from 'on high' - in what form though is open to debate. I hear no consensus at all from any point on the globe. Your right again that about change for the future not being obvious. It would be fantastic to see vision-guided, values-based decision making take a front and centre role. Somehow though I think the rule makers will find that too difficult to face and we'll end up yet again with weasel words and hollow actions.

I was with the MD of a multi-national Insurer today. He was high on the personal consciousness stakes which was great to see. It took sometime to get him to acknowledge that he was in the minority in his field. He was at least graceful in agreeing. It'll be interesting to see how that conversation moves forward because he believes I'm talking a great deal of sense in using Culture and values to strengthen M&A activity.

Regards

Andy