tips for quality service
Avoiding “Business Cancer”
by Carl Tompkins
I hope the title scares you into sitting up and taking special notice of one of the most destructive elements of business management: downsizing. It is a slow and sure death of a business.
So if downsizing is so bad, why do so many companies do it? From much study and observation, I find that it is a direct result of companies judging and deciding everything by the numbers and that it is a quick and easy thing to do. Often, the bigger the organization, the more common the practice of downsizing.
In my 28 years in the business, I’ve been within some of those towers of management and heard, “Well, our cost-to-sales ratios are off by 12 percent and the math indicates we need to reduce monthly expenses by $375,000. Fire 57 employees and shut down 14 locations and we’ll come back into balance with our budget!” What has always bothered me most in seeing this type of event take place, beyond the fact that it fails to represent a business strategy, is that downsizing never affects those wearing out the buttons on their calculators. Instead, it is the front line people who complete their tasks properly who are affected by upper management personnel that just don’t get it.
Note the following results coming from a Sloan Management Review compiled by three economists who completed some investigation into downsizing:
• Since 1979, corporate America has lost 43 million jobs to downsizing.
• More than 67% of all companies downsizing repeat the process within 12 months.
• Those that downsized failed to achieve higher productivity, reduced expense, better stock performance and more flexibility.
• The prominent reason for further failure is “survivor poor morale.” Only 31 percent of surviving employees trust in management or the organization.
Those that downsized destroyed their competitive advantage, namely, employee trust and empowerment.
• Employees view downsizing as a top management admission of incompetency.
Adding further credibility to the statement referencing management incompetency, I was told by one leading business consultant that downsizing indicates management inferiority. His reason was that downsizing proves one of two things: management either fails to know how to make a profit in tough times or is too fat and sloppy on expense management to begin with. Either way, management is the weak link.
On the positive side, the research conducted by the same economists shows similar traits exhibited by some high-performing companies. Note what was discovered by those organizations:
• Rather than downsize, these companies “re-sized.”
• People were treated as a valued asset and not a faceless expense.
• Rather than cutting people and closing locations, they retooled business processes, changed products, improved services, re-directed activities and re-invented their way of doing business.
• These companies’ stock values increased between 30 to 40 percent during the same period when downsizing companies’ stock value only grew at an average of 4 percent.
• Overall operational and selling costs were reduced as a percent to sales.
• Quality of goods and productivity increased.
• The common attitude of management was that the will to win and promoting people to higher levels of empowerment make a difference.
• Good will and morale increased at all employment levels due to the appreciation and respect felt toward management and their witnessed commitment to people.
The antidote for business cancer is resizing. I’m of the firm belief that if the numbers aren’t right, you have people problems. As writer Tom Peters states, “Excellence in business is based on managers ridding themselves of such roles in exchange for becoming ‘leaders’ through their demonstration of paying attentions to customers, their people and innovation.”
|Tips for Resizing
In terms of resizing, truthfully consider and pursue the following points:
• How would you evaluate the morale of your company? Have you taken into account the costs paid out daily when your people are not adequately cared for by management? As Peter Drucker states, “If you’re not taking care of a customer, you had better be taking care of someone who is.” You are in for a financial surprise if you start diverting your attention in this direction. Don’t ever expect to make a difference on the outside with customers until you clean up the inside.
• Have you considered the markets you pursue and determined your ability to make a profit? Resizing says to pursue only those customer bases that you can have an effect on terms of selling presence, service, quality and price. This creates the best chance of controlling profit. Case in point is that we have way to many 7-11 types glass shops trying to be a Wal-Mart. This is a mistake; pursue the customers who are looking for what you provide and what Wal-Mart doesn’t.
• Have you considered business diversity? I can’t tell you how many times I’ve witnessed glass shop survival from product diversity. Having an expertise in multiple products is a huge advantage from the market flexibility it creates.
• Start thinking outside the box and be innovative. Search for new alliances with customers, suppliers, other companies and the industry.If you only do what others do, you’ll never be worth any more value and you’ll only be able to buy market share with lower pricing. Get your team of employees to brainstorm new ways of doing business with new customers and a few old customers.
• Never give up on your market presence and selling activities. This is the avenue of discovery. If you’re out of sight, you’re out of business. Enjoy the benefits of downsizing by calling on all the customers who used to be called on by the competitors who no longer have sales people, service trucks, inventory, service or local people taking care of the local customers.
• If you’re in a state of financial emergency and have only the option of cutting expenses immediately, a proven method of acceptable downsizing is for everyone to share equally in the burden. Management must explain to all employees the need and that everyone will share in the burden of carrying the load until the financial woes can be corrected. Everyone taking a 10-percent cut in pay is much better than firing 10 percent of your work force. It protects morale, and often will pull the team tighter together to pitch in a make a difference.
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