The Horka Blog

People in corporations have memory. Then why is it that employees with impeccable track records of sound performance and numerous cases of performance above and beyond the call of duty, get laid off? Did someone forget what the employees did? When employees put in that extra effort, yes, it is partly because they have pride in their work and believe that their performance reflects on themselves and gives them a sense of value. But for most of them, not all this work is strictly altruistic. They also hope that those that matter – managers, etc., will recognize the great and/or extra work and will take that into account  when considering promotions, raises and who gets the axe when times are tough.

However, in most corporations, those managers, the memory that matters, change quickly.  And when they do, all those hard earned accomplishments are very quickly forgotten. The memory is lost. How else do you explain employees whose work has exceeded all expectations, who receive awards in recognition of their excellence, but end up being laid off within a year of getting that acclaim? The people they tried to impress are gone. And feeling good about yourself only goes so far when one no longer has a job. And when the only objective is short term share value maximization, a life of service to a corporation is quickly sacrificed for share value.

I have seen excellent employees have to fight over and over to impress their ever-changing managers. In any corporate department there is a general sense of who the performers are. Yet there is no structural mechanism in place to note the achievements and on-going excellence and ensure that this information is front and center whenever management changes.

This is just part and parcel of the malaise of many modern corporations run by MBAs who don’t know the business and management which is only rewarded on the basis of increasing shareholder value. Corporations have no memory, and more and more they have no sense of obligation to employees who give up their lives, other than through the payment of the  most minimal wages they can get away with.

I have been pondering this question of late. At every company I have worked for the constant mantra has been “increase shareholder value”. I understand the logic behind this. In publicly traded companies, the owners are shareholders. Shareholders invest in companies because they expect to obtain some reasonable return on their investment. Otherwise, why would they have invested their hard earned dollars to start with?

Many of the large shareholders in today’s corporations are pension fund managers. Their investments represent years of toil and sweat on the part of the workers who invested in the pension funds so that they would have some hope of a reasonable retirement income. I get this.

But what I don’t get is the brain dead response of so many senior managers to cut operating costs as soon as economic prospects dim. Cut operating costs? The fact that you can do this and still maintain the corporation as a viable entity means that the company has not been an efficient entity for, probably, years. If it is possible to run the company with 5 or 10 of 20 or more percent less operating costs suggests that the senior management that allowed the company to be run that inefficiently should be fired on the spot, no questions asked, for gross incompetence.

Further, is senior management so plain stupid these days that the only response they have when times are tough is to cut costs – i.e. fire employees? I can train a chimpanzee to walk into the head offices of a company and have it wave its arms and thump the desk to indicate by how many percentage points costs should be reduced! But this is the only response I see these days. Mentally deficient managers yell “off with their heads” and are treated as brilliant visionaries!

The other side of the coin is what can a company do to make its products/services more competitive, desirable, and worth a premium price compared to the competition? In many instances where companies have simply tried to reduce costs, the root cause is a senior management level filled with incompetents who just don’t understand how to move the company forward, how to improve the products and services and how to beat the competition. They too should be fired on the sport for gross incompetence.

This brings us to the other side of the equation. When operating costs are cut, who suffers? Inevitably it is the employees who spend the major part of every day devoting their lives to the company. When you start considering the blood sweat and tears that so many workers have given to a company, over so many years, can you simply say that you are willing, with clear conscience, and no remorse, to fire some large numbers, all in the interest of increasing shareholder value? Is an additional 1% return worth the lives of sometimes thousands of workers? Would the ordinary people who invested in a pension fund, if asked, agree to the termination of these workers so that they could get an extra 1%? I don’t know. But it is a question that I think we need to ask.

And the sad part is that the brain dead managers who can only yell “off with their heads” inevitably leave before the consequences of the cost reductions are felt. If truly justified, as I noted earlier, any managers who allowed the company to get into that state should be fired on the spot. In the many cases where “off with their heads” is a substitute for any resemblance of intelligence, the consequences for these moronic decisions should follow the perpetrators.

Their are many forums on the internet where the performance of professionals such as doctors and teachers and others is reviewed by people who have been subjected to their attention. Bad previous treatments don’t go away, they are recorded and considered whenever someone wishes to determine whether to use their services. The same report card method should be implemented for senior management. Their track records need to be recorded and considered at every company they apply to. Decades of bad decisions and mistreatment of employees cannot and should not be ignored. Inevitably these people move to another company before the true implications of their bad decisions become obvious. Today many of these appointments are made despite shockingly bad track records because either the implications of their previous decisions are not considered or not made known, or because the selection process simply involves hiring one’s friends. This is all too common because incompetence breeds incomptence and this seems to be the prevalent modus operandi for senior management hiring practices.

So, I repeat my question, how many employees is a 1% increase in return on investment worth? More seriously, how can we even ask this type of question? There is something seriously wrong with our society.