Nancy, an acquaintance of mine, is a long-time employee with a well-known company. A year ago the size of Nancy’s department was “right-sized” and she was covering the workload of three people. Now, a year later, after another cutback, Nancy is responsible for the work that seven people used to do, and she’s working sixty-hour weeks. Customers are starting to complain that they’re not getting the same level of service they used to.
At Nancy’s annual review, her new boss said, "Nancy, I’m disappointed. The level of customer satisfaction in your department is dropping steadily."
Nancy cut off her boss before he could continue. "You’re disappointed? I’m disappointed! This company used to care about customer service and now they don’t. How do I know? Because they have one person responsible for the work seven people used to do. You can’t ask one person to do in 40 or even 60 hours what seven people used to do in 280 and expect the same results."
Her boss could not reply. Nancy was right.
Excessive focus on the bottom line and limited focus on what really makes a company’s wheels turn has many organizations cutting personnel with the hopes of keeping everything rosy on the balance sheet.
Publicly held companies are usually the worst, as they focus on keeping stockholders happy. But what they’re not considering is the long-term ripple effects of short term thinking.
One financial advisor with U.S. Bancorp Piper Jaffray, who spoke with the request that his name not be used, says both private and public companies have made cutbacks, but he frequently does not see long term strategic planning on the public side.
This advisor believes long-term planning is the key to success. He says "by laying people off, [public companies] may have a one-time savings, but once that’s done, that’s it. Their balance sheet won’t be planned and they’ll be relying on hope. That’s asking for trouble. If they would plan adequately, they would emerge healthy from our recent economic doldrums."
Brian Bartschi is a registered investment advisor with another national financial services company. He says "it’s frustrating when companies set things up to look good for two or three quarters and then make a sudden announcement that something ‘went wrong.’"
Bartschi says he tries hard not to be a cynic, but he thinks some publicly-held companies do abuse the system.
A sales manager for a large consumer products company, who also asked not to be identified, is in agreement that these practices occur. He confides, "The so-called solutions our directors are coming up with to solve today’s problems are going to cause even worse problems for us down the road, but they just want stock prices to look good this quarter. They must be praying that things will somehow magically get better next quarter."
Then there are private companies who get too myopic about the bottom line. One large privately-held company I know of is demoralizing its workforce because it insists on using a reactive management approach to problems. It’s a case in which senior managers and vice presidents are of the mindset that each month has to be better than the preceding month, or else. So they twist and bend the rules, the people, and the numbers each month, building up a false sense of growth that eventually snowballs into a huge problem.
Public or private, companies that choose short-term gain at the expense of long-term growth do themselves an injustice. Long-term growth sometimes means making a sacrifice now for better results down the road.
The tough part is telling stockholders who want quick returns and employees who want stability that sacrifices have to be made. People do not like sacrifice, but smart businesspeople know that sometimes it’s necessary, and a little forthrightness can go a long way. It’s all part of communication, and it’s part of the balancing act that is good business.
Nancy, my acquaintance who is overloaded with responsibility, says her place of work used to be great. For many years the owner of the company walked through the production plants and offices and talked with workers. But somewhere along the line she felt his focus shifted from long-term growth to short term profits, and with that, poor decisions were made that have left the company shortchanged.