Responding to hard times

The United States economy is either in recession or heading there very rapidly.

Companies, responding to the ultra-short termism of Wall Street - and knowing that a dollar saved is a dollar added to profit, are doing their best to cut costs. A corporate myth is that there are some easy places to cut quickly without apparent immediate harm: advertising and marketing, as well as research and development are among them. As a bonus, there is often a quick rise in the company's share price.

At least the claim is that there is no harm.

Except that hard times end and good times return. When they do, potential customers have forgotten those who cut back on their advertising and marketing efforts. They flock to buy from those who have maintained or grown their share of mind.

Much the same applies to those companies that slash research and development costs. When customers regain the urge to buy, these companies have few new and interesting products or services to sell.

Companies need to distinguish between waste - and there is waste in almost every department - and expenditures that are really investments. The campaign against waste and duplication should be part of a continuous improvement program (as invented by Toyota) rather than a panicked response to hard times.

Who is to blame, other than senior management, when the announcement is made that, for example, two thousand white collar jobs will be eliminated at a major company? Why did that same senior management permit these two thousand surplus, and presumably unproductive, people to be hired in the first place?

Unfortunately accountability, at least above a certain level of management, is lacking. It is refreshing, although rare, to see bonuses cut or eliminated. Golden parachutes (an Orwellian term describing rich rewards for failure) remain a curse upon business, however, and seem unlikely to vanish anytime soon.