If you are an entrepreneur, employ a few, the best available based on affordability and treat them well. If you don't, good people will leave. If you pay them well but do not treat them like human beings, they will still leave. Employee loyalty cannot be bought with money. People who stay back under such circumstances are either not good enough or have some extraordinary compulsions to stay back. In such cases they will leave sooner than later because they know you are exploiting them. Remember you are hiring employees, not buying them - Madhavan Gopalachary.
I read an article by Ms. Carol Hymowitz in the Wall Street Journal titled ‘Jeffrey Immelt defends GE’s wide reach’ on July 11, 2008. Mr. Jeffrey Immelt is under fire for missing his first quarter target by 5.9%. According to the report, Mr. Immelt attributed the primary reason to the poor economic condition that is prevailing. I am giving below some of my observations.
Unfortunately for Mr. Immelt, GE’s share has dropped by 32% in 7 years from the time he took over in 2001. Dow industrial average has climbed by 15% during the same period. This means the actual loss is 36.8% in 7 years averaging 5.26% per year. The problem with GE is it is too diversified with too many lazy dogs and question marks. It is also very low on innovation. I have not seen a single new product coming out of its stable for a very long time, even before Mr. Immelt' s time. Why blame him alone? What the other top managers are doing about it?
There is no company in the world that is recession proof and that includes GE. No human beings collectively can control the environment. We have to change ourselves to meet its demands. Mr. Immelt has one more disadvantage. He is just compared with Dr. Jack Welch all the time and will be under his shadow. I feel sorry for him but he must be mentally prepared for that. This will apply to all leaders who will follow at GE for decades. Dr. Welch will remain the benchmark for leaders at GE for a long time to come till a new super guy comes along. But somebody will definitely come but nobody, except God, knows when.
Having said that, many top managers think that cost cutting should be done only in bad times. This is where they are wrong. Cost cutting should go on all the time, whether in good times or bad times. In one of the cash rich company I worked for, I had a very tough and great boss who would insist that all internal reports should be done on the back side of the junk literature we were receiving in tons. If anybody used a fresh and plain A4 sheet, he had it coming.
Dr. Jack Welch’s success was in his ability to cut costs ruthlessly. He was relentless in this area. I don’t know what ratio he was following. I had another great boss who used to say ‘Costs walks in on two legs’. He had a ratio of 1:5. Unfortunately, he died in 1986. My ratio is 1 person should do the work of 10 or even more. If we follow such rules no recession will ever hit any company. Pay and treat the existing employees exceedingly well, above the industry average. There is no point in hiring and then firing people. Do not hire people at all. That’s it. You don’t need to fire people in that case and get a bad name. But what do you do if you already have too many people on board?
© Copyright, Written on Jul, 12-08 . Without prejudice. All rights reserved
Cost Cutting – when it should be done? - To learn more about this author, visit Madhavan T Gopalachary's Website.
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Madhavan T Gopalachary
(Visit Madhavan's Website)
Madhavan Gopalachary, nick name "madgopes"
(g pronounced as in go) given by IIT
classmates, is a Mechanical Engineer and
an alumnus of Indian Institute of
Technology, Madras having passed out
specializing in IC Engines &
Thermodynamics.
He has nearly 35 years of experience in
the Corporate World. He started off as a
trainee and handled sales, marketing,
manufacturing, product management, profit
center management, strategic planning and
corporate development including R & D in
various organizations and at various
levels before becoming a CEO. His last two
professional assignments were at CEO level
before embarking to start management
consultancy business on January 01, 1998.
He has worked for British, Swedish MNCs as
well as very large Indian business houses.
He has spent a large portion of his time
from June 1998 till date in East African
Countries practicing as an independent
Management Consultant.
More details can be obtained at the
following web sites:
mmg.name
/mtg.html;
mmgconsu
lting.biz/
Madhavan's articles can be accessed at www.madgopes.com
.
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