Thursday, November 25, 2010

Belshaw's World - short term gain, but lame in the long run

Note to readers: This post appeared as a column in the Armidale Express on 17 November 2010. I am repeating the columns here with a lag because the Express columns are not on line. You can see all the columns by clicking here for 2009, here for 2010

People are meant to become more conservative as they growing older. I seem to have gone in the opposite direction!

Like all of us, my own views span.

On some of the current symbolic issues such as the monarchy, I have become more conservative. I am far more pro-monarchy today than I was twenty years ago. On management and social policy issues, I have become more radical.

All this gives rise to an odd, sometimes uncomfortable, feeling. People attach labels. As a monarchist, I am expected to have all sorts of other views; often, I do not.

This column is not about the monarchy. I leave that to others to argue! I am simply using it as an illustration.

Many things combined to reshape my views. This column tells the story of one of those things.

After we first came down to Sydney, I did some outplacement work for a Sydney recruitment firm.

This was very much the modern white collar equivalent of piece work. The practice charged a fixed price for every candidate based on the package of services purchased. I was paid a proportion of this.

This made for a very unstable income. The money I earned depended on the work coming through the door and that fluctuated. It also meant that there was constant pressure to do things in minimum time.

Those selling the firm’s services were paid a percentage of sales. To get the sale, they would effectively price cut, selling the package that the client would accept even though they (the sales people) knew that more would be required.

This created a constant tension for those of us concerned with delivery. Did we deliver just the purchased package, or should we go beyond this to provide the extra support that we knew would be required?

If we did the second, we reduced our own incomes. Our hourly earnings fell, but we also tended to get less work since work was allocated first to the high producers.

The firm had a candidate focused ethos. This was more than just words. However, there was an irreconcilable conflict between the ethos and the firm’s business model.

Many of the candidates I dealt with were the human rubble remaining from organisational restructuring.

The 1980s were a period of fundamental change in the Australian economy. This change coincided with a global change in management approaches that emphasised efficiency, measurement and process. This was reflected in the way executives came to be rewarded by performance pay based on the achievement of generally short term targets.

The Keating recession, the one we had to have, reinforced the impact of the changes. Organisations cut staff and then cut again. New words emerged – process re-engineering, corporate restructuring, outplacement.

Markets rewarded corporations not just on the basis of past performance, but on the basis of prospective profits flowing from cost cutting.

New dynamics were created.

Announce a restructuring and cost cutting program and your share price will rise. Deliver by cutting costs sharply so that your immediate profits after redundancy costs rise. You have delivered, share prices rise. Performance bonuses based on profits and share prices rise.

In my outplacement work, I was dealing with those left behind.

The hardest case I had to deal with involved a senior manager retrenched by a national bank.

He left school early to join a bank. Over the next forty five years he rose through the ranks, mainly in administrative roles. His bank was his world.

Following a bank merger, his corporate position was abolished and he was retrenched. The personal effects were devastating, a devastation accentuated by his continuing failure to get another job. He was seen as just too old, lacking the skills required for a modern work place.

By the time I saw him, he was in a state of total despair. The hardest thing was just convincing him that he actually had still useful knowledge and skills.

This story actually had a happy ending, one not due to me. Fraud prevention, an area he had worked in, came into market demand. With skills short in this area, he was actually searched out and offered a job.

The work I did as an outplacement consultant was wearing, if sometimes satisfying. However, I found a bigger problem in the work.

By 1996, I was convinced that current management approaches could not work in the long term. They had, in fact, become a super Ponzi game.

I will explain why in my next column.

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