Because they didn’t have the time (or the will) to make the structural decisions that would help to face a downturn, companies often react by acting on the easiest adjustment variables :
â€¢ Cuts in bugets
â€¢ investments putt offs
â€¢ employees lay offs.
It makes it possible to attend to the most urgent things first even if I think it only defers what’s unavoidable. The focus is on cost and not on revenue, andÂ costs can’t be endlessly cut except if you want to turn a company into an emplty shell. Any cut expenditure won’t be able to be cut again the next quarter or the next year because it won’t exist anymore.
I’m one on those who think that the goal of any enterprise is to make money and that thinking only in terms of expenses only makes it possible for directors to act like firemen. But it’s easier to cut costs instead of trying to find an innovative way to drive incomes.
Whatever, this kind of policy also have dramatically bad effects for the future.
Even if it can be done quickly and if it’s efficient on an accounting point of view, weakening an enteprise in a downturn can be fatal when business will pick up again. More, many successful companies were built in such hard times, that perhaps mean something. The years that followed 1929 saw the birth of the Michelin Guide, of Texas Instrument, saw the growth of insignificant businesses like Air France or IBM. Closer to us, many of today’s internet leaders where built during the dotcom crash.
There is a logic to that : businesses without excess weight (so they can’t cut anything off) and which are, by nature, not focused on preserving what exists but on increasing their revenue, crisis or not. Even it it means they have to innovate and reconfigure themselves continuoulsy, what is a part of their DNA. So they get stronger as the other weaken themselves and when the business picks up again they just keep going when others can’t accelerate because their fuel tanks have been lighten and are now empty.
Let’s consider what’s happening on the Human Capital side.
In 2002, KPMG Uk laid more 700 people off. They realized, maybe to late, that they lost more than employees. They have lost expertises, competences, a human network that had to be rebuild. I don’t even mention trust. We all know that thoses elements that are key to performance are those who take a long time to be rebuilt. This year, KMPG did not make the same mistake and prefered to reduce people’s work duration rather than laying them off. It’s a more responsible attitude towards the future of the company…and the present of people.
Beyond this example we have the proof that :
â€¢ capitalizing on expertises, keeping trust and membership at a high level and making people feel they’re a part of a network is essential, most of all in a downturn. An employee is more than an employee and a team is more than the sum of the people who composes it : it’s a valuable capital.
â€¢ short term solutions have their limits : cutting everything is possible, but it makes it very hard to restart. More, it makes it easier for agile competitors to surpass those who decided to weaken themselves.
Moreover, after many bad nexs, it seems that some businesses realized they overreacted and.
And for those who think that it’s impossible to avoid such bad consequences, a ray of hope can be found here : a list of 10 companies that never laid anyone off in their history.
capital-humain, crise, croissance, expertises, kpmg, licenciement, rÃ©seau, rÃ©seaux, talent