A CEO’s job is never easy. Sit in any shareholder meeting and you will soon hear shareholders complaining about costs. They will talk about ‘lean’ it’s the new buzz word and they will come up with examples of similar companies to yours that can do what you are doing at a fraction of the cost. Companies that pay their people less, that have downsized far, far below yours.
I once made the big mistake of suggesting to an investor, “If the company you know is so much better than the one you invested in then why didn’t you invest in it in the first place?” To my complete shock his reply was, ”Because I would have made less money. My theory is to find a fat and inefficient company and persuade the CEO to drive down its costs so that it makes more profit. During the process I will see my share value rise sharper than if I had invested in the leaner organization. That is where I make my margin”. The problem is that there comes a point where it is unwise to cut back anymore if long-term sustainability is required and very soon any CEO with a long term strategy will come face to face with his or her own worst nightmare.
Today I hear of so many companies that have cut back year on year, on year. So much so that they simply have too few staff to even have time to think of creative schemes to make improvements or to bring in more revenue. If truth be known the investor that invested in the company I mentioned did so because of its vision, innovative products and marketing, so all the talk I was hearing was based upon other criteria that had crept in since.
One thing I know for sure today is that for most companies shareholder demands for cuts, cuts and more cuts have absolutely no place on the work floor. This language needs to stay permanently in the boardroom. Employees want to hear about new ideas, about winning more business and about new strategies to outsmart the competition. They know that to win a race you need to be lean. Employees are not stupid and more often than not, they are not the real block to spending less.
Try telling your family to cut back on all its budgets for five years in a row. Just see how easy it is to sustain. The alternative is to talk about attractive things that might be out of reach financially but can be reached via austerity. Benefits that the whole family can see the point of. Very soon you will see your family members offering to cut here and to cut there to obtain them. When people see the ‘why’ savings are not really a problem, as long as everyone is in it together. This can easily be demonstrated by charitable donations. A family supposedly flat broke can sometimes do the most amazing things to find money for a good cause. The exact same phenomenon applies in business.
I know this is basic stuff but I just don’t get it why so many intelligent shareholders and business leaders forget that real efficiency improvements come from planting a vision, rather than a negative demand for savings on things that once were considered so important. Lean is not a new project, it is a must have in a healthy and well balanced company. A little fat here and there can go a long way if it is put to good use!
Have a good week,Harley