Carly Fiorina missed her calling. While clearly a failure as Chairman/CEO at HP – she has shown real insight in her observation and writing on business and the economy. Today, she does a nice job with a WSJ Opinion, titled: Corporate Leadership and the Crisis. (This page includes a link to the right but a subscription is required.)
Reading the whole article is more than worth the effort, but please allow me to share a few quotes and thoughts:
“To earn a bailout, a CEO and board should be held accountable for the decisions they’ve made – or perhaps the actions they’ve failed to take.” Mr. Wagoner, that means you don’t get to show up in Washington peddling the Credit Crisis as THE GM-Killer and try to tie it to your poor performance as CEO since June 2000!
Further, Carly writes, “Employees bet on a company when they show up at work. Shareholders bet when they put their money to work. Customers bet when they buy a product. And now we’re asking taxpayers to bet.” She then goes on to make an outstanding case for full corporate-reporting transparency. Here are the beginnings of a superb next book.
Ms. Fiorina also nails that oft touted but never mitigated scapegoat: short-term earnings tyranny. “Quarterly earnings and share price cannot be the singular purpose of business or metric of success for CEOs.”
She goes on to fill in the blanks on what to do to mitigate it the despotism of the shareholder – one stakeholder in the modern corporation - at the expense of all the others. Most commentators’ leave this scapegoat dangling, expecting it to somehow fix itself because they identified it.
For all the spending, our government, banking and business leaders continue to miss (and therefore have no answer for) the biggest reason this years Holiday Season will be a consumer spending bust. The tyranny of short-term earnings, that is: shareholder expectations of continual growth and need for constant profitability added to limited cash-flow; has or will drive vast lay-off activity.
Layoffs bring earnings contraction to those laid off and economic uncertainty to those who are afraid they will be the other shoe that drops. Said simply – consumers either have no money to buy stuff, or they are afraid they will have no money to buy stuff – so they don’t buy stuff.
Lay-offs and future lay-offs may well be a larger force driving the length and depth of the recession than continued lending contraction.
Don’t misunderstand, I’m not advocating business become a massive welfare program, continuing to employee myriads for whom they cannot actually provide work now or in the future. Everyone with an MBA (isn’t that most of America these days?) knows that a lean organization will be well-poised to come out of the gates when growth returns.
For once I’d just like to see business be able to hang on to some of the “institutional knowledge” they so often cut in lean times. If so, we may not see the negative effects of whip-saw hire and lay-off cycles.
Government may have to stop taking shares in every bank or unprofitable auto company and provide assistance on this front. Frankly, if businesses with a real future could have needed capital infusions, or borrow on their closed or rapidly closing lines of credit, it may not be necessary to talk about incentives to keep staff. All of that may depend upon just how deep we get in the next six months or so.
My recommendation to CEOs would be: If you believe your post-recession capacity will be X then if you can, remain staffed to support X, find marketing solutions to help get to X more quickly than your competitors, and do not cut spending beyond X now.
You’ll not only be poised to get to X, you will also not have to spend future profits on expensive talent searches, new hire training, and on the repair of the damage new employees do to long-term customers. You may also earn a little future devotion from those on staff today who will know you stuck with them.
Perhaps the next Treasury Chief will have some sense of how to make this happen so we get back to business soon.
Ah, forgive me, it must be the Christmas Season – I just keep on dreaming!
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