Gather ’round kids, while I tell you a story. Of course, it is “just a story”, but let’s change some of the names anyhow, just in case. I’m sure you can all relate to this one, as it has happened to me, and to you, and to you and probably will happen to the rest o’ you.
Once upon a time, there was a company called Innovation Ain’t Us (IAU). IAU had been around for a while, but as it always happens, they reach the peak with their products. Competition was nibbling at their heels.
The competition tried to figure out ways to beat the leader in the industry. “What can we do?” they all asked. One of them then came up with an idea. “I know!” she said. “Let’s go see the wizard! He’ll know what to do!”
So, they went to see the Grand Business Wizard. “What can we do?” they asked.
“Well,” said the wizard while stroking his white beard, “for a small fee, I could cast the ‘spell of frugality’ on them.”
“But how will that work? Everyone’s cutting back on costs these days,” said the competition.
“Yes, but is everyone cutting out extra costs or needed costs?” he asked.
So, after much discussion, they decide to pay the fee, and the wizard casts the spell upon IAU.
“We must cut costs,” the leadership said. “Halve all bonuses, cut back on travel, cut back on training and don’t buy any books for the teams.”
So, time went along and they tried to get more customers, but the competition was fierce.
“We must maintain,” they said. “Halve all bonuses, cut back on travel, cut back on training and no more team outings.”
IAU was able to get a few more customers, but they began to lose them to the competition.
“We must remain the leader,” they said. “Halve all bonuses, cut back on travel, cut back on training and no more department outings.”
IAU surveyed their customers. They wanted newer technology. They were having trouble buying the platforms that the system ran on.
“We must innovate,” they said. “This is how we will pay for it: Halve all bonuses, cut back on travel, cut back on training and cut loose those too highly paid.”
People updated their resumes. They looked elsewhere for work.
“Why can’t we innovate?” asked the leadership. “Let’s have meetings; let’s let them know how serious it is.” So, they held meetings beating up people for being innovative.
The technicians said, “We don’t know how to innovate. We have no training, and we have no books. Our best and brightest lost interest and went somewhere else. We have no outings, so morale is low. We have almost no bonuses, so why should we even care?”
The leadership responded, “We need to innovate. We’ve become stuck in a rut. We will re-org. We will bring in new blood and cut loose dead wood. We will take away all bonuses (except for the executives), cut back on travel, take away all training and make everyone work overtime to get more work done.”
So, the leadership never got the message because they weren’t listening. They were eventually forced to sell the company. Executives got cut, but they didn’t mind since they still had nice bonuses. Morale tanked even more. Others were let go, but with minimal severance pay. Morale tanked again.
Kids, I wish I could tell you that everyone lived happily ever after, but it’s still too early to tell. I’m sure the economy isn’t helping, either. If they survive, it will take real leadership and not the “leadership” that got them into this mess to begin with.
The moral of the story is that cutting costs to meet the bottom line isn’t a long term strategy. Plan a strategy, innovate to save money, invest the money for a rainy day, and take care of your greatest asset: the people who get the work done and execute the strategy.