By their fruits ye shall know them
Bad decisions reveal bad leaders, whatever the excuses they make
How can you gauge the quality of leadership in an organization? There’s one, simple way: by looking at the decisions they make. When short-term decisions are the norm, greed is everywhere, and ethics are either ignored or seen as something to be “got around” for the sake of profit, you know that the leadership has become so riddled with Hamburger Management that it has reached rock bottom.Two news stories in two days brought home to me just how far down the scale of basic leadership competence organizations can go. One was about a company that allowed secret military information about night-vision equipment to be provided to companies abroad, including some in China. I say “allowed.” That’s too weak a word. According to a spokesperson from the US Justice Department, some of the organization’s executives not only knew that they were breaking the law, they tried to work out the best ways of doing it, so as not to be caught. The United States attorney, John L. Brownlee, said in a statement. “The criminal actions of this corporation have threatened to turn on the lights on the modern battlefield for our enemies and expose American soldiers to great harm.”
Why did they do it? To save money by outsourcing, so inflating profits.
The other story was about Circuit City. It seems they are planning to lay off more than 3000 experienced, higher-paid people and replace them with new recruits at lower wages.
Why? To boost the bottom line.
This time, even some of the financial analysts expressed surprise. The New York Times quoted one as saying:
While we view these cost cuts as clearly good for near-term earnings, they are not necessarily the way to drive longer-term operational success. It stands to reason that firing 3,400 of arguably the most successful sales people in the company could prove terrible for morale.Yet, despite this clear statement that management were making a decision that mortgages the future for short-term gain, the company’s shares rose by more than 2 percent. It seems that Wall Street still can’t manage to raise its eyes beyond the next quarter. Never mind that customers will now, presumably, be served by newer, less qualified and experienced staff when they want to buy an expensive flat-screen TV or some other expensive electronic gizmo. Who cares about providing quality service when there is money to be made?
. . . he found it incredible that a business would endanger the lives of American soldiers, just to increase their profits by a few percentage points.
Short-termism is the essence of Hamburger Management. Yet how staff behave, especially towards customers, is telling the rest of the world—very clearly and loudly—how good the executives are as leaders. When I see poor staff, I know the leadership is crap. And don’t give me all that rubbish about blaming the quality of the people available. If management employs the cheapest people that they can hire, there’re getting what they deserve and telling potential recruits that they would rather fire you than reward you properly. As a result, good staff soon won’t be seen dead working in their organization. Worst of all, management obviously don’t care. Only the cheapest is right for their customers. Never mind the quality, feel the profits. However they slice it, it’s clear who will be to blame for the long-term decline of the business. There can be no excuses.What about the ethics of decisions like this? Is it right to break the law and send military secrets to possibly unfriendly countries to make a buck? Is it right to fire good employees, just because you may be able to hire less good ones more cheaply? I listened to a US government official saying that he found it incredible that a business would endanger the lives of American soldiers, just to increase their profits by a few percentage points. I want to ask him what world he was living in. There are executives out there who would sell their children into slavery to boost the value of their stock options.
Civilized societies don’t foster unbridled greed.
It’s high time we took a very long, careful, and objective look at the kind of business communities we in the West are allowing to develop. Do we want truly unfettered capitalism, where everything is fair and all that matters is how much profit the company reports each quarter—and how much cash the executives take away as a result? Do we want the pursuit of money and power to become the sole arbiter of what is acceptable? Do we want our business leaders to put personal greed before the public good?If we don’t, it’s time that we found ways to rein back the less acceptable forms of corporate behavior. Civilized societies don’t foster unbridled greed. They don’t condone law-breaking in search of better-looking figures. Nor do civilized organizations. I have yet to hear that anyone involved in these dubious decisions has been disciplined, let alone fired.
“By their fruits ye shall know them,” it says in the New Testament. What do these decisions tell you about the businesses involved?
Labels: business ethics, civilized work, corporate culture, Hamburger Management, management attitudes
4 Comments:
Hello all,
I think it is possible for conscientious people to get capitalism to work for us if we all try. Here are a couple of suggestions that I think can make a difference:
1) Direct your investments, savings or superannuation toward a managed fund that is accredited as a sustainable investment. That will promote companies that not only care about the planet, but care about employees and long-term thinking - which seems to me like a good idea for a long-term investment.
2) Choose a mutual organisation (or even a not-for-profit organisation) for your banking and insurance (car, home, health) needs. You may end up with better service and you will be promoting more caring companies.
Thanks,
Ryan
Good suggestions, Ryan.
There's nothing intrinsically wrong with capitalism. What causes the problems is human nature.
Keep reading, my friend.
A question - do you think that there is a greater tendency toward hamburger management in publicly-traded companies? Judging from my own (admittedly limited) observation, I think so. It seems that having pieces of your company bought and sold by complete strangers shifts your focus away from long-term viability to "making the numbers" for next quarter - no matter if doing so is actually a good thing or not.
Yes, Allen, I do.
Several commentators have made the point that private companies are free to set strategic priorities purely on the basis of business needs. Those that are publicly traded are always under pressure from the "money guys" to do what they want — regardless of whether that makes sense for the business in the longer-term.
Costco, for example, has resisted going public for exactly that reason.
Wall Street, like all stock markets, began as a way to raise money from people who wanted to take a share in the profits of the businesses that they invested in. When that is your goal, your interest is in a steady flow of good dividends. That's at least a medium-term objective.
Nowadays, most of the people on Wall Street are traders. They make their money by buying and selling shares, or gambling on share movements via so-called derivatives. Dividends are of little interest. Many businesses no longer pay any.
The result is rampant short-termism. Buying and selling (trading) is essentially a short-term business. Besides, the traders have little or no interest in what they are trading, just as long as they can sell for more than they paid — hopefully in the shortest possible time. Hence the emphasis on quarterly figures.
Keep reading, my friend.
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