My American friend is a bit down. Not surprising when Ken Thompson had been asked to step down from Wachovia, Kerry Killinger is having similar issues at WaMu, and Standard & Poor’s is downgrading Merrill Lynch, Lehmans and other big name bank stocks.
As a result, my friend is focusing upon the theme of ‘inspiring the troops’, focusing upon practical strategies for business improvements to the top and bottom line. He made it clear that big, strategic themes, such as innovation and disruptive strategies, were off the agenda. When banks are fighting for survival, the last thing they are going to think about is big picture ideas. They want practical ideas to survive.
I must admit, I can understand this mentality, even though I absolutely and totally disagree with it.
In my few decades of work, I cannot think of one single business that has managed itself out of the doldrums by cost-cutting. I could name company after company that, due to a cost-cutting focus, has instead hoisted themselves by their own petard.
The problem with the cost-cutting approach to survival is that it is indiscriminate. It kills as much good as bad. It suffocates the business, demotivates the staff, murders creativity and stifles energy.
All it does is create negative vibes that are hard to shake off. As a result, the vibes get worse, so the cost-cutting gets worse, so the vibes get worse, so the cost-cutting gets worse.
You end up cutting away fat, then muscle, then bones, then limbs, arteries, veins… you just kill the business.
So, I propose an alternative view.
Every firm that has been successful coming out of the bad times has invested in the things it strategically believed in during that recession. The strategy remains the same, provided you believe the strategy is right.
Plans change, but strategies are not plans. A strategy says that you have seriously thought about getting the firm from A to B and it was the right thing to do. So it’s the right thing to do, whether the markets are sunny or stormy. It just may take longer to get there.
Sure, you might fine-tune the budgets, the timescales and the effort, but you hold true to what you believe in.
The problem with most management is that they just don’t have the guts to do this.
Whatever your business is trying to achieve, hold on to the principles you believe in as that’s the only way to succeed.
So here’s my challenge to my friend in the US: ditch the strategic discussions and focus on the practical day-to-day management issues by all means, but it is not going to motivate anyone to wake up in the morning and get into the office. People need visions to see where they are going, not hatchets to see what they are missing.
And here’s my challenge to the folks out there: name one company that continued to prosper, survive and grow by focusing upon cost-cutting. Apart from the management consultants.Chris Skinner is an independent financial commentator (www.balatroltd.com).
