Firing Workers Isn’t Fixing Problems

I commented on a post on Evolving Excellence that Jim Jubak is a wall street guy who has good ideas. He has posted another good article: Firing workers isn’t fixing problems

Both CEOs, Edward Zander at Motorola and Jeffrey Kindler at Pfizer, of course, kept their jobs and their paychecks. According to Motorola’s latest proxy statement, Zander received a salary of $1.5 million, a $3 million bonus and $2.3 million in restricted stock in 2005.

For this kind of money, investors — let alone the workers who are being fired — deserve something a little more imaginative as a turnaround strategy. Cutting jobs has become a reflex, not because it works especially well at fixing the real problems at companies like these but because firings produce the kind of immediate earnings improvements that help CEOs keep their jobs. Getting rid of workers, you see, lets a company forecast the kind of immediate cost savings and surging profit margins that keep shareholders from marching on the executive suite.

Right. Wall street is not incapable of seeing past short term “thinking.” Even if many on wall street can’t seem to understand. I am far from convinced short term thinking is Wall Street’s fault, it seems to me many executives have this problem and blame “Wall Street.” I believe short term thinking is mainly management’s fault.

Short term thinking is part of the management system. Exorbinant executive pay exacerbates the problem. A failure to understand variation exacerbates the problem. Failure to understand systems exacerbates the problem. Job hoping by executives exacerbates the problem. And adopting lean thinking, Deming’s management methods etc. reduces the problem.

Related: Change is not ImprovementCurious Cat Investing and Economics BlogRespect EmployeesDr. Deming’s Seven Deadly Diseases

3 thoughts on “Firing Workers Isn’t Fixing Problems

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