Where all think alike, no one thinks very much

At least according to Walter Lippmann, US author & journalist (1889 - 1974).

Without doubt, the current economic cycle requires managers to critically review their sales outlook (demand) and match output to that outlook. If demand has softened fundamentally across their industry and product segments (an example would be luxury car sales), they are going to have to reduce output and costs associated with it. Pretty basic stuff really.

However, the best managers don't simply follow the crowd, they look at what is unique to their business and determine how they can be best setup for the future.

Many companies have chosen to cut costs as if there will be no upturn in the economy i.e. they've cut workers from their workforce (as Adobe did earlier this year) in order to reduce costs and reduce output.

As Stephen Elop (who worked at Adobe and I have respect for) outlined in
Microsoft's Elop: It's 'Time to Double Down' on R&D, "there are companies that don't make that shift, that don't make the big investments, that don't make the hard decisions. But now is the time to double down and actually make those investments, [so that when the recovery starts] we're in a strong position and can take a share and be more successful than we were in the past."

Granted, for some organisations, reducing headcount is an appropriate move, but there are other approaches that are better suited to organisations that will experience that recovery.

As the article Afternoon shift to be cut shows, Holden:

"... is responding to an 80 per cent drop in export sales as well as declining local large car sales, but the company was aiming to retain its workforce as it prepared for the introduction of a second production line at Elizabeth to build a four-cylinder powered small car.
This is a really good workforce, highly talented and highly skilled – the last thing we want to do is lose that," Mr Reuss said."
They've taken, in my mind, a great step to reduce costs, spread that burden across the entire team equally, and ensure there is a skilled team in place to respond to future increases in demand. Let's just hope they don't go and give their management team absurd bonuses at a time like this.

But if all other options have been discounted and headcount reductions are required, responsible managers will ensure they are aligned to those investments in the future and not 'across the board' cuts.

The HBR article How to Market in a Downturn makes a parallel point regarding marketing budgets (another 'cost') succinctly:
"As sales start to drop, businesses typically cut costs, reduce prices, and postpone new investments. Marketing expenditures in areas from communications to research are often slashed across the board—but such indiscriminate cost cutting is a mistake.
Companies that put customer needs under the microscope, take a scalpel rather than a cleaver to the marketing budget, and nimbly adjust strategies, tactics, and product offerings in response to shifting demand are more likely than others to flourish both during and after a recession".
Perhaps I'm being harsh? After all, as the HBR article, The Layoff acknowledges:
Why aren’t layoffs taught as a subject at business school?... Boards expect executives to do them well, but nobody knows how.

Image by Sanja Gjenero

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posted by Lee Gale @ 4:31 AM,


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