Crisis! What crisis?
Author Alasdair White
Given that the majority of companies are currently run by those in their forties and fifties and that most middle managers are younger than that, it is no surprise that few in business today remember the last really major global recession, which took place nearly 28 years ago in 1980-82. There have been other economic ‘corrections’ of course, but in the 1980-82 recession 55% of developed countries experienced an extended period of flat or negative growth. Even the 1987 financial crisis and stock market ‘correction’ is outside the memories of most managers and so it comes as no surprise that they are very ill-equipped to deal with the current recession (which borders on a depression) and are panicking.
The extraordinary thing is that the current response to the economic turmoil is very similar to the failed responses to earlier recessions. Many companies are simply cutting the work force, cutting production, and cutting overheads in general – although in some sectors it is particularly noticeable that these cuts are falling disproportionately on the front line workers rather than across the business as a whole: there is little evidence that there is a thinning of management ranks as yet.
It is probably true to say that in the good times many businesses try hard to retain those workers whose performance is deemed to be below the required standard (which begs the question whether the ‘required standard’ has been realistically ascertained or whether performance figures and criteria have simply been plucked from the air) and that when times get hard these ‘poor performers’ are made redundant. In theory, this makes the company ‘leaner and meaner’ as it gets rid of those making the least contribution to the business – but in reality, responsibility for the performance of these people rests with the managers and it is these people that should be looked at very carefully.
The other failed approach to redundancy is the ‘last in, first out’ strategy. Read the rest of this entry »
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Author Alasdair White
It must have been totally irresistible for both the Premier of China, Wen Jiabao, and the Prime Minister of Russia, Vladimir Putin: both were speaking at the opening of the World Economic Forum in Davos and both had the opportunity to slam US policies and the system of laissez-faire capitalism and they took the opportunity and worked it for all it was worth. But, of course, being politicians they both targetted the wrong thing.
The current economic problems are not caused by laissez-faire capitalism nor poor US regulatory policies but, rather, the underlying problem is human behaviour and, in particular, greed and neither Russia nor China is free of human behaviour nor of greed.
Only recently Russia’s oligarchs flexed their muscles in pursuit of greater financial control over gas supplies to Europe so that they could make even great financial gain for themselves – and if that analysis is wrong, then the alternative is that the Russian government orchestrated the disruption of the gas supplies to put economic pressure on Europe. Read the rest of this entry »
Author Alasdair White
The UK has proposed a second huge bailout of the banks: this time to underwrite the loans they are supposed to make to SMEs. While not disputing that this is needed in terms of getting the economy started again, I am saddened that the government has not forced the banks to fire the senior management that allowed the banks to get into this mess in the first place. Ultimately, senior management are responsible for what is happening in their business and if they insist on setting targets that demand higher and higher risks being taken so that the targets can be met then, when the collapse happens and risk-taking turns to rout, then those who insisted on the inappropriate high-risk targets should be forced to take the responsibility for their actions and be fired.
The arguments that they are the ones to sort out the problem is unutterable rubbish – they caused the problem, why should anyone in the right mind believe that they have any idea how to fix it. If they actually knew how to fix the problem then the problem wouldn’t have occurred in the first place.
The senior bankers, in particular, should now go!