Modern day capitalism is infected with greed, and in parts become dysfunctional; but that does not mean that we throw the baby out with the bath water. We need to reset, not to zero, but keep what is right in capitalism, and start from there. Democracy is not much different in the poison of extremism. Communism is not an option.
Ripples of communism in capitalism are accentuated in the highs and lows of business cycles. This post focuses only on the outgoing tide, economic downturns. A later post will reflect on communistic aspects in capitalism during economic upturn.
When markets are squeezed, Boards initiate manning reductions as a primary and quick form of cost reduction. One perspective that surfaces under stock market pressure is “costs walk on 2 legs”. The communistic approach sets in, operational sites instructed to reduce manning equally, by some %. Death by a thousand cuts. Share equally.
Think about it, boards are partly expressing non confidence in their leadership, that they allowed waste in the good times. Share market short term punishment impacts weak leadership the most, they implement cuts blaming others for the firing, even telling people that they don’t agree. These leaders are not trusted in the upturn, they are not trustworthy, their actions were not integral to their own beliefs.
I never advocate that Board decisions are not carried out, what I am urging is that courageous leaders debate and present alternatives that are evaluated. Ideally there is buy-in from managers who must implement dismissals, but ultimately, they must implement the decision without blaming others.
In my career, blanket “communistic” manning reductions were never enforced on our teams. We avoided cost creep and waste even in the good times. We reduced costs whenever we believed necessary, never hiding behind an instruction from HQ. We took full responsibility and accountability ourselves to do the right thing.
In the “2009 financial crisis” we reduced manning by more than instructed, not because we were told to, but because we knew that we could come back from cutting too deep, vs. not being around at all.
Irrespective of the business cycle, we invested in strategic sites and key personnel, and we closed non-strategic sites. We were data driven to measure productivity across operations. We built a reputation of doing the right thing no matter how tough, hence we were never painted with the same “communistic” brush in the downturn.
Blanket cuts at strategic sites place a significant risk on future new hires, and in todays environment of a labour shortage, that could be catastrophic for future expansion in such strategic sites.
Leadership that addresses associate performance in all moments is nicely positioned to seek labour savings in a win/win process that retains skills, like a 4-day week, where associates get paid less but have more time off. Too often weak leadership uses manning reduction edicts to eliminate their “problem” associates, stuff that should have been addressed before.
Think Bigg-r 