“We’re focused on cost control.”
“We’re taking cost out of the P&L.”
“We’re restructuring the organisation to optimise responsiveness and to keep costs down.”

How many times have we heard these lines? I have watched organisation after organisation pare back the fat and pare and pare and pare … until they hit bone. Some thoughts occur to me:

  • An organism that consists of bone with flesh stretched over it is not a healthy organism.
  • An organism that consists of bone with flesh stretched over it is not a particularly attractive organism.
  • That organism is not going to have the reserves necessary to deal with lean times – illness, cold, famine or whatever.
  • When you hear the ‘plink’ of knife on bone, it is too damn late to do anything about it.

I’ve said it before and I’ll say it again – you don’t rev your car to the red line every time you change gear because you know you will very quickly kill your car. You can’t run your stereo at maximum volume all the time and expect to get any life out of your amp, speakers or ears. So why would a business be any different?

Well, let’s be frank here: because you can replace defective parts in a business relatively easily. When ‘parts’ become worn out in a business, they either vote with their feet or get downsized as part of some sort of rank-and-yank restructuring exercise.

And that’s about how long-term I see the majority of companies thinking. The pressure to deliver short term results and to give the analysts something to write about quarter after quarter over-rides sense and reason. (Interesting aside: I had a client who was up against stiff competition in his region. His first task was to phase his advertising – and he did it so that he was advertising in month 3 of his competitors’ quarters. Why? Because they were American companies and he knew that they would trim their spends to achieve targets if things were tight towards the end of each quarter. The result? for almost 5 months every year, he had the airwaves to himself and in those ‘TV industrial complex’ days, his market share grew nicely to reflect his apparent dominance.)

Until someone figures out how to break out of the extraordinarily myopic corner that business has painted itself into, we are going to be stuck in a mode whereby last year is ancient history, next year is science fiction and this year/quarter/month/week/sale is the only reality that impinges on the consciousness.

If you ran a corner shop on that basis, you’d be out of business in a month. Somehow, the big guys are surviving on that basis – for now. (More thoughts on this tipping point here)