Body of Knowledge

“So – Are you telling me you’re going out of business…?”

This is a question that I recently felt compelled to flat-out ask a COO of a publicly traded Fortune 500 company in response to a series of comments he made to me during an engagement interview.

His shocked response was, “Of course not…!”

There was obviously a disconnect someplace.

To be sure, we are living through difficult times. Every day we hear of people being laid-off – “blue-collar” and “white-collar” alike. It seems that nobody is immune to the risk of job-loss except for the people in the media reporting it and the people in government. And certainly, the government will tell you that they are “reducing headcount”, but there is a difference between reductions through attrition and giving someone the boot.

The “Butcher’s Bill” of lay-offs from America’s 500 largest publicly traded companies during the period November 1st, 2008, through January 30th, 2009, stood at 362,335. And the employment statistics (with the exception of September of 2005) indicate that the lay-off events and initial claimants are at least 50% higher than at anytime since 2005.

Of the “Big-3”, only Ford feels that they can weather the storm and has refrained from taking any “bail-out” money from the taxpayer (although they have requested the option, if needed).The others, General Motors and Chrysler have begged and cajoled for help – which they received.Additionally, Chrysler has looked to an unobvious partner in Fiat (remember that GM recently shed its partnership interests in Fiat just a little over a year ago – paying roughly $2b for the privilege).

But we already know all of this…

What of the other major automobile manufacturers such as Toyota, Volkswagen, Nissan/Renault, Honda , etc…?They seem to be weathering the storm better than their US counterparts – or at least staying out of the news.How is that?

And in watching the earnings-reports come through on Bloomberg , I can’t help but notice that most of the Fortune-1000 companies are not posting losses or burning through cash – just that their revenue and earnings are down, albeit in some cases significantly.

Obviously, share-price is one indicator of a company’s position – and we all have seen share-value shed. But it is not the only inditor, and arguably it’s not even the best indicator.There is also EBIT, EBITDA, and my personal favorite, free cash-flow from operations .

If a company has a reasonably strong balance sheet, is still profitable, and is still enjoying free-cash-flow from operations in today’s economic climate, wouldn’t one conclude that they are going to survive the down-turn?Then why are so many companies not taking the opportunity to fortify and expand their positions in the marketplace?Why are so many companies not taking the time to repair or improve their ability to execute?Why are they acting as if the arrival of the four-horses of the apocalypse is upon us?And why – when their cash can go so much further today as compared to any period in recent history – are not more companies putting their cash to work instead of under their mattresses?

Are these seemingly healthy companies going out of business?They sure are acting as if they are…

And what of those companies who are a bit less comfortable in their circumstances?Are they hording what cash they have and hoping the “slow-burn” will see them through to better times?Is this what a leader would do?

How many times have we heard (or even said), “I’d love to improve xyz, but I can’t now because we are too busy.”Well, now is the time.

And sure it takes guts, but that’s what a leader does and guts are what it takes.

By taking action and seizing the moment, this attitude and approach can serve a two-fold purpose.The first; the company improves its lot and ability to execute when the economy turns around (and it will) – thereby generating a return of magnitude to the company.And the second; the company can leverage its existing and knowledgeable resources into making these improvements – thus adding value to the company – instead of turfing them out by the body-count.

Mind-you, I am not a “pro-labor” person who is against lay-offs on general principle;nor am I “pro-business” who thinks that all riches should go to the folks at Headquarters.I like to think of myself as a pragmatist who learns from the past, lives in the present, and plans for the future – all for the enrichment of the entire organization and its value-chain.

I believe that lay-offs are but one tool to help bring in-line costs by eliminating excesses and redundancies.But I also don’t believe that a company can be made healthy solely by shedding bodies.A true leader will look beyond the obvious and the here-and-now by seeing a vision for the future and following a path towards it – making sure to communicate it.

This brings me to Toyota – now the biggest automobile manufacturer in the world .Toyota has thus far been able to navigate through these difficult times and still keep its “no lay-off policy” and workforce in-tact.Toyota is able to do this because – when the employees are not building vehicles (or whatever) – they turn their energy towards building the company, investing, and effecting operational improvements.This is a key component of the “Toyota Production System” (TPS) and – although not a guarantee of full employment as there has been some talk of Toyota actually going through a layoff – the numbers are miniscule compared to others (1,000 employees on a workforce of 316,000 or 0.34%).

On a similar note, I was recently speaking with the head of operations of an oil company. He made mention that, “You can hide a lot of sins when oil is at $147 a barrel, but at $50 a barrel (or less) the tide goes out and exposes the rocks.”His company is dedicated to the continued increase in shareholder value – regardless of the price per barrel – and realizes that they cannot hope for the markets to do all of the work.They are committed to being proactive and making the investments today to ensure their future.

As “Red” said in ” Shawshank Redemption “, “You either get busy livin’ or get busy dyin’.”

What’s it gonna be?

Paris is the Founder and Chairman of the XONITEK Group of Companies; an international management consultancy firm specializing in all disciplines related to Operational Excellence, the continuous and deliberate improvement of company performance AND the circumstances of those who work there – to pursue “Operational Excellence by Design” and not by coincidence. 

He is also the Founder of the Operational Excellence Society, with hundreds of members and several Chapters located around the world, as well as the Owner of the Operational Excellence Group on Linked-In, with over 25,000 members.

For more information on Paris, please check his Linked-In Profile at:

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