Dumbest moments in business

CNN.com recently published an article called “101 Dumbest Moments in Business“. I’d like to draw particular attention to #77: Bank of America, which laid off 100 tech support jobs in the San Francisco area and told their employees that in order to receive their severance pay, they needed to train their replacements. That’s funny in “The Office“. Not funny in real life.

Yet, executives wonder why morale is low, employees have little loyalty to the company, and can never seem to figure out why they can’t find good people to do the jobs. These executives apparently missed National Lampoons Christmas Vacation.

Frank Shirley: “A healthy bottom line doesn’t mean much if to get it, you have to hurt the ones you depend on.”

As a business owner, I can relate to wanting to save the company money. Sometimes to survive, you have to do what you have to do. But there’s a difference between surviving and pleasing the stockholders. This is what has always bothered me about the stock market and about Corporate America in general.

The stock market is based on perception, not on facts. You’re gambling on how a company will be perceived in the future as opposed to how it is viewed now. If it’s favorable, the stock goes up. If it’s not favorable, the stock goes down. It doesn’t have a whole lot to do with actual income. It’s all about perception of future business. I’m sure to be flamed by someone for that statement, but if you look at history, that statement holds true across the board.

I’ll intentionally choose a poor example to start with. Look at Enron and Adelphia, whose accounting scandals made them look great on paper. Once the ill favored bookkeeping surfaced, they tanked. But not before people made and lost millions of dollars over it. Investors made decisions based on the false perceptions that were being put forth. Someone will certainly claim that investments were made based on incorrect financial records, not on how the company looked. I would claim that these concepts are are subtly intertwined and can’t be logically separated.

I’ve seen numerous occasions where a stock will tank for reasons which have absolutely nothing to do with its financial well being and everything to do with the perception of the company’s growth. The company I used to work for was a publicly traded company and the stock price halved in a matter of just a few months. Guess what? It still posted millions of dollars in profit each quarter after that. It NEVER lost money on any given quarter. The company wasn’t making enough to meet the expectations of Wall Street. And that’s the root of the problem.

The stock market is based on expectations, not on facts. Executives in general pay more attention to the stock market than to their employees. What they might not realize is that if they paid more attention to their employees, their employees would likely work harder and they wouldn’t have nearly as many morale problems. Or perhaps they don’t care. After all, if the stock goes up, the stock options they are given increase in value and those stock options are typically worth far more than their salaries ever amount to.

And for the executives who do understand the concept, it doesn’t matter. Ultimately, as a public company they answer to the shareholders, not to the employees. So they end up in a catch 22. If they neglect the opinions of the shareholders, they’re tossed out the door. If they neglect the employees and pay attention to the shareholders, employee morale suffers which ultimately translates into the company suffering.

The only real option seems to be to screw the employees, risk being fired because you’re ‘wasting’ too much money on the employees, leave to work at a private company, or to start your own. None of those roads are easy and three out of four of the choices lead to the door. The path of least resistance seems to be screwing the employees, and that’s the road most traveled

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