Call 4 Action

You’ve seen it. Sales are down. The immediate response is for corporations to cut costs by laying off workers. The layoffs force workers to scramble to find a job, any job, often having to accept a fraction of their prior income. The unemployed or under employed no longer have any disposable income with which to buy products. Sales drop lower.  And the layoff cycle begins again.

Let’s take a closer look at the problem. The apparent cause of these harmful reactions is a lack of vision. Company decisions are made as a reaction to short-term pressures instead of long-term planning. Cost accounting has supplanted management in the bulk of American corporations.

In the “good old days” a lack of sales was analyzed to find the root cause. Employees were considered a valuable asset to the company and efforts were made to retain them. If the problem was high production costs, the first response was to find ways to increase production per unit cost. If the problem was lagging quality, the effort was to examine the process to correct the quality problem. If the problem was reduced market share, research was done in ways to produce an advanced, higher-quality product to recapture market share.

Today, the prevalent cost accounting systems identify workers as a numeric resource. No value is placed on a person’s experience. When sales drop, no effort is made to identify and correct problems. No effort is made to keep the experienced and knowledgeable employees whose efforts have helped to build the company. The first action management normally makes is to improve the bottom line by eliminating employees. This elimination is usually done by one of two ways.

One way is to layoff a number of employees with the expectation that the remaining employees will work harder to keep production levels high. This has two major effects. The first effect is to demoralize the remaining employees. The second effect is that the overworked employees make more mistakes and quality suffers.

The other way companies often respond is to open  or contract with a facility overseas and close a corresponding facility in the United States. This results in a large indiscriminant layoff which may devastate entire communities. In recent years corporations have exported American jobs on a wholesale basis.

The cost accounting systems fail to consider that American’s consume about 25% of the world’s production and more than 75% of America’s production. By discarding employees without any effort to increase productivity, quality or innovation, the corporations are “shooting themselves in the foot.” The reckless abandon with which corporate management casts off employees is, in reality, reducing the customer base of American corporations in order to pad the bonuses of their executives.

Considering that many countries protect their industries by making it difficult for their companies to export jobs, the time has come for the United States to protect American jobs. Corporate executives should not be allowed to receive astronomical bonuses for destroying American jobs.

Richard T. Moolick

Richard’s Business Sense

A Call 4 Action