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As one CEO said to me recently, "No one who has a conscience ever wants to lay anyone off." Yet the headlines are filled with announcements that companies are making massive cuts in jobs and employees. Recently, these cuts are even coming in the fastest growing technology industries. If people don't like to fire anyone and people don't like to be fired, why is this happening?
Mr. Ludy argues that faced with missing budgets, the orders come down to spend less. Most people do know how to fire someone, so that option gets plenty of attention. Most people do not know many other ways to cut costs or boost profits in the short term, so the alternatives get little attention.
Our firm did a study more than a decade ago that has been quoted in dozens of books and magazine articles. We found that the stocks of companies which did layoffs usually underperformed the stocks of companies that did not. By the end of four years, the differences were enormous in favor of those who did not do layoffs.
Many people believe that this is because people do layoffs poorly, and many people do. But it also because the effort that goes into the layoffs could be better deployed in activities that increase profits. Usually, the bulk of those who go are the most employable people. They end up working for the competition, or having to be hired back as expensive consultants. How does either alternative help, while you are paying severance benefits as an additional cost?
Mr. Ludy points out, based on his extensive experience, that most executives, managers, and supervisors know little about profit improving.
Much of the recent training in companies has been on how to reduce errors, and that may help cut costs in main processes. That learning is often of little help in secondary processes and in areas where the processes need to be totally replaced, revised, or outsourced. Xerox and Motorola are both famed for their quality processes, and both companies are struggling now to make a profit.
Mr. Ludy has developed a process described in the book that helps to get people focusing on the best opportunities, and following through to implement the opportunites that they select. He also provides lists of items which many companies ignore, to help get the process started.
Although I have not seen this process working in practice, it is similar enough to elements of successful processes I have seen that is has credibility to me.
If you decide to pursue this process, I suggest that you can improve upon it. First, rather than just having one small team working on this, you should try to get as many people working in small teams as possible. The most successful profit-improvement program I ever saw involved over 14,000 people in suggesting ideas. Second, be sure to compare the performance you are achieving in one part of the company with what you are achieving in another part of the company in the same activity. Most large companies get their best ideas from benchmarking to their own best practices. Third, be sure to create an e-intelligence capability to get more information to everyone about how the company is performing. E-Business Intelligence is a book that can help you understand this point better.
The three strengths of Mr. Ludy's process to me are:
1. The emphasis on finding ways to improve profits, without hurting people.
2. Training people about how to improve profits.
3. Eliciting questions to locate opportunities.
In regard to the second point, you may find it helpful to read Dr. Ram Charan's new book as well, What the CEO Wants You to Know. That book focuses on simple business concepts and metaphors to make everyone better able to relate to the issues of the enterprise.
One of the major weaknesses of companies is that leaders are often asked to pursue tasks for which they do not have relevant information, experience, or training. Where else does your company have this issue? In my experience, two areas stand out.
(1) Finding better solutions to repetitive problems.
(2) Choosing directions that will lead to better results, regardless of business conditions.
May you find more intelligent, and more humane, ways to profit!
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