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11/7/2001
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Ask The Secret CIO: Bird-Brained Decisions

Readers agree and disagree with Herb about whether companies cut foolishly to save money. And the letter about rented swans getting pink slips demonstrates that life in the corporate pond can be tough.

Doughnuts or Water

I read, with interest, Let's Cut Out the Petty Perks, and I came to the same conclusions as you and your associate, Stephanie Stone.

Our own company, a newspaper, was recently called to an "after-hours" meeting (read: "off the clock"). The publisher, transferred here by corporate headquarters two years ago to 'raise the bottom line,' announced a number of cutbacks, including a discontinuation of company-provided coffee and doughnuts. (The doughnuts were a long-standing Friday morning tradition--average cost $25 a week.) He even broached the subject of eliminating the water cooler. The publisher then offered the assembled employees a choice: it was either the doughnuts, or the water cooler. Being situated in a health-conscious community (more or less), we opted to keep the water cooler.

I wonder how long it takes management to realize the trade-offs it makes, consciously or otherwise, when it cuts perks and launches a campaign of propaganda to get employees to "pull together as a team." The concept of "loyalty to the company" went out with the coining of the word "downsizing."

Unless the man in charge is willing to put his own share on the block, announcing, say, a small pay cut (at the very least) on his own part, he's not going to find a lot of sympathy from anyone with even a modicum of intelligence about the real world.

Fed-up@thisplace

Dear Fed-up:
When I see a CEO taking a pay cut in his base salary (not just his bonus) in tough times, I think that he is smart enough to know that he has increased his chances of getting some employee commitment to his plans.

What frosted me about our own cost-cutting efforts, and led me to write "Let's Cut Out The Petty Perks," was Phil's attitude that we should eliminate some rather mundane benefits for the worker-bees, without a corresponding cutback in his own goodies. People in our company are not stupid. They know that we spend a meaningful portion of a clerk's yearly salary on our periodic executive retreats.

I did not go into details in the article, but back before the disruption in the Concorde service, Phil decided to travel on that supersonic bird so that he could attend a civic affair without rushing on the day he returned from a trip to one of the European offices. A little math would show that the one-way airfare plus the private limo service to his house from the airport was sufficient to pay for all of the coffee and Danish in the home office, as well as our water coolers for a year or two.

It still surprises me that otherwise intelligent executives don't understand that people in the company watch much more what they do as a boss, than what they say.


Not Feathering This Nest
Dear Herbert:
When times were good, a certain Fortune 500 company in a cyclical industry built a huge and beautiful headquarters in a suburban office park. In front of the building was a huge and beautifully landscaped pond. In the pond swam a pair of huge and beautiful swans.

But they weren't employees; they were only temps. They were Rent-A-Swans!

Times turned tough in this cyclical business. Many real and symbolic cost-cutting moves followed: branches were closed, hundreds were laid off, thermostats were turned down in the winter, harpists were no longer hired to play at corporate receptions ...

And the Rent-A-Swans were pink-slipped.

Thanks to these cost savings, that Fortune 500 company lived to fight another day.

Signed ...
Ugly Duckling

Dear Ugly Duckling:
What a heart-rending story! It just goes to show you that the life of a temporary consultant--even a swan--is not swimmingly peaceful. I suppose the swans were lucky, though, that they were not permanent employees. Otherwise, they may have wound up on the menu at the company cafeteria instead of just having to find another pond.

Your Fortune 500 company was doing its downsizing where it made sense--although why anyone in a highly cyclical business would build a huge corporate headquarters is beyond me. As pretty as swans are, I would much rather they find another pond than have more employees--or employee perks--be eliminated.

I'm glad the company lived to fight another day.


Penny Pinching Will Backfire
Dear Mr. Lovelace:
I read your column on penny pinching and agree that your CEO has it all wrong. Doesn't he realize the costs of recruiting, training, and cultivating talent? Does he expect loyalty from these people by rewarding their efforts with meaningless cutbacks on perks? The money he saves on doughnuts and coffee will be more than offset by the lost productivity of some of these folks surfing job sites to see if they can find a company in less dire straits.

If you want the troops to help your bottom line, then help theirs. Offer a plan where employees can make suggestions that will cut costs. If management puts their suggestion into production, give them something like 20% of the savings for 12 months.

Let's say one of your networking guys figures out a way to eliminate a T1 that costs $650/month. In the first year, the company would save $7,800. The employee who made the suggestion would get $1,560. The company would realize a savings of $6,240. After the first year, it would all be gravy. Sounds like a win-win for everyone.

Bennett

Dear Bennett:
Phil does understand the costs of recruiting and training new talent, but like most CEOs he is far more concerned about quarterly profits than long-term growth. His problem is that if he does not produce, the board of directors may decide that he is the wrong person for navigating the treacherous shoals of this economy's waters. His attitude is that if does not deliver in the short-term, then the long-term decisions will be someone else's responsibility.

I am all for your idea of rewarding individuals for saving, but it isn't quite as simple to implement as we might imagine. Stephanie Stone, our huma-resources VP, would tell you that administering such a program is time-consuming and difficult. It requires a definition of what constitutes an action worthy of a bonus vs. what is simply part of doing your job of managing company resources efficiently. I would add that you run the risk of people providing the cheapest service rather than the most cost-effective. To use your example of eliminating a T1 line, you have to be careful that the new level of service is adequate.

What makes sense to me is to give people bonuses and team awards for saving money that does not meaningfully impact the quality of service. Give employees incentive to put money on the bottom line of the company, while balancing the impact on service levels, and they will favorably respond. It's a shame that more corporations do not trust their employees to do so.

There is no doubt in my mind that if you told your employees they would get 25% of the money they saved (let's say divided among all workers, for simplicity), they would find a lot of spending that could be eliminated. Maybe they would even decide, on their own, to get rid of the pastry at the corporate meetings.


Herb, you're wrong, and your CEO is right
Dear Mr. Lovelace:
I have to disagree with what you think about penny pinching and taking away the little perks. Your CEO is right, Herbert; these little things cost a company a lot of money.

One penny in your hand does not seem like much. But if I put a jar full of pennies in your hand you would probably thank me for the money, right? By Phil telling you guys about the need for cost cutting, he is recognizing that the other people in the company are looking to the executive team for advice and leadership. Herbert, unfortunately that is you and your associates.

By you starting the momentum of cutting costs, the others around you will follow. Kind of like a herd of cows in a stampede. It only takes one cow running to get all the other cows to start running after it.

David

Dear David:
Well, I don't know about cows, but I have heard that some of us on the executive committee are being compared to other animals--sheep and relatives of a donkey, for example.

It is indeed important for the executives to set the example for others in the company, whether in cost-saving or ethical behavior. My problem with what Phil did was that he concentrated on the benefits that affected the average employee, not the executives--and especially not Phil. We would have been better off if we had discussed what we, ourselves, could do without, and then publish that list to the rest of the company, showing our own commitment to the company's health. Then, any other measures might have gone down a little easier with the staff.

Of course, you might ask, why didn't we just suggest that approach to our beloved leader? Actually, another of our staff VPs (no one I've written about in the past) did just that. Frank suggested that we cut some of our own perks. Kratmeyer, our head of international operations, sarcastically responded by pointing out that the dollars wouldn't be high and that instead of grandstanding, "we should try to cut out the fat to make the situation real to the troops." Phil nodded his approval and we moved ahead with the boss' plan.


Your letters to my print column and this E-mail forum raise some serious issues about managing information technology in today's world. Since today's world is essentially absurd, my serious responses may sometimes sound a little whimsical, and my occasional whimsical one, serious. In any case, if you want to participate, or comment, write to me at lovelace@home.com. I reserve the right to edit for size and content. Just sign your E-mail the way you want it to appear online. And feel free to join me in my discussion forum.

As I've mentioned, I'm planning to put my InformationWeek columns together into a book with a little bit of additional commentary around the events and people about whom I write. If you would like to be notified of such an event, please drop me an E-mail and I'll build a mailing list to let you know about it. Just use the word BOOK as the subject line.

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