Legendary CEOs like Jack Welch and “Chainsaw” Al Dunlop made their reputations from a hard-nosed philosophy that elevated financials over people. For instance, they famously advocated firing the bottom 10% of performers every year as a Darwinian strategy to continually improve the fittest. If things I’ve heard are correct, a few distributors have turned that philosophy topsy-turvy.
The rumor mill is churning out stories of industry veterans who have risen in
management and sales positions - thanks to track records of top performance - suddenly
getting canned, basically because they make too much money. Branch managers or
sales reps with a history of good performance find their numbers sagging in
today’s miserable environment, so they get replaced with someone of lower rank
willing to work for less. The replacements don’t necessarily perform any
better, but at least they don’t cost as much.
The weirdest story that burrowed into my ears goes back a few years and concerned
a manufacturer CEO who fired a rep firm because he was infuriated to cut checks
to the rep each month that amounted to more than he earned. It was explained
over and over that those commission checks represented gross pay, out of which
the rep firm was responsible for its own payroll and overhead. Yet despite
having an MBA from one of the country’s most prestigious business schools, this
executive turned a deaf ear to the explanations. He couldn’t get over the
psychological anguish of seeing a mere sales rep with a bigger paycheck than
his each month.
Many businesses in our industry have been stung badly by the housing downturn.
Recessions are nature’s way of telling us we’ve been living high off the hog,
so cost cutting is essential. Many businesses in our industry have already
trimmed the organizational fat, so painful cuts are inevitable. But it’s
important to recognize that nobody ever saved their way to prosperity. There
comes a point where the cost cutting imperative ends up throwing out babies with
Leadership, whether in business, politics or any other endeavor, is anchored in
judgment calls. Judgment calls require calm and collected thinking. One aspect
of that is to keep in perspective how panicky decisions made today during a
crisis might reverberate in the long term after recovery gets underway - as it
most certainly will whether sooner or later.