The Power of Negative Thinking
By Mortimer R. Feinberg
Assessing the nation's economy recently, Wallace Rasmussen, former CEO of Beatrice Foods, remarked that he fears that as the economy moves upward, people will fall back into their old ways and create the same old problems. "Once people feel comfortable," Mr. Rasmussen believes, "they become affluent, lazy and fat again. Prosperity may be around the corner, but learn from the past."
Much the same advice could be given to individual companies. At Eastman Kodak, for example, management grew too comfortable about its success. Consequently, it missed the warning signs that its core business was changing in fundamental ways — with new technologies and new competitors flooding the market.
So how does a company prevent itself from getting too comfortable? Doesn't a certain arrogance inevitably come with being part of a winning effort of seeing entrepreneurial dreams realized, or of reaping large financial rewards? The challenge for a prosperous company is to find ways to simulate poverty when, in truth, the organization is still affluent.
Closely held companies are particularly susceptible to this complacency. For the firm's founding partners, memories of the poverty of the early days can still be very real. They still turn off the lights. More recently named partners, by contrast, know only the days of affluence. The resulting gap can be enormous.
What steps can senior management take to foster the old fire in the belly? These suggestions should provide a start:
Psychologically, people may feel better with titles. But titles create an expectation that there will always be "a VP slot" Dampen expectations by banishing titles, though not responsibilities. As Peter Drucker has said, "Responsibility should always exceed authority."
Rather than burying your failures under the carpet, talk about them - not because you want to wallow in the bad news, but because you want to acknowledge that things won't remain rosy.
The late Sam Walton once was called with congratulations on Wal-Mart's tremendous year. "People are walking around with their heads in the clouds," he acknowledged, "but in the next couple of hours, I'll knock them off at the knees."
This will mean deflating some much cherished parachutes. But it is one way to communicate to key managers that they're going to be held accountable. Nobody likes to talk about give-backs, but if unions can be asked to take a step backward in salary and benefits, so can management.
Cut management salaries 5% or 10% for starters. In this context, it's a motivator. Ask people to justify their raises. "Treat your people as consultants who have to earn their keep. Bring this idea into their performance reviews," advises Dennis Bottorff, president and CEO of First American Corp., a banking firm in Nashville. In what ways have they built the organization in the past year to warrant an increase? Ditto stock options. Ditto company cars. Perks are not gifts; they're rewards.
Remember, in the Mayan culture it was the captain who got decapitated when the army suffered a defeat not the foot soldiers. What we need to implement is a system of creative take-backs.
Indeed, companies can ask managers to justify in writing the existence of their entire departments. Instruct people to take some time to think the exercise through seriously. It's one more way to get people to concentrate on their contributions to the organization and will help restore some of the original spirit that's been lost over the years.
This is hardly intended to break the bond between the company and its employees. Nor is it meant to advocate some sort of dictatorial "managing by fear." It is a reality check.
Mr. Feinberg is chairman of a New York-based consulting firm.