'Rallying round a flag'

When Elon Musk was receiving the deserved amount of flak last year for the slipshod handling of his mega acquisition, many of us were left wondering about the reluctance of senior leaders & contributors in leaving the organization despite facing the prospect of a new boss who might not be aligned to what they grew up on. Some experts attributed this to something called ‘sunk costs at work’, which makes employees nervous about exploring the ( possibly better) unfamiliar over the (possibly decaying) familiar.

?And as you would agree, while Musk took massive bad press on himself ( risking his own billions), we see sloppy leadership all around, and which leads to iconic orgs licking dust.

?This is a layered problem. Yes, sunk costs is a part of it, but not the entire problem, as you may agree if you too have grown up in a large & successful MNC that’s seen disruptions (sometimes brutal) over the past decade.

?When disruption hits, as it often does these days, not everyone is unhappy. There is always a disgruntled section from the previous order who now wake up, their aspirations re-ignited, as they buy in into the new management’s vision, sometimes displaying delusional optimism. A few quarters down, some of them do find a footing, while others could be jolted by rude shocks that they ‘didn’t see coming’.

?And there are the opportunists who do the neutral game, playing along & sampling future possibilities within, but also having a few external conversations going. Most of them show up at a competitor outfit within a year or so.

?Then, of course, there are the martyrs who get sacrificed in the bloodbath that ensues.

?And the rebels who go down, fighting the change.

?However, what I’ve observed in orgs I’ve studied ( I don’t know how Twitter works, though), is that when a disruption of this magnitude hits ( & the Twitter disruption was quick & huge), the functional mass is actually too numb to react during the first few quarters. Most of us have an optimistic explanatory style in the stories we tell ourselves & we all feel that bad things will happen to other people, not us. Also, the real contributors in any large org are generally the invisible crew who keep the ship sailing during the turmoil while the ‘leadership’ is busy sending colorful mailers over the intranet & delivering? Pollyannaish sermons in employee townhalls, insisting ‘everything is fine’.

?So when the ship is shaking, the functional mass keeps working on, trusting their ‘leaders’, ‘Like’ing, sharing & re-tweeting their messages, and occasionally dismissing nagging anxieties about the continuity of their mortgages & kids’ college fees.

?They’re just rallying around a flag & choosing to not see the obvious.

?When you pull out 10% resources & still get a job done, your efficiency jumps. When you reduce inventory by 10%, close 10% remote centers & eliminate 10% JDs, your cash flow bulks up. When you construct a 10% lag between demand & manufacturing, you eliminate storage costs. When you reduce sales HC by 10%? on a slow year & ‘optimize’ 10%? project HC between projects, your financials get sharper. When you shave 10% spending from innovation, you can easily get away with it without anyone noticing. When you cancel training programs, push out promotions, delay annual raises & convince employees to take a 10% pay cut, you make your CFO smile.

?Getting lean is great till it stops being great. Because your bones need meat & muscle on them to stay functional.

?Eventually, you’ll reach that 10% band where you’ll cut back on quality, safety, delivery timelines & your credibility. So you ‘reduce’ a base cost HC under one head & again account for a ( possibly higher) ‘separation cost’ under a different head. So you ‘optimize’ project personnel and save a few pennies, only to get hit by execution gaps & a few millions in terms of penalties. And then, a year later after the cycle turns, when your current ‘leaders’ get kicked out, you go back to hiring folks at a higher base or you hire untrained staff & spend a fortune to get them back to speed. By then, of course, your customers are fed up with you & your competitors are having a field day at your expense!

?And of course there will always be someone out there who will still out-strip you at the cabaret. That’s how the race to the bottom looks like.

?But most importantly, when you do this 10% game, you’ll cut back on the dignity of your people. Sooner or later, the 90% will get a whiff that they could be part of the next 10%.

?And that’s when they stop rallying around the flag & dump you for another.

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(Ayon's Blog? - Archives'23). Please leave your thoughts / comments.

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