43 Rumors

@ Thom. My opinion isn’t too different from yours. I also don’t like to hide bad news, because it’s like in denial… (and when the spoil breaks, it’s ugly). In the case study I mentioned in the previous post, my team mates and I discussed whether or not to disclose the finding I ultimately suggested, which is basically “sell” on the company’s stock. My team mates were for not telling, because they sort of guessed the reason we were assigned to that company was because the professor also owned the stocks. My rebuttal was (I am pretty good at doing devil’s advocate, as you probably are aware by now) it’s better to let her know now so she could react in time…. We’re actually doing her a service by telling the truth, though hard to swallow as it may be. So my team mates left me deliver the bad new. Of course my team mates were right (and I believed them); the professor admitted she owned the stock. I certainly hope she didn’t get all emotional about her stocks and sell them as I suggested, or I would have been the villain, but for what?

I have to admit I am not very successful at my career so far and unemployed more often than not (that’s why I am out of business world trying for something else now). I like to tell the truth but not terribly tactful (bad combination, no doubt). A successful devil is the one with sweet tongue and I don’t have one. But I hope you do realize the moral of the story I’m telling (I know I am preachy, so I really should just let Steinbeck do the job for me), and perhaps you’re better at letting your clients know my true intention which is of course, hopefully good for the company who hears it. I always say it’s hard to fix a problem unless you know there is a problem. Hiding the bad data is not the solution, but a problem. Though here is what I differ from you. It’s okay to be honest among insiders, but not always good for outsiders (stress on “not always”). Sony CEO admitted their stock was over prices (right thing to do). Guess what…, Sony’s stock never really recovered since, the brand suffered, investors relationship suffered…. I am for slowly prepare everyone for the truth…. I believe that’s what Olympus is doing. Japanese tend to be a lot more indirect so not every Americans would get the drift.

Another thing I learned in B-school is, your prediction is only as good as the data provided. Again, we agree with each other (trust me, I agree with you more than you realized; it’s the method we deliver that differ from each other, but not the fundamentals).

I am certainly sure you’re aware of Maslow’s Hierarchy of Needs as that’s the foundation of modern human resource management. Maslow comes from the Humanistic Psychology school of thought, and that’s also what I believe in. Management doesn’t have to be slave driver. After all, what’s the point of destroying morale only so you could spend money on those supposedly morale boosting party (come on, admit it, those parties usually have stupid and corny activities and does very little to its original intention, which can be achieved by simply respect your work force as human beings).

One of the gigs I did after graduated from B-school (undergrad, btw) was this really low-end work, sort of front line management thing. I took it as an opportunity to test whether what we learned in school was actually useful or merely theories (I always tries to be open-minded about everything, but remains critical. Basically, “trust, but verify” attitude). I had nothing to lose in that position. Guess what, it works. The caveat is, the management has to believe in the theory fully, not “I’ll try it, but I am sure it won’t work” kind of fatalistic attitude or the employees will sense it and negate the whole effort. What I was doing was just the common stuff like “set the good example” or “golden rule” or “criticize in private, but praise in public” type of stuff. I could go on and on and but I think you get the drift.

Anyways, I am a no BS type of person. If something can’t be solved, then don’t make a fuss. So go back to Olympus issue and my proposal would be the same as yours, we don’t have the data. Trust me, if I have it, I would give more concrete and constructive opinion. Back when I was still a finance wiz, I could know the story from income statements even when someone was BS their way through. It’s not that hard to burst a lie, but sometimes we do have to do what we have to do…, and turn a blind eye. Anyways, the hint is always use DuPont formula first. Sometimes things can be fixed a lot of times without cutting jobs. There are more bad management than people think. With the new management theories we have now, a lot of things can be done, but the older generation of people just didn’t it could be done because they don’t have the know-how (but I still wouldn’t say “old farts” should be fired like another poster said…, probably someone who has never had much experience. People from different age group have different skill sets, and obviously, different values…). Anyways, there is no shame in admitting mistakes (though probably hard for Japanese company to do).

Another thing, though probably too romantic a notion for US corporations, executives must be willing to cut their own salary (on their own, nothing we could do as analysts). Always share the pain with your workers. Just golden rule. Percentage of sales type of budgeting does not discriminate, so if the result says 30% budget cut that means every division, every position must be cut by 30%. Not the best budgeting method, we all know that, but it’s the easiest way to do it, and the only way you can meet the deadline if the company laid off too many accounting/finance staffs. That being said, if the executives aren’t willing to take the 30% salary hit themselves, that means the money has to come out of somewhere…, and you’ll cut too much work force biased toward front end, which tend to be the ones who do the actual works (like sales and accounting). That’s why I said how much people you can lay off before a company becomes dysfunctional.