Paradigms and Shared Vision LO5317
Sat, 3 Feb 96 10:16:24 GMT

Replying to LO5269 --

Roxanne wrote

> 1. Since employee payroll costs are such a large part of total
> operating expenses, we must control this cost very carefully either
> through modest increases or through head-count reduction

It is very clear: without building up the business of tomorrow,
without developing future markets, without developing the
business further, all what you can do is to reduce the
numbers of employees and/or reduce the investment, net asset
to increase the ROI. To speak with Hamal/Prahalad, US and UK
have developed a generation of managers, who can downsize,
declutter, delayer, and divest better than any managers in the

However, this is in the best case a harvest strategy, a strategy
that cannot build up the future, and will only correct mistakes
of the past. More, we know today that reduction in numbers
of employees is not a successful strategy to increase
performance; In one 1991 study of 850 companies which had cut
staff drastically, only 41% had achieved the savings they hoped
for. Most failed because they had overseen the 'side-effects' of
downsizing - like demotivation of staff, what lowered
performance again.

> 2. Since executive payroll costs are such a small part of total
> payroll costs, it is not a major concern. It is much more important
> that we pay our executives generously so that we can get and keep the
> best talent that money can buy.

Managers who can only downsize, but have gernerously earnings,
are guilty for at least two reasons:

1) they give a strong signal that - even if the company does
not well - there main interest seems to be to earn a lot of
money. This signal is very strong and impressive if you are
willing to discuss it with people at the bottom of the
organization. If the CEO buys a new car, this signal is
seen by most people. It is not hard to imagine that this
demotivates again people, increases the paradigm of the people
down in the organization that the management does not care
at all, but only for their own pocket.

2) management has not been successful with developing the
business further - but still earn a lot of money and cut
number of employees. Again a point that prevents the development
of a shared vision - how should a simple worker be able to
accept a vision as his vision, as shared vision under such

It is really borring to see people who have high positions, but
have no idea how to improve the situation, and demotivate
the people instead to overcome old paradigm and develop
the business (and the vision) of tomorrow.

Wolfgang Schmid
Compuserve: ($!!)

company address: OMV AG Raffinerie Schwechat Mannswoertherstrasse 28 A-2320 Schwechat Austria/Europe