When A Good Company Goes Bad!

Discussion in 'Business & Economics' started by Brutus1964, Jul 23, 2005.

  1. Brutus1964 We are not alone! Registered Senior Member

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    I’m sure this same scenario is present in many large companies. However, one in particular has gone from being an industry leader to an industry loser. How did it happen and what is this company’s future? I am not going to name the company because the principles that have caused this company’s woes are not unique to just one corporation.

    I will just call it the "Widget Company". There was a time when the Widget Company was at the top of the industry. It was a great company for customers, stockholders, and employees alike. The company was great to work for and treated their employees with respect, and fostered a “family” atmosphere. Customers loved it because they offered down-home southern hospitality. Stockholders loved it because it consistently gave a return on their investments. Employees loved it because the company treated employees very well. They always paid at the top of the industry, and their benefits were outstanding. Managers, and supervisors were there to serve the rank and file, and for the most part bent over backwards to help. Many good people devoted their lives to the Widget Company because they knew they were providing a valuable service and doing something worthwhile. Happy employees made happy customers....Then the dark days came.

    The Widget Company was severely impacted by September 11th and a general economic downturn. Many things were beyond their control, and the industry as a whole was in a tailspin. However, other companies adapted quickly and recovered. The Widget Company on the other hand had a deep-seated problem that had existed for years but it did not become apparent until things got very bad. Since the Widget Company had always been successful it had become arrogant. It's un-wielding bureaucracy was extremely resistant to change and innovation. The top brass thought it was mainly outside influences that were hurting their bottom line. In some aspects that was true but in reality it was the internal mismanagement that was causing the biggest problems. No one had any vision, and the people at the top continually misread the signs and future market conditions.

    Things the company should have done early on to stop it’s economic bleeding were put off, or not done at all until it was too late. The company felt invincible. They had the attitude that they were better than other companies, and didn’t see the need to compete with smaller upstarts until they started eating away at their market share. They discovered too late that people liked the new start up companies and were not willing to pay the higher prices that the Widget Company was demanding. The company had always enjoyed the ability to charge customers what ever it wanted. With the smaller companies fierce competitive nature it became impossible for the Widget Company to control the price of its service.

    Arrogance may prove to be it’s undoing. Instead of adapting to the new market, the Widget Company decided it was just a matter of cost cutting to bring it back to it’s glory days. Now cost cutting certainly was necessary and there is always plenty of fat to be trimmed, especially from a bloated, fat, top heavy, bureaucratic company like theirs. It was Arrogance that kept them from cutting in the areas that really needed to be cut. They could have trimmed thier top heavy management team or streamlined the snarled bureaucracy, but instead they took a sledgehammer to the very things that made the Widget Company successful in the first place. The quality of their product fell dramatically, and complaints skyrocketed. Constant changes to the product left customers confused and unsatisfied. Their once valuable stock fell into junk status

    In an attempt to increase productivity, the company demanded more from employees, but in return they cut pay and benefits. The company that was once great to work for had now become a tyrant. Pushing workers for more and more but giving less and less in return. Morale plummeted and many people that had devoted years to the company quit, were forced to quit or worse. The Widget Company thought this was a benefit to them because they could get rid of high seniority and higher paid employees. They no longer considered employees to be part of the “family” but mere hired help. The more they demanded from employees the less they actually got in return. They constantly had to hire new workers because they could not hold on to older ones. Years of experience and expertise vanished and mediocrity was the natural result. Like parasites, management fiercely protected themselves and each other for thier own interests at the expense of the company as a whole. Supervisors and managers were seldom held accountable for bad decisions. It was all about them.

    Yes it was once a great company, but now it is a mere shadow of itself. It is no longer benefiting, it’s customers, employees, or stockholders. It is just a black hole sucking up money. It is probably too late for the Widget Company to pull out of it's inevitable bankruptcy and possible insolvency. Anything it attempts to do now will only be rearranging the deck chairs on the Titanic. Will it pull out and become a great company again. I am not hopeful. Not in it’s present form or present management. The question is, should a company that is benefiting no one even stay in business at all?
     
    Last edited: Jul 23, 2005
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  3. Light Registered Senior Member

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    While it probably fits many, it's an accurate description of the company I retired from - AT&T. In it's case, the matter is already resolved. It will soon be sold and the name will pass into history. End of story for a once proud and powerful organization.
     
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  5. Baron Max Registered Senior Member

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    Power corrupts ...ain't it really just that simple?

    And as Light implied, its happened to many, many companies ...some are simply gone, others have restructured and reorganized. I don't think that type of company can last long in the world of capitalism AND law.

    Baron Max
     
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  7. nirakar ( i ^ i ) Registered Senior Member

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    Exactly! What more can be said? Power corrupts is the right answer to so many questions.


    Brutus, is the widget company an airline?
     
  8. Brutus1964 We are not alone! Registered Senior Member

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    Niraker.

    I'll at least give you that.
     
  9. Light Registered Senior Member

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    Hello, Baron,

    Yes, that's certainly true but far from being the whole story for most BIG companies. The operative word there is smugness (or complacency).

    They develop the feeing that they are "King of the Hill" and that customers will continue to do business with them as they have in the past. Another descriptive phrase is "sitting on your laurels" (past accomplishments). They were very good once and figure they always will be.

    And there's the problem. They fail to keep up with changing times and chnaging consumer demands. Thinking that their inertia will carry them through, they fail to adjust/adapt when it's needed for survival.
     
  10. Baron Max Registered Senior Member

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    Oh, I agree. And there's also other factors involved. But if you examine them closely, they usually come back to "power corruts" in one way or another and with one or more of groups involved. I.e., even the employees of the BIG company feel that "power" and it corrupts them, too.

    Ditto for the investors, they see that money roll in and the "power" makes them ignore the obvious pitfalls. Enron is a prime example ...and should be studied carefully in all financial courses in universities the world over.

    But what you say is certainly true .....it's always after-the-fact that people begin to bitch n' moan and "see" the problems. They're too high up in the cloud of "power" to see it.

    Baron Max
     
  11. kmguru Staff Member

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    Sad story for many companies. The reason this happens is that the upper management get isolated from their customers and well wishers through a labrynth of gatekeepers. They also feel so powerful like the Mayan chief who thought that guns (technology) have no power over his/her magic.

    Without naming names, we presented an Artificial Intelligence application to a company president that could save them $80 million per year. Rather than asking how, their gatekeeper said, we must sign with them as a vendor and they will call us if they need us. Exactly same thing happened with another retailer CIO (WinnDixie) before their Chapter 11. Stupidity is contagious. Our experience is the same with Polaroid, Kodak, Global Crossing and many more.

    The CEOs never seen the new Gun (technology), so they bring in their CTO who can not relate the technology to their business - so the company loses the new technology that could save them from death (Chap.11). And so, like sheep...they fall to the abyss.
     
  12. Brutus1964 We are not alone! Registered Senior Member

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    It wasn’t just the price of jet fuel, or market forces that brought down Delta Airlines. In my oppinion the greatest cause for Delta's woes was a culture of arrogance among management and an adversarial relationship with the equally arrogant pilots. The management at Delta believed their own rhetoric that they were better than everyone else and incapable of failing. In the end it was their air of superiority that blinded them to a changing market. Early on they felt no need to compete with new upstart carriers that would eventually run rings around them.

    Delta’s management knew how to make money when times were good but were absolutely clueless when times were bad. Their bloated bureaucracy and archaic systems made it impossible to react in time to changing market forces. They continually miss-read the market and put all their hopes on false assumptions. When they tried to be bold it was too late for their efforts to be effective.

    A month before September 11th Delta signed the biggest Pilot contract of any airline in history. It was so great that Pilots could take a 40% pay cut and still be the highest paid in the industry. It was unrealistic and foolish for both sides. The contract would have been difficult for Delta to fulfill even in the best of times, but then the dreadful day came and Delta Airlines fate was sealed. Delta’s fortunes crumbled along with the twin towers.

    Other airlines and pilots quickly saw the writing on the wall and realized they were all playing on the same team and both their fates were tied to each other’s. Delta management and the pilots however took an opposite approach. Like a giant tug-o-war they dug in their heels and refused to budge an inch. Delta management lavished themselves with huge bonuses and perks at the same time they were demanding deep concessions from the pilots. The pilots with their unyielding union made unrealistic demands themselves. They were both equally to blame. By the time management and the pilots could reach an agreement it was at least a year too late.

    Delta should have taken out bankruptcy back then. They would be alive and healthy today and on their way to a prosperous future, but their pride kept them from doing it. Now they have waited too long again. What ever they do now will merely be rearranging the deck chairs on the Titanic. Most likely they will be liquidated or sold before they can ever emerge from bankruptcy. 60,000 People will probably lose their jobs because Management and Pilots had to get into a pissing match. I hope they are all satisfied.
     
    Last edited: Sep 15, 2005
  13. kmguru Staff Member

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    It is the age old story in our country...In good times, the management make too much money - then the company gets bloated - then workers who are in union make a lot of money...then no body watches the store....then competitors take off....then the company has to file for bankrupty. There is usually a 3 to 5 year period, a Fortune 500 company has to reinvent itself (20 years for countries), after that, they fall like a rock. General Motors has 2.4 years left.

    By the way, Delta Airline did not know how to use their Business Inetelligence system that they took their sweet time implementing. Just throwing a software without a process is like becoming Tom Clancy overnight after buying MS Word. That was their real story. Blind leading blind.
     

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