I really like analogies for some reason. When people ask why something happens or what it is like to be in a particular situation, I much prefer presenting a situation that others can relate to rather than get into specific details that nobody is going to understand anyway.
Not everyone may understand what it is like to run a company since they have never done it. And nor have many been the captain of a sinking lifeboat. However, I think it is pretty clear what you need to do when you are sitting in the front of a boat with water pouring over the sides and you have a couple of five gallon buckets in your hands. You start bailing water (costs) out of the boat, of course, until the buoyancy of the boat is greater than its weight and the weight of the passengers (employees).
But what do you do if you can't keep up with the onslaught of water and even with everybody bailing endlessly with five gallon buckets, the boat keeps going lower and lower into the freezing cold waters (bankruptcy)? You guessed it. You throw somebody off the boat!
But who? The heaviest? The least able to bail? Men? Women? Children? People you aren't friends with? The last one to get on the boat?
It may make sense to throw the biggest liability to the boat off first. In the case of a company this would be the one with the highest salary who doesn't produce enough to justify their cost. On the boat, this would be the person whose bailing to weight ratio is very low.
However, on the boat, like in a company, there are little alliances and politics going on. This guy is buddies with that guy, and this guy has done so much over the years, and this one is young enough to deserve some time to prove themselves. Yadda, yadda, yadda.
But we all know who will not be thrown off the boat. The captain!
There is no way the captain (business owner) is going to be taking a dive in the freezing cold waters to save those on the ship. No f'ing way! He or she will be the last thing with a pulse on that boat before it goes down. So the captain may have some tough choices to make about who gets tossed, but recognizing how to keep the boat afloat is really not that hard.
Of course the captain has to worry about a mutiny and such which may have some similar comparison to a company, but when the business owner holds the money, they might as well have access to the eject button on everybody's seat.
So what is the point of this somewhat peculiar diatribe? The point is that if you are the captain of the boat, you've got a much better chance of survival. Honestly, its really not that hard to keep a company alive during a recession as long as your company is big enough to just drop employees until you are profitable again. In organizations where the majority of costs are in their staff, like construction companies, you can easily drop the dead weight, or pick off the low hanging fruit until your boat is back above water.
It's just not that hard - as long as you're the captain.
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Being a professor of entrepreneurship and a sea captain, I found your comments most appropriate and comforting. This especially true in our Aloha state, where the Governor is attempting to reconcile the state budget shortfall with layoffs and furloughs of University of Hawaii employees.
ReplyDeleteGood article. Just remember that the captain is the only one on the boat who has the risk of being tied to the boat all the way to the bottom of that ocean. (Personal and business debt) Everyone else can bail as soon as it starts to really go under. (Find new jobs with no debt associated with that company) That is what gives the captain a few extra priveledges.
ReplyDeleteAbsolutely true. There are paradoxes in that business owners who know what they are doing (true captains) can survive even in the harshest conditions but if we are too generous and delay what needs to be done too long, as the last commenter notes, we can go down with the ship without any lifeboats! (Also, it is easy to get complacent during good times and be tempted to delay necessary actions when things turn south.)
ReplyDeleteVery true. I really liked the article and your thoughts. Thanks for sharing.
ReplyDeleteindiaSpeaks
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MauiRaf - I guess it's not that bad since the water in Hawaii is very warm. You can just swim to shore. I doubt the Governor would jump in though.
ReplyDeleteWeGrowBiz - I wonder how much risk the captain has. Bankrupcy laws protect personal assets and as long as you are smart captains can make a quick get away. The trick is to get to the point where you're the captain and there a many people below you who you can toss if things slow down.
Mark - I think you're right. Toss now, think later.
IndiaSpeaks - glad you liked it. I enjoyed your blog as well.