Which is (and was) OK. Cutting costs is certainly a part of any successful business plan and yet something went awry just this side of the Vietnam War, beginning in the late sixties and early seventies. That ‘something’ was an inordinate concentration on financing business entities from the stock market instead of banks.

No one goes to the bank anymore. They issue stock. It’s painless, there’s no stipulated interest or payback date and, like taking cocaine, it’s habit-forming. 

But unlike a staid old-fashioned bank loan, the money raised today issuing stock can disappear tomorrow in a decline of share price and so (pardon me, while I take another whiff of this white powder) the main job of the CEO is no longer running company affairs, but supporting share value. Share value is almost wholly dependent upon quarterly profit.

Money, in the investment game, flows to the highest return. When you hook Universal Widget up to share value instead of bank loans for business expansion, the focus of business turns from sound strategy (new and better widgets) to the wooing of Wall Street. Essentially, you’ve developed a ‘coke’ habit and that hasn't a thing to do with a preference for soft drinks.

Every moment is shadowed by the clock, ticking relentlessly toward the dreaded Quarterly Report. Manipulating accounting practices to massage the quarterly report serves the same metaphor as gulping a couple Viagra pills-- the sure cure for quarterly dysfunction.

Quarterly dysfunction is very common. The Sexiest Businesses Association estimates that 1 in 10 corporations in America have recurring problems with their quarterly reports at some point in their life.

Living and dying by the quarterly sword, the avoidance of being drawn and quartered on Wall Street is why the hired-guns are hired. Money talks, but only the hot-shots can make it sing and dance. The typical CEO under those circumstances is no longer running a company, he’s a sprinter himself, only as good as his ability to beat his last time out.

(Voice over) Return with us now to those thrilling days of yesteryear . . . blue-chip stocks, research and development, steady growth and a fair return on equity . . . The Lone Ranger Rides Again!

Those days are as anachronistic as our cowboy and Indian past. Long-term investments and stock portfolios depended upon—upon what?—upon dependability. Volatility is the word of the lesson-plan in Harvard MBA lingo and it’s hyper-volatility when you connect it to short-term goals such as stock options for meeting growth and profit targets.

Not for productivity, not for market diversification, not for product development—for growth and profit. Growth at all costs, because growth rather than value has become the mantra. Growth above all else, because all else depends upon capital and capital is captive to stock price and stock price is captive to growth and profit, relentless and never ending, always a higher bar, quarter by quarter by quarter.

Uncontrolled growth is a definition of cancer and American business has a malignancy that has staggered its body and from which it may not recover. Courtesy of your MBA program, whatever Ivy League colors it may shake in  your face at half-time.

(New Yorker, James Surowiecki April 30, 2007) The increasingly short-term nature of C.E.O.s’ jobs, along with the pressure on them to deliver results quickly, doesn’t help matters. The average C.E.O.’s tenure today is just six years, long enough to see the benefits of downsizing (like a lower payroll) but not long enough to suffer costs that may appear in the long term. And the lack of job security means executives have to worry more about what shareholders and analysts are saying.

While the market as a whole may be skeptical about downsizing, many powerful people on the Street aren’t. Before Citigroup announced its layoffs, for instance, it had to contend with a chorus of critics—including its biggest shareholder—insisting that the company was a bloated giant that needed to get its costs under control. Even if the job cuts didn’t move the stock price, they were at least a sign to those critics that the company was listening.

On top of all this, a C.E.O. is likely to look to layoffs as a solution because that’s what almost everyone else does, too. The word “downsizing” wasn’t even invented until the mid-seventies. The waves of layoffs that began at the end of that decade and peaked after the recession of 1990-91 were largely a response to crisis on the part of manufacturing companies swamped by foreign competitors and stuck with excess capacity. More recently, however, downsizing has become less a response to disaster than a default business strategy, part of an inexorable drive to cut costs.

That’s why Circuit City can proclaim, “Our associates are our greatest assets,” and then lay off veteran salespeople because they earn fifty-one cents an hour too much.

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