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August 15, 2016

Stupid Consultants: The Spiraling Decline of America's Corporate Culture

By David Haggith, The Great Recession Blog
I’m working on a new Linked-in profile and wanted to get your thoughts on it. I’m sure others have similar experience in the decline of corporate culture to share here, too. If I wanted to stay employed in the current corporate climate, I’d update my profile as follows to make it fit what corporations are really looking for:

My prospective Linked-in profile, targeted to the declining corporate culture in America:

Summary: David has twenty-five years of experience working as a general manager for assholes who couldn’t care less about their employees and has earned the monicker “Proctologist of Political Dysfunction.” David is currently seeking employment with another severely dysfunctional corporation.
Most recent employment: Mismanagement Trainer. Two years direct experience as general manager, most recently serving under a delusional board of self-congratulating idiots. During that time, David administered sensitivity training on behalf of the board by helping staff become less sensitive to the hostile working environment created by the board’s endless belief that staff costs too much. Aided the board in boosting staff morale by convincing all staff they really aren’t worth much anyway so no reason to feel bad about being underpaid. Counseled the board on restructuring as it sought to fire highly qualified people who were near retirement in order to replace them with morons who have to be willing to work for less now that they’re out of prison. This work directly saved the company thousands of dollars by eliminating the high cost of skilled human resources who had a broad knowledge of the company’s unique facility operations, thus allowing new employees to creatively guess at how things worked, thereby expanding employee creativity.
Benefits in hiring David: David brings broad experience in observing how companies can successfully lie to their shareholders: Convince shareholders that the meat lost by cutting fat out of the corporation was riddled with parasites anyway. While your company becomes less robust, shareholders will appreciate the dividends from cost savings that accrue immediately to their pocketbooks before they sell off. Anorexically streamlined companies will find themselves better adapted to an environment where owners who are fatigued from the high costs of quality investment can reap a savings windfall from downgraded expectations.

The backstory on my experience with dysfunctional corporate culture:

That’s what I was tasked with doing by a new micro-managing, highly dysfunctional board of directors that replaced an already semi-dysfunctional, already staff-hating, already cost-cutting board in a hostile takeover. Fortunately, I was ready for semi-retirement anyway, so I refused to cooperate as the new board’s henchman, which would have been to live to my own human disgrace. Instead, I moved on as a happier person to lesser-paying things, including spending more time on this blog.
Thus, I became one of the Great Uncounted in the ranks of the underemployed because I refused to go along with the management game under these increasingly common management goals. I’d rather risk my own career collapse that treat the employees who labor under my management so disgracefully.
The irony was that I had often fired employees who were simply dead wood or dishonest or a known risk. The board was fully aware that I had no problem in doing that; but that just wasn’t enough. Now, they wanted me to cut good-quality loyal employees to save more money, and when I explained that they wouldn’t save any money by cutting into the muscle of the organization, they simply didn’t want to hear it. I could participate in the new agenda or be terminated. At the same time, they asked me to organize a barbecue where they could attend to celebrate the staff and assure them of how much they appreciated them.
The new general manager and new board has, in the two years since, seen 90% turnover in the corporation’s employees and has seen the maintenance of its facilities stall as the board makes endless excuses to its angry members as to why it is no longer able to get the job done on budget … or done at all. The management company they contracted with to replace me and the company accountant who worked under my management was tossed out on its ear in a near-unanimous member revolt.
It turned out that losing all of their best help due to micromanagement and penny-pinching didn’t save them a dime in the long run. They had to hire replacement employees at much higher rates because they discovered no one worth hiring (or worth contracting with) was willing to work for the low wages they paid the previous employees (wages that I had been working successfully, albeit painstakingly, to get the previous board to raise). Many of their best employees fled, which left them severely disabled and bickering among themselves.
To this day, projects that were slated to begin immediately sit undone because they cut deep into the muscle and skills of their human resources and found themselves paralyzed. And has the dysfunctional board learned anything? Not from what I hear from employees who have moved on because they grew sick of the chaos. The board members, who were nothing but hatchet men like the little cartoon above, still hold their positions for the most part and endlessly attempt to justify themselves to the members of the organization, which I suppose they will do until the next coup of meat-cutters replaces them because theirs is a membership obsessed with cutting costs … at all cost.

Productivity decline due to dysfunctional corporate culture is one of America’s worst problems

My experience above is just a microcosm example from a small corporation of what is happening in major corporations throughout America.
Idiot savant and former Fed chair, Alan Greenspan, worries that productivity decline is America’s most threatening problem. Why should he be surprised that productivity throughout the US economy is significantly down when most corporations have maintained earnings through years of penny-pinching, rather than by empowering their human resources with capital improvements, training, etc.? Board members have sought to stuff their own pockets by draining their companies dry through cost-cutting measures that improve immediate earnings but diminish company’s longterm strengths. They also diminish the middle-class workers who ultimately constitute the market for their products.
My experience is just one personal glimpse inside of a greedy mindset that is endemic right now. When most board members in America are rewarding themselves and other stockholders with dividends made affordable by cutting labor and by taking out corporate loans to pad their own pockets with stock buybacks, you can only expect productivity to drop as no money goes into development. Corporations make improvements to earnings with cuts in human resources that improve the bottom line this year but that will be more expensive to replace in later years if the company actually wants to grow and expand its market. You can expect to see the entire nation dwindle over time into economic decline in this kind of corporate culture where companies become less robust and fail to build a future for themselves just to realize easy money now.
Stockholders and their elected boards are doing what makes the most money for themselves in the short-term by sucking the life energy out of the company. They have no intention of investing for the long term, so they don’t care. Corporate loans should only be taken out to develop new markets or improve the equipment employees have to work with or make other improvements that boost how much employees can accomplish and what the company can earn, but never to benefit stockholders by paying for dividends or share buybacks. Yet, that has become standard procedure. Using corporate loans for stock buybacks, enables the major stockholders to easily move their money to another companyon the company dime by having the first company buy them out while the getting is still good. Then they can start sucking the next company dry.
This kind of short-sighted greed has come to dominate in part because investors no longer have to care about whether a company’s profile is looking better positioned for a solid future because no on is paying attention to company profiles. They’re paying attention to what the other speculators are doing, and one major reason they don’t have to care about how a company is positioned for the future is that central bank money-printing and continued rock-bottom interest (due to leaders like Alan Greenspan) are pumping so much money into the stock market that prices are driven more by speculation as to what the central bank will do next than by any other factor. It is now the banks that move the markets en mass because that is the major money in play, so the old-fashion look at capital improvements, market innovation, productivity gains, expansion of market share, etc., has become less relevant.
The cheap-and-easy money created by central banks’ low interest policies entices board members to use the company’s line of credit in order to buy themselves out and then move on to deplete the next company. There is, of course, much more involved, such as the obvious cronyism in politics that protects the greedy at every turn and assures they can continue their pillaging of America. The world of exchange-traded funds and robo investors also assures a short-term mindset that never has the longterm best interest of the company in mind, much less any interest in the employees.
Sapping all the corporation’s energy to richly pay board members and CEOs who don’t deserve anything based on company market growth, real earnings improvement or productivity gains is ultimately not a form of sustainable economics. It’s a guarantee of gradual economic collapse for the entire nation as the great middle class takes all the hits while the top 1% get richer. Corporations are essentially cannibalizing themselves as the rich feast on the corporation’s muscle.

Courtesy of David Haggith, The Great Recession Blog
The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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