Madoff Madness

The entire Bernie Madoff episode is rocking the financial world and shaking the confidence of already edgy investors. I have little sympathy for people who directly invested in Madoff funds because there was so much evidence to smell something was not quite right there. Here's the reference to one for the record. Malcolm Gladwell has written a lot about the perils of too much information with regards to the Enron scandal. This is another example of how we just ignore the fine print if the headline appears good. Little work and good sleep after a good game of golf is valued by all irrespective of the size of their paychecks.

Go back to basics - Know your costs

I have been following the whole Big Three Auto for last few weeks closely. After listening to the congressional hearings and the sound bytes after senate rejected the bridge loan proposal, I am really convinced about one thing - most of the major manufacturing firms (automakers included) do not know their real product costs. Most of the large product firms don't have a half decent Activity Based Costing system and the others don't know how to implement it correctly. I believe the reason for that is that the top management's focus remains top line growth and investment of resources and time for implementing such systems is not considered a priority. The action to reduce costs is forced by international competition and usually includes wholesale measures - like moving manufacturing to India or China. They can't think of doing things beyond that point. The companies having complex product portfolios do not really know what products they are making or losing money on and why. I hope this recession forces firms to go back to basics.

Carrots and Sticks

The reason why I believe that the root of the current crisis lies in HR practices is very simple - look at all the people you have worked with during all these years, tell me who have been rewarded with carrots and who were\are getting beaten up by sticks? I believe that the recruitment and rewards systems at most big corporations were\are designed to encourage people to get the kind of 'success' they enjoyed till not so long ago. In one his recent posts, Tom Peters asks for a sense of service, sacrifice, equity or honor amongst corporate honchos. I believe that HR organization in most corporations do not regard these as key attributes for doing any level of job. Those CEOs that we are vilifying today rose through the ranks by demonstrating the kind of behavior that gets rewarded in the corporate world, and so are their seconds or thirds in command. In short, the corporations are getting what they asked for. Recent events may temper this behavior for a while but not for long unless you overhaul these practices.

Bailout Business !!

My apologies for staying away from blogging all this while. But comments and encouragement from loved ones have made me come back. With all the mayhem in financial markets over past months, and the world economy worsening despite several governments throwing loads of money at the problem, the people are getting extremely suspicious of the bailouts. The impending US auto industry bailout looks is the hot topic of past week. There is also this talk (and criticism) of how top executives have managed to hold on to their jobs despite their companies having to ask govt. for taxpayers money on their watch. I believe that people who want to solve this mess are ignoring the root of these problems in corporate world. In my opinion, the root lies in their HR practices - how they hire, reward, remove and retain people. More on this in following post.