The Way to Optimize results and Destroy a business
I worked for a company whose business was a mix of books and trade shows. The transaction shows made a great deal of cash. The books were profitable, but not quite as far as the trade shows. That made those people writing for the company’s magazines and sites a little like second-class citizens. We’d no clout or resources, along with the trade show people often treated us as if we’d IQs ten points lower than theirs.
I finally left this sorry scenario, but I kept tabs in my previous employer. The company was eventually sold to a company whose overwhelming bulk of earnings came from conducting industrial trade shows. This outfit could not wait to ditch the books and sites that came with the purchase. That left them even more intensely invested in the trade show industry, which had been their goal all along.
All this transpired just before Covid hit. The term bloodbath comes to mind.
These results probably wouldn’t surprise University of Toronto Professor Roger L. Martin. Martin is an outspoken proponent of the idea that the single-minded quest for growth–as practiced by the money-losing trade show company–is a pretty dumb idea. “Judging company performance only on the grounds of short-term shareholder value increase has caused executives to give short shrift to long- term stewardship of the employees, communities, and the environment,” he states.
Martin also blames this lack of equilibrium partly for the big divide between the working class and the well off. “Unconstrained pursuit of labor- cost efficacy has left tens of millions of American workers earning less than a living wage while the top 1% achieve unprecedented wealth,” he states. He doesn’t see the problem getting better so long as”economics, business, and public-policy schools still teach the importance of a singular goal function. . .And it isn’t going to occur provided that reward systems are geared around accomplishing singular goals–like reaching this year’s budget, which is still the dominant goal in a lot of American people and private-sector life.”
Lately, fundamental engineering practice exemplifies the disadvantage of running a company according to the notions Prof. Martin rails against. If you subscribed to the maximum optimization concept prevalent in business today, you would assemble in no cushion whatsoever to handle loads even marginally larger than the design maximum. In the end, adding capacity above what’s needed could be viewed as spending more on unused resources. Business schools teach that the existence of fresh resources is a situation that good managers must prevent.
Of course, an engineer that enabled no security margin in the sake of efficiency wouldn’t be designing products for long. However, a supervisor running a company this way could wind up keynoting the customer CES series — if the trade show company wasn’t in shambles.