Managing Your Company To Death

puppetman writes "This weeks I, Cringely is a frightening monologue on the plight of over-managed companies: VC's and professional managers who are looking to make a quick buck, even if it consigns the company to the rubbish heap. He praises companies like Oracle and Sun because the founder still runs the company, and is in touch with the core of the buisiness. He also makes an interesting aside about the founders of the Canadian company, Research in Motion (makers of the Blackberry) and their personal contribution of $120 million for research into particle physics, to illustrate what happens when technical expertise and business success can lead to."

Comments

Since you mentioned RIM...

[shepd]

You might want to know about their local exploits.

Too bad that by percentage, I'm told they only bought the R. :-) At least they didn't rip off the city.

Death imminent

[Anonymous Coward]

I work for a major Dutch cable company, in the tech support department. About two years ago, we had about 10,000 customers, built up over a year or two, and were therefore relatively small. Service was fairly good (except for a bad choice in cable modem systems), and improving.

Then the mother company, French, decided that they wanted to sell us. So, they set a goal for 100,000 customers by the end of the year. That's a lot of growth. Somewhere down the line, they even hired to consulting managers (*expensive*!) to guide tech support and the like.

The result is obviously guessed: The company is now nearly bankrupt, though a buyer has been found ("Look! Over 100,000 customers!"), and the layoffs have begun to keep the company afloat long enough for fresh capital.

They destroyed a perfectly functioning company that could have handled quite a bit of painless expansion, simply to increase its value for a sale. Can someone explain to me why this sort of thing would be good for the economy?

Re:Counter point - Balance shortterm/long term!

[Associate]

Again, IBM related. As I work for a former division of IBM, I have to routinely tell people that the selling of our division may have put a lot of people out, but not out of a job mind you, but it made perfect business sense. I think the term someone used is asset free business, or a more service oriented company. That goes along with their long-term goals. As for short-term goals, you got me. I just hope my 51 shares go back up in value.

Re:Counter point - Balance shortterm/long term!

[terrapyn]

This is in fact one of the problems with any 'analysis' based on anecdotal evidence. "First mover advantage" in the dotcom world turned to "first mover disadvantage" almost as quickly as the bubble itself burst, generally based only on a few examples, rather than real research.

For some interesting insights on what makes for long-term success, take a look at the analysis in Jim Collins' book "Good to Great", which is based on an examination of almost 1500 companies over a period of years.

Remember...

"There is no reason for any individual to have a computer in their home".

(Ken Olson, President, Digital Equipment, 1977)

Stagnation can be an enemy, too.

[SIGBUS]

A case in point is the fate of the Schwinn Bicycle Company - what was once a famous Chicago bike manufacturer is now nothing more than a brand name slapped on Chinese bikes sold at Wal-Mart.

How did that happen? Several factors: first, the third-generation family owners preferred to kick back and party rather than concentrate on the business. Even during the 1970s, the signs were showing. For a long time, they produced a line of lightweight, high-quality bikes in their Chicago plant, along with their heavier, mass-produced cousins like the Varsity. However, the utterly failed to promote them, and they were easily mistaken for the low-end bikes.

Meanwhile, out in California, people were taking old heavyweight cruiser bikes and fitting them with derailleur gears, and the mountain bike was born. Schwinn basically ignored this trend until it was too late.

Also, labor strife reared its ugly head. The Chicago factory was unionized, and the United Auto Workers decided that Schwinn workers should be paid on the same scale as GM, Ford, and Chrysler workers. Management's response was to build a plant in Mississippi, which turned into a complete boondoggle. Production eventually was shifted over to the Far East.

Schwinn eventually went bankrupt, and the pieces were picked up by vulture capitalist Sam Zell. Eventually, the Zell-operated version of Schwinn went bankrupt again.

It was picked up by GT, went on for a few more years, and went Tango Uniform yet again.

Now it is in the hands of Pacific Cycle, a mass-marketer whose products grace the shelves of department stores.

The only member of the Schwinn family who is still in the bike business is Richard Schwinn, who owns Waterford, an ultra-high-end manufacturer located in Waterford, Wisconsin. The factory, once upon a time, built Schwinn's high-end Paramount line. What a pity he didn't have the resources to buy back the name.

Every time I see a "Schwinn" in Wal-Mart, it sets my teeth on edge.

Re:Anybody forgot to mention Microsoft?

[Night Goat]

Read the article, Bill Gates is mentioned.

Coca-Cola is a great example

[Loco3KGT]

Coca-Cola is actually taught as a company that was overly managed. When Ivester took over in 98 or 99 he micromanaged it to the point of negative equity income from bottlers. Before he took over, everyone in the world thought he would be the best guy for the job when the time came. Then it turned out he wasn't and he resigned on his own citing his inability to effectively manage the company.

Starbucks

[lpret]

What about Starbucks? Howard Shultz brought in management (underneath and around him) to help build Starbucks -- he said in his book he just looked at companies 2x his size and found management from there. So, in their case it worked. Or is Starbucks still committed to it's core goal or has it changed?

AARGH.

[runlvl0]

For those who couldn't be bothered to read the article:

"We're lucky in the computer industry that the companies are young and many of them are still run by their founders. I may not always agree with what Scott McNealy does as CEO of Sun Microsystems, but I know McNealy understands what Sun is about because he was there at the beginning and built the first few Sun workstations by hand. Certainly, as long as Microsoft and Dell and Oracle and Adobe have been around, there has been a founder at the helm, and it shows. Love them or hate them, at least these companies have identifiable characters."

*sigh*

Re:Anybody forgot to mention Microsoft?

[leandrod]

> Microsoft is possibley the most profitable company at this time

According to Bill Parish, CPA, it isn't and hasn't been for quite some time now.

Re:Borland?

[leandrod]

> I was confused about "Borland" being in Cringely's "effectively dead" list as well. Borland has bounced back _amazingly_ over the past couple years under Dale Fuller's leadership.

There you have it. Borland has again a leadership. After its founder Kahn was sacked I don't remember for what offense, it went really bad. Even now they still can't get their act together with InterBase, but I digress.

Re:Much of this is because of the Stock Market

[jafac]

I'm very sorry to hear of your plight with the AMT.

I was smart, and sold all my stock options as same day sales - thus avoiding AMT - but getting bent over by having been taxed as income.
I agree 100% that AMT is the most boneheaded idea, and actually discouraged people from buying and holding, and was largely responsible for the dotcom crash. Absolutely every person I know at my former place of employment had to do the same thing.

Fortunately, I had a few extra thou laying around, and when I left, I cashed in and bought a buttload of my options when the price had hit rock bottom, very near my option price. In a few years, these may be a nice addition to my retirement. Unless some other diabolical tax law is devised to fuck us all up the ass.