Friday, October 24, 2008

Trim the Fat

It seems like time to trim the fat, I wish I could do this as easily for the fat on my tummy :-).

Times are bad and pay-cuts, job-losses are the order of the day. Everyday brings another bad news and people are completely lost about what to do about their careers. The fear of Am I going out next is very high.

My earlier post around CSR was a reaction to the Jet fiasco, but if one has to seriously look at how companies should respond to the situation that we are faced with today, we would probably come up with a good CSR model.

There are two ways of responding to a difficult situation, one is the easy one and the other is the hard but the right one. The easiest thing that most companies can do in a situation like this is go for mass lay-offs, which is how most companies respond. The hard way and the right way is to look at expense optimisation. This is not easy and not quick, but definitely will end up helping a whole lot of people in the country and also the whole economy, in a significant way.

Over the last few years, the biggest increase in cost has happened on the salary front, and especially top management salaries. The gap between the salary of a fresh recruit and the salary of the CEO has become so wide that at times it does not seem to make sense. Now is the time for most companies to have a re-look, first at their Top-Mgmt compensation and then at the other levels of the company, and rationalise salaries to a meaning ful level. This will help us as a country to become cost competitive once again and make India the prefered destination for goods and services. Also a good time to have a serious look at all expense heads and see opportunities to save before the final call on lay-offs is taken. There is a chance that we can save a lot of people's jobs and come out stronger as a country. The last one with a big hope that the politicians will let this country grow stronger, which does not seem like their intent given the religion, caste, regionalism and other issues they are raking to win votes.

My simple thought in difficult times is to think about solutions which will help a lot many more people than a handful of investors in the short term.

Wishing everyone a Happy Diwali!!

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