Short sighted management
25th October 2002
Bob Cringely: The Case Against Professionalism:
Here is a scene that happens at some point in almost every young company. The founder/CEO/technical visionary meets with his board and finds him or herself out of a job. How could this happen? Well, the company has grown to the point where the board feels that “professional management” is required, so they are bringing in a new management team. The new team is composed of old friends and classmates of the board, and the new team costs five to 10 times as much, but that’s okay because the company is “hiring for growth.” This new team cuts staff, cuts costs and outsources everything that can be outsourced, with the result that earnings are improved and the stock goes up or the company makes itself look better for an Initial Public Offering. The professional managers get big bonuses, they exercise mountains of stock options, sell those option shares, then go on to some other, even bigger, job having “saved” the company, which then stagnates, goes into a slow decline, and is eventually acquired by a competitor.
This is a scary article—it demonstrates how short sighted modern management techniques are, and how they benefit those involved at the expense of the long term future of the company. It doesn’t help my geeky distrust of management much either.
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