Over at Focused Performance Frank Patrick has posted an article called “Cost Cutting Nightmare.” It also references Circuit City as I did a few days ago.

Frank provided a link to this article about Circuit City and their actions. While there are many good insights in the article the one that caught my eye was this one:

By breeding an environment that doesn’t reward the knowledge or loyalty of its staff, then “why would workers have the incentive to put in any extra effort?” asks Dean Baker, co-director of the Center for Economic and Policy Research in Washington.

Exactly. And this ties in with the article I wrote last week regarding the global workforce study done by Towers Perrin that found that only one in five workers around the world was fully engaged in his/her work. (“Engaged” in this context means having a strong emotional connection to the success of the organization and thus being willing to, for example, sometimes invest discretionary time in an effort to improve the performance of the organization.)

I think Circuit City CEO Philip Schoonover is probably a bright-enough guy. What I suspect he is missing is a practical means for checking a contemplated action for likely bad outcomes — or “negative branches” in TOC speak. I expect that there were many people in his organization that thought that his plan for massive layoffs would have negative ramifications on the business. But without a way to reconcile their concerns with his concerns the outcome was never in doubt: He’s the boss and he’s going to do what he thinks he must do.

Can an organization work itself into such a hole that layoffs are required? Yes, it can. An organization can get to the point where the number of problems facing it are so large and so severe that there is no other credible choice.

But are most such layoffs required? I don’t think so. Rather, I think most organizations work themselves into these situations by managing poorly for an extended period of time. I know this because I have done it myself in the past.

One of the ways in which organizations can manage poorly is by not building a model — even a simple one — of the factors that they must achieve in order to achieve organizational success.

Doing this will help to ensure that people within the organization have only a partial picture of what is required for organizational success. This will in turn make it much easier for people to argue for their preferred course of action while ignoring the ramifications that their preferred course of action while have on the other conditions necessary for organizational success.

In a previous post I showed a very simple example of one such model. Building such a model by yourself is enlightening. Building such a model in collaboration with your top people is how you begin to secure the future of your organization.

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