Archive for the 'Financial management' Category
Thursday, February 18th, 2010
Hoots No. 14 – 18 February 2010: Advocacy: Grasp the Political
Downsizing: another silly idea promoted by advocates for small government and “New Public Management” and should be resisted.
(The next hoot will deal with global climate change and the fact that evidence for change includes evidence for increasing instability, not only warming: museum scientists should be actively promoting the evidence and not leave it to others.)
Twenty years ago Daniel Thomas, then Director of the Art Gallery of South Australia and President of the Art Museums Association of Australia, wrote an article entitled “Grasp the Political” (Adelaide Review March 1990)
He wrote, “What art museums most need in the 1990s is to become politically and economically conscious. They must not only equip themselves with arguments as to why they should exist, but also with hard statistical data about their costs and their benefits.
“At the same time they must be very cautious about positioning themselves within the entertainment industry. There the user-pay principal reigns; the showbiz needs of popular exhibitions can displace special-interest exhibitions, such as scholarly art-history exhibitions or difficult, adventurous contemporary art exhibitions.”
I just wonder how many people took any notice of these important statements.
This hoot comes from sunny San Francisco – well it was when I started to write this – with its many museums including the wonderfully redeveloped green California Academy of Sciences and De Young Museum of Art, currently showing the truly astounding exhibition of Tutankhamun (see recent articles on the ABC Science site on this Egyptian Pharaoh who died mysteriously when 19 – younger even than John Keats and Giovanni Battista Pergolesi who both died aged 25) and the always marvellous San Francisco Museum of Contemporary Art.
It is also time to again recommend the Global Museum site managed by Roger Smith, now Director – Online Operations (East Asia) at the British Council. Like the Arts Journal Global Museum gathers together interesting articles focusing on museums all over the world; the site also has sections on travel, jobs, resources and links to various documents as well as links to podcasts, which can be downloaded, from many museums.
I have argued for years if not decades that museum people need to do a number of things to advance the goals of their museum:
- find how the benefits of their activities link with the benefits of other similar organisations and enterprises and seek to make common cause with them: it is relatively easy for the enemy to undermine the strategies of people or organisation acting alone, it is quite a different matter with many people pursuing a common goal;
- recognise that there are many lessons to be learned from other organisations, indeed from some which do not immediately seem relevant: leadership in a museum can benefit from understanding leadership practice in a hospital or even an airline; and
- understand that the goals of museums are not simply to put knowledge out “in the ether” but to have that knowledge make a difference for the common good; as Steve Weil said, museums are for somebody, not about something.
There are a few museums where staff have taken the argument up to the frontlines and tried to convince those in government and the community that a certain approach to a situation is appropriate and that some others are not.
“Layoff the Layoffs” is the title of an article in Newsweek for Februrary 5, 2010
Pfeffer’s recent article is a good summary of why the downsizing of organisations, which has been quite a fad for some decades and has been popular in the last couple of years as a device for coping with the GFC, is anything but economically positive quite apart from its often devastating effects on the people involved. Museum executives faced with the demands of downsizing, especially when it is part of “encouraging organisations to be more entrepreneurial” have a responsibility to their museum and their staff to make it clear to those who are promoting the “solution” that they do not agree with it. Unless there are the most convincing and carefully thought through justifications!
Jeffrey Pfeffer is the Thomas D. Dee II Professor of Organizational Behavior at the Graduate School of Business, Stanford University where he has taught since 1979. He is the author or co-author of thirteen books including The Human Equation: Building Profits by Putting People First, Managing with Power: Politics and Influence in Organizations, and Unconventional Wisdom About Management, a collection of 27 essays about management topics, as well as more than 120 articles and book chapters. Pfeffer’s latest book, tentatively entitled Power: An Organizational Survival Guide is to be published early 2010 by HarperCollins.
These quotes give a sense of where Pfeffer is coming from:
Power centres around scarce and critical resources and in times of uncertainty those with established credibility tend to be favoured as the enlightened. Those in power tend to define problems in ways which institutionalise their power. The more institutionalised the power is the more likely it is that the organization will be out of phase with its environment (from a 1977 paper with Gerald R. Salancik)
Organizational success comes more from managing people effectively than from attaining large size, operating in a high-growth industry, or becoming lean and mean through downsizing – which, after all, puts many of your most important assets on the street for the competition to employ.
Pfeffer opens his Newsweek article by pointing out that when the tragedy of September 12 2001 struck there was vast uncertainty about the future of airline flights. Almost all US airlines, and many other corporations, immediately laid off staff. Southwest Airlines did not. (I have written about this company before in “Lessons from Southwest Airlines” and “A chat with Herb Kelleher“) Southwest, which in fact has never laid off staff in its entire history, is now the biggest domestic carrier with a market capitalisation bigger than all other domestic carriers combined. Southwest’s former head of human resources once told Pfeffer: “If people are your most important assets, why would you get rid of them?”
Layoffs, Pfeffer observes, have become an increasingly common part of corporate life, some firms seemingly in permanent downsizing mode. If an industry is declining downsizing would seem inevitable. But in industries where demand is fluctuating? When a company lays off staff in a downturn, staff Â have to be when the upturn comes and demand increases. In the process considerable costs have been incurred!
Here is a quote that will surprise some and anger others even more: “A recent study of 20 Organization for Economic Cooperation and Development economies over a 20-year period by two Dutch economists found that labor-productivity growth was higher in economies having more highly regulated industrial-relations systems – meaning they had more formal prohibitions against the letting go of workers.” So much for the notion of employment flexibility leading to economic growth!
Here are myths dispelled by studies of the effects of downsizing:
- Companies that announce layoffs enjoy higher stock prices than peers
- Layoffs increase individual company productivity
- Layoffs cut costs
The negative consequences of downsizing are particularly evident in R&D-intensive industries and in companies that experienced growth in sales.
Layoffs lead to lower morale leading to employees looking for another job at the first sign of better times, greater distrust of management and greater likelihood of stealing from the firm.
Layoffs also have a significant negative effect on the economy since laid off workers spend less, may demand social services payments from government, their houses may end up having to sold because of mortgage default and so on. The consequences to employees themselves can be devastating! Pfeffer says, “Layoffs literally kill people”.
(In the US those who lose their jobs also often lose their medical insurance which, as well as expected outcomes, can also lead to violent behaviour. Reviewing Michael Moore’s latest film “Capitalism: A Love Story ” Chris McGreal (The Guardian, 30 January 2010) writes, “Early on, Moore sets out the meaning of “Dead Peasants” insurance. It turns out that Wal-Mart, a company with revenue larger than any other in the world, bets on its workers dying, taking out life insurance policies on its 350,000 shop-floor workers without their knowledge or approval. When one of them dies, Wal-Mart claims on the policy. Not a cent of the payout, which sometimes runs to a $1m (£620,000) or more, goes to the family of the dead worker, often struggling with expensive funeral bills. Wal-Mart keeps the lot. If a worker dies, the company profits.)
Governments around the world have adopted the strategy of downsizing claiming this will lead to working smarter. The consequences of such downsizing have often led, as in business, to poorer service. At the same time as downsizing, outsourcing has also been promoted as allowing the organisation to fous on its core business. But as with downsizing it is now realised this seldom works to benefit the organisation as tasks and skills critical to the enterprise are realised as having to be in-house where they can be influenced appropriately by the culture and the staff involved interact with staff in the “business core”. One of the problems is that the downsized organisation seldom has the skills to develop an appropriate brief and project management regime for the outsourced contractor.
Most importantly, a downsizing operation seldom is accompanied by a clearly explained strategy for the future which will lead to a better company which is clearly explained to employees, those affected and those who are to remain. One of the critical jobs of leadership is not done!
For instance, Right Associates (“Lessons Learned: Dispelling the Myth of Downsizing”, Philadelphia, 1992) found that in 66% to 75% of companies which had downsized neither profitability or [productivity] had increased. They argued that companies must investigate alternatives, define the new organisation, plan the downsizing, develop a communication plan and nurture the survivors. Observing that outplacement assistance fosters positive career growth they emphasised that change has to be embraced: no person or organisation can escape the consequences of downsizing.
In the study of museums around the world it was found that the museum organisations that were perceived by staff to have achieved successful change outcomes, were also perceived to have managed the change process through a strategically linked vision of the future state and communicated in ways which enabled participants to know what would happen and how they would be affected by the change, provided appropriate financial, human resource and training in support of the change the change; executives were prepared to devote the time to meeting with people and created the energy to get the change initiated and sustained by leadership action which emphasised patience and support and leading by example through modelling the appropriate change behaviours. (See Morris Abraham, Des Griffin & John Crawford, “Organisation change and management decision in museums”, Management Decision 37/10, 736-751, 1999.)
Museum executives faced with the demands of downsizing, especially when it is part of “encouraging organisations to be more entrepreneurial” have a responsibility to their museum and their staff to make it clear to those who are promoting the “solution” that they do not agree with it. Unless there are the most convincing and carefully thought through justifications! (Note that the responsibility of boards and executives is in the first place to the future of the organisation.)