Friday, December 19, 2008


Enterprise Architecture and Reduction in Force...

The economy is on the decline and corporations need to practice fiscal responsibility, but is cutting jobs the right answer?

Some folks are strategic in their thought process while others are tactical. When these two are forced to combine, it equates to distractical. When the pendulum swings the other way, will companies that have downsized a large portion of their employees be prepared for an upswing in momentum? How do they plan on sustaining top talent if the rationale for letting folks go is all about expense and not performance?

The real costs of downsizing may actually have a larger price tag than disclosed. Have you seen how much companies take in "charges" related to downsizing? The costs of severance, benefits, outplacement, unemployment costs, cashing out vacation time, legal fees, etc is simply spending money that doesn't advance the strategic intent of the business. It is wasting money.

Ironically, this is also when companies may need to spend even more in terms of training yet they cut. What happens when you eliminate the folks who know how to do the job and replace them with folks that don't? Do you think training makes sense here? If you don't train and just let folks struggle, what else suffers?

OK, so let's stop looking at this from either an employee or company perspective and consider the outcome if you are a stock investor. We can conclude that Q4 is likely to be more profitable than Q3 because of layoffs, but if you are an investor (distinct from trader) you can't figure out what long-term benefits are gained by this event. Sure, we can drink the Kool-aid and intuitively understand that cost today may equate to lower salary burden in the future, but reality is much different than perception as this is not backtestable.

Has anyone ever ran across a company that has grown revenues yet seen the salaries of all its employees shrink? The amount spent on payroll tends to be correlated to revenues. If you cut salaries, over the long term you will also jepordize revenues. What is more saddening is that executives haven't yet figured out that these moves also have a side effect on employees who stay and is guaranteed to drag down morale.

I wonder if executives have ever thought about the fact that they can do more simple things to save money. For example, Why would you spend millions on Documentum when you can choose an open source offering such as Alfresco for easily 1/100 of the cost? You are not losing functionality, scalability or any illity. In fact, the brains behind both products is the same guy, John Newton. What if all IT folks were to stop attending Gartner IT events and paying for research and were to instead attend local user group meetings and network with each other?

For example, if I wanted to understand something about technology used on Wall Street, instead of paying lots of money to talk with an analyst who will give me over-summarized information, why can't I just pick up the phone and talk with Chris, John and others in the blogosphere that are employed by these firms.

Consider how much it costs to attend an analyst sponsored conference say on IT security where you spend several hundred a night just for hotel, another couple of hundred for airfare, etc. Now compare that to attending a local OWASP users group which has the same speakers, the same attendees yet it is free to attend. If you attend the one that I lead, you will find that you will even get fed for free. See the difference in expenses.

Anyway, I guess the missing action item that executives need to do a better job at is in encouraging their employees to eliminate the luxuries such as industry analysts, trips to locations that lose their appeal over time (Vegas and Orlando is cool for the first time, but going there every year?) and most importantly reducing expenses while not comprimising the strategic intent of the business is in order...

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