Editor’s note: This article was first published in July 2011. Its figures are from 2011: 300 US companies paying executives more than $11 million, up 23% on 2009, and executives raising their pay by over 20% during the crisis. No source is given for either.
I don’t know who first said that a crisis is a good time to clear out the people in a company who aren’t up to the job. When everything is plain sailing, anyone can get results in a business, but when difficulties appear, very few are able to weather the storm and keep their company profitable.
When the crisis hit, both workers and executives were laid off as a cost-cutting measure. Ironically, elsewhere we find executives who have raised their pay by more than 20% (because they’re worth it).
While in many countries companies are looking to a community manager as a lifeline in the crisis (if anyone ever manages to define exactly what that is, please come and explain it to me), in other countries some companies are sticking to the business model they have always used and trusting the intelligence of executives who don’t know much about interacting on social media but know how to do business outside Web 2.0.
Once again we have the old school against the new model of the tech-age “gifted executive”. For now, the battle is being won by the dinosaur who believes that in a crisis you have to look for new markets and new customers, cut costs on incompetent people and pay competent people more. These executives earn up to 10 times as much as a young graduate, and nobody can complain, because their results speak for themselves.
On Thursday I had the chance to talk to the owner of a company from Granada that now exports to 15 different countries. They don’t have a Facebook page and don’t know what Twitter is, but they know that a sales rep with 20 years on the road is their greatest asset when it comes to growing the business.
“We couldn’t put all our efforts into a shrinking market, so we had to review our prices to make them more competitive abroad. We now have customers in 15 different countries, 10 more than three years ago. We’ve increased our revenue by 35% with the same workforce.
When our profitability started to fall at the beginning of the crisis, we hired new people with new ideas, and even outside consultants who recommended a path into cyberspace. Their first piece of advice was to cut the workforce by 43% and let go of people who had proved their worth since the company was founded. We weren’t convinced by either the approach or the method, so we decided to bet on a finance director with more than 35 years of experience in business management. His main idea for creating value wasn’t to lay people off but to give them more work by winning new customers, diversifying into new products and rethinking our distribution network. We’ve been reborn as a company and we’re now stronger than we were in 2007. When the crisis ends, we’ll be fully positioned in the market.”
In the United States, 300 companies have executives earning more than $11 million, 23% more than in 2009, because they have not only kept their companies standing but made them far more profitable than before the crisis. These executives are paid according to their worth. They aren’t on sale, they aren’t trendy and they haven’t adapted to the new era, but why adapt when the method they use still works?
“The crisis doesn’t have to scare you, because it’s a chance to ask yourself whether your business model was the right one. It’s time to analyse your business’s weak points and strengthen them. If you build a vehicle that can handle rough terrain, once the road is properly paved you’ll have a fast and safe vehicle.”
Further reading
- 5 ways to grow your business
- Tips for increasing your business’s sales in a crisis
- How to run a small business in hard times
- The most profitable businesses of 2011
Featured image: Martin Pettitt, CC BY 2.0, via Flickr.
