Harmony at Work

Source: Green Thoughts

A few months ago in Mumbai we attended a CII (Confederation of Indian Industry) conference on “Managing Growth in a Downturn”. The managing director of McKinsey & Company – India, Adil Zainulbhai, gave some general advice on how to reduce costs: “Cut fat, but not muscle. And definitely not bone!”

One approach to this can be to cut overhead costs that do not directly affect the customer. Some of these costs might be judged “employee comforts” that the company can no longer afford. Cutting some “comforts”, however, can be short-sighted. Not even considering the impact on employee morale, some cutbacks may actually cause the company to lose money—the opposite of the intended effect.

Consider the following true story.

This took place at a multinational company with multiple offices in India. At a leadership meeting, the Chief Operating Officer was proposing various plans to cut costs. He suggested turning off the air conditioning in the company cabs that transport employees to and from their offices. He estimated that the reduction in fuel and maintenance would yield a savings of Rs. 2 lakhs ($4,166) per month.

The CEO immediately seized on the idea and said it should be done. The Human Resources Director hesitated. She thought this was a bad plan. She also knew that once her boss grasped onto an idea, it was difficult to change his mind.

The HR Director said, “I think it may not be wise to turn off the A/C in the cabs.”

“What are you telling me?” retorted the CEO. “That the employees will all quit and go work at another company that does have A/C in their cabs? They won’t quit. Not in this job market.”

The HR Director persisted. “The employees in some cities might be able to manage without A/C. But in Delhi right now it’s over 40 degrees every day.”

“You’re just saying that because you sit in Delhi and you want good public relations with your own staff!”

“It’s not that. I’m concerned for their health. The other day a woman fainted from being outside too long in the heat. I think this could happen again if people travel without A/C.”

“Well I think it won’t happen. We will go ahead with the plan.”

At this point some of the other leadership team members smirked, as if mocking her “failed political ploy.”

The air conditioning was turned off in the cabs. At the Delhi office as the days passed, the HR Director began to overhear the employees complaining. They said to one another in the washroom, “I’ve just arrived at work, and now I need to change my clothes!”

A few days later, one of the company cabs got stuck in traffic. As a result, three people fainted from heat stroke. The HR Director had to call an ambulance. She also had to file an incident report.

One of the people who fainted was in charge of processing a payment that had to be completed that same day. Because the payment didn’t go through, the company lost Rs. 10 lakhs ($20,833) in penalties.

Later, the HR Director received an email from her boss. “I know you’re going to say, ‘I told you so.’ You were right. I appreciate that you spoke up, and I see now that you speaking from wisdom. I’m sorry I didn’t listen. Believe me, next time I will hear you out.”

Even when pressed to reduce costs, it’s important to keep in mind human values—not only philosophically, but practically as well—because encroaching on human values can have drastic consequences, financially.

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Tags: business ethics, cost cutting, human values, mba

This entry was posted on Tuesday, August 11th, 2009 at 3:06 pm and is filed under business ethics, productivity. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.