Amidst today’s turbulent global business climate, rife with economic uncertainties, organizations confront challenging decisions, including hiring freezes, widespread layoffs, and various cost- cutting measures. Nevertheless, a confounding paradox emerges when certain organizations defy this pattern and attain remarkable success only to succumb to the allure of excessive hiring and extravagant spending, thereby perpetuating a self-destructive cycle. This enigmatic phenomenon begs for closer examination and understanding.
The prelude to excess
During a recent podcast interview with Bloomberg, Stewart Butterfield, the former CEO of Slack, shared his insights on the recent wave of layoffs in the tech sector and how AI is challenging traditional business models. Butterfield identified an intriguing chain of events that occurs when there are no real constraints on hiring and referred to this behavior as the “root cause of all the excess.” He explained that hiring one person often leads to an immediate impulse to bring in more recruits, and having more subordinates translates to higher prestige and increased power within the organization. The allure of ascending the corporate ladder and the pursuit of personal advancement become irresistible temptations for managers and senior leaders, initiating an ongoing and unending cycle.
The cost of misguided exuberance
Consider this service organization in the Middle East, where an enthralling tale takes shape. As the organization revels in subsequent years of extraordinary success, a spirit of jubilation fills the air. Champagne flows, confetti rains down, and the hardworking ones are duly rewarded with well-deserved bonuses and pay increases, evoking a state of sheer bliss. And with this wave of triumph still in full swing, an extravagant hiring spree unfurls, as if the organization can’t resist the magnetic allure of expanding its ranks during this exciting ride.
Here, corporate extravagance doesn’t stop with excessive hiring alone. The prevailing mindset of “we have money, so we must spend” drives the narrative. The focus shifts to IT systems. A relentless pursuit of the holy grail of ERP systems engulfs various business verticals, reigniting an age-old debate between SAP and Oracle. The ensuing passionate discussions trigger a frenzied race for budget allocations. In the blink of an eye, substantial funds are allocated to replace one system with the other. Embracing audacious ambition, a business leader proclaims, “While we are at it, let’s overhaul the performance management system too! Don’t ask me about the (non-existent) performance management culture. A new system should surely do the trick.” The IT counterpart enthusiastically chimes in, “Fantastic idea! In that case, why not engage our new hires and create our own customized performance management system from the ground up?” It is as though these mere acts of system swapping will magically ignite innovation and propel the organization towards unparalleled success. Ah, the irresistible allure of technology and its promises!
The tempting dance of re-branding and marketing
Meanwhile, in the sleek corridors of a healthcare firm’s marketing and communications department, a grand spectacle of rebranding emerges, determined to steal the spotlight. It starts with the arrival of the most expensive brand consultant. The existing familiar and beloved logo? Discarded like yesterday’s leftovers. The corporate colors? The serene hues of blue and green give way to vibrant yellow and fiery red, transformed with meticulous care and profound consideration. A new style guide is painstakingly crafted, infused with the bold essence of the company’s newly discovered “vision.” Marketing teams unleash their spending prowess, whether it be enlisting top movie stars and sportspersons as brand ambassadors who demand a princely ransom or indulging in a lavish spree of event sponsorships. In their sphere of corporate pageantry, drowning in a sea of brand visibility can guarantee astounding financial results.
We need the shiniest toys!
Well, can the sales and operations teams with their insatiable desire for the latest gadgets and gizmos be left behind? Forget practicality; it’s time to equip the teams with the shiniest toys on the market. Vendors rejoice as no expense is spared, ranging from cutting-edge tablets to virtual reality headsets, all in the pursuit of impressing internal staff and external observers. While the impact on efficiency remains uncertain, at least everyone will look incredibly cool while performing their tasks!
The winds of change and the consultant’s call
Fast forward to three years, and the organizations find themselves in a new reality. The haze of extravagant spending has cleared, prompting them to tighten their financial belts and embark on a transformative journey. Enter the top-tier external consultants, who arrive armed with impressive presentations, industry insight reports, and proven templates. Their expertise and collaboration with the organization result in a meticulously crafted year-long plan, offering a promising solution to address its challenges and set things in order.
Welcome to the grand theatre of transformation initiatives, where the spotlight shines on the consultants as they meticulously examine every aspect of the organization. These complex and time-consuming initiatives are backed by a strategy to instill confidence and showcase the potential for success. It’s time for the “quick wins”—short-term initiatives designed to deliver immediate and tangible results, creating ripples throughout the organization’s bottom line. The consultants showcase their prowess in capital efficiency, financial governance, revenue management, and the art of cost-cutting.
As the consultants gracefully exit the stage, having passed on the implementation baton to the business, a relentless storm ensues, driven by the pursuit of a lean and highly efficient organization. Outdated systems are dismantled without mercy, and dreams of investing in new technology come crashing down for many. As the curtains rise, the focus turns to the captivating realm of “people cost” and organizational restructuring. Amidst the upheaval, hundreds are shown the door, leaving the remaining employees to shoulder additional responsibilities, accomplishing more with fewer resources. Unfortunately, these measures often come at a steep cost—the loss of invaluable talent and a wealth of experience. In the quest for a streamlined organizational structure, high performers and skilled individuals are sometimes unceremoniously cast aside, while those who should have long bid their farewells somehow manage to linger on.
The endless encore
The organization now gleams with pride over its transformative accomplishments, savoring the fruits of its success. Yet, as time further marches on, a familiar sense of déjà vu permeates the air. Like an illusionist’s sleight of hand, the structures that were once cast aside reemerge, and the same roles, now disguised in a flimsy veneer of novelty, reclaim their positions on the stage. Centralized strategy yields to decentralization, consolidation morphs into diversification, and so the dance repeats. Those who have endured the test of time recognize the unfolding spectacle for what it is—a comedic repetition. The cycle ends up perpetuating an unending encore of absurdity.
Even HR teams, the guardians of employee well-being and the stalwarts of organizational balance are not immune to the allure of executive whims. Often, they find themselves unwittingly caught in a game of follow-the-leader, where questioning the rationale or considering long-term consequences takes a backseat. In their earnest endeavor to please, and safeguard their own positions, they unknowingly become complicit, perpetuating the vicious cycle.
The above instances of excessive hiring and overspending after initial success in some organizations, followed by grand transformation initiatives in subsequent years, undoubtedly serve as a cautionary tale. It is crucial that we pause, break free from the confines of this predictable cycle, and instead, embrace a more thoughtful and mindful approach to talent management, financial prudence, and organizational growth. Through such actions, we can cultivate environments that not only fuel innovation but also protect our most valued assets—the remarkable talents and expertise of our workforce. The power is in our hands: Navigate a path that leads to sustainable success, guided by wisdom and discernment at every turn, or surrender to the same old game. Ah, the eternal question: Will we ever truly learn?
Have you personally encountered or heard about this paradoxical phenomenon in other organizations? I welcome your insights and experiences, as well as any lessons learned along the way. Feel free to share your perspective and contribute to the ongoing dialogue.
Opinion Piece: Neel S Vaidhyanatha