How Would You Vote on This Week’s Bailout?
So, if you were a member of Congress, how would you vote on the auto bailout? After all, the auto CEOs are only asking for $34 billion (up 36 percent from their failed request of two weeks ago). I mean, come on, these guys are asking for less than 5 percent of what the banks got in the initial $700 billion package for the financial sector. Given the amount of jobs, physical and intellectual capital at stake, it should be a no-brainer, right?
And yet, there is a lot of push back and skepticism, not just from Congress but from the public as well. In spite of the more detailed plans that the auto execs brought to the table this week, there still seems to be this nagging sense that they just don’t get it.
In the current issue of the McKinsey Quarterly, UCLA business professor Richard Rumelt offers a framework and perspective that I think gets to the heart of all the bailout proposals and debates and likely gets to the heart of how you need to think about your organization as well.
Rumelt argues that the economy is not just in a down cycle, it’s in the midst of a structural break. As Rumelt says, “during structural breaks in hard times, cutting costs isn’t enough. Things have to be done differently, and on two levels: reducing the complexity of corporate structures and transforming business models.”
In a structural break, the organizations that come out strong on the other side are those that focus and simplify now. Rumelt offers a lot of good advice for leaders in his article. Here’s a sample of some questions that he suggests business leaders ask themselves right now:
• Which information flows can you omit? Information that doesn’t inform value-creating decisions is a wasteful distraction.
• How can you work with customers, suppliers, and the government to simplify their processes so that you can simplify yours?
I was listening to some of the auto industry hearings in the Senate yesterday as I was driving back from a meeting. One of the senators was asking the execs if they had thought about making light buses. You know, that’s not a real comfort builder is it? Do we really need the members of Congress making new product suggestions? I’d argue that they start with the kinds of questions Professor Rumelt is suggesting. If I was a congressman and could get solid answers to questions that suggest that the auto execs are serious about a fundamental change in the way they do business, I’d vote yes on the bailout. Otherwise, we’re just facilitating more of the same.
What’s your point of view?