Ed Goes For Austerity
‘With austerity being the order of the day, now is the chance to reduce costs’, Ed writes in his diary, ‘everyone seems to expect tough times. Cutting is part of the zeitgeist. If I can get some cost-cutting measures in place now it will increase our value at the IPO.’
‘I have asked our external accountants to give me some suggestions about what we can get away with and how much we can save over various time periods’, adds Ed.
A few days’ later, the following entry appears in Ed’s diary.
‘I get some suggestions from the accountants. It seems that cutting pay can have unacceptable consequences – like walk-outs, set-downs, demos, destruction of property etc. But freezing pay is a good way to make cuts without causing resentment because a pay freeze can be presented as an alternative to job cuts.”
The following week, Ed writes:
‘At the board meeting, I make my presentation on the pay freeze proposals. “A freeze to the end of 2011 will save us $6 million. A freeze to the end of 2012 will save us $9 million”, I tell the board, “I propose a freeze to the end of 2012 which will look good to potential investors at the IPO and help raise the sale price’.”
“Ed”, pipes up one of our non-execs, “we can ship every chip we make; our lead-times are lengthening; several of our products are on allocation; we’re making money hand over fist selling on the spot market. Our employees know all this – there’ll be blood on the carpet if we try and impose a pay freeze in current market conditions”.’
‘I asked for a show of hands’, writes Ed, ‘the decision against the freeze was unanimous. Oh well, only 116 days to the IPO and I’ll be out of all this with a bumper bundle of bunce.’