One way to reduce the inequality between top management and the median paid employee (Chief Executives, the Sky Is the Limit for Pay, New York Times, Sunday Business, June  9, 2024: 3) is to reconsider the role of bonuses in the compensation package.

In an organization, everyone makes a contribution to the success of the organization. That contribution is of course greater for the CEO than for the janitor, or even for the research scientist at her bench. These differences in contribution can and should be reflected in different salaries: a living wage for the janitor and a good differential for the research scientist, and a large differential for the CEO. But when it comes to the bonus awarded for the firm’s performance, let equity reign. Let every member of the firm get the same percent bonus. Depending on the firm’s success, let everyone get a bonus of 100% of their salary or let everyone get 8% of their salary or let everyone receive no bonus at all. Reward differential contributions with different salary levels, but let the bonuses be an equal percentage of that salary, though of course, the CEO will get a bigger pot of money because the bonus is based on a higher salary.

The government could encourage the adoption of this policy by having a higher corporate tax rate for firms that do not adopt it.. 

Conditions for successful downsizing

 

Downsizing is only successful in the long run if two conditions are met:

• that the layoffs are structured according to a well-defined strategy, and
• top management shares the pain though significant salary reductions.

GBH has met the first condition through its strategy of cutting local news television. I regret the loss of those programs but, unlike WBUR, GBH has a strategy. However, GBH's failure to cut top managements' salaries is a severe impediment. Remaining employees will be resentful, and this may reduce commitment to the new strategy.

Don’t abandon your core competencies: Boeing and GBH

 Don’t abandon your core competencies

Martin G. Evans

[429 words]

Back in the 1990's when I was still teaching business school (Rotman, University of Toronto), one of the major contributors to a firm’s competitive advantage was the fostering and protecting of the firm’s core competencies. Core competencies, first articulated by C. K. Prahalad and Gary Hamel in the Harvard Business Review, were those skills, abilities, and capabilities that distinguished the firm from others in the industry. A firm might be the low cost producer, it might have the best after sales service, or it might lead the industry in innovation. Each firm would be distinctive in its own way.

It was also important that the core competencies fit to the demands of the environment: if a product in use, required high reliability, then the capability to produce a highly reliable product was an important core competency.

Over the past few years, we have seen storied and well-respected companies abandoning their core competencies. On the west coast, the textbook example is Boeing. Its vaunted safety culture has been abandoned for an emphasis on quarterly results. To achieve cost savings, important parts of the company like fuselage construction and wing construction were spun off to as independent supplier, Sprint AeroSystems. The problem with outsourcing a core ability is the loss of control. The spinning-off firm no longer has direct input into the manufacturing and quality control decisions of the supplier. The costs for Boeing and its customers have been tragic. They surely outweigh the cost savings and profitability that accrued over the past 20 years.

We see something similar developing in a very different industry in Boston. The fabled TV/Radio Station GBH, home of American Experience, Antiques Roadshow, Basic Black, French Chef, Frontline, Greater Boston, Nova, Talking Politics, This Old House, Victory Garden has just downsized and has announced the abandonment of three key local news programs: Basic Black, Greater Boston, and Talking Politics.; they may return as podcasts but when is unclear. In addition 11% of the 100 newsroom staff members were laid off.

GBH is very much in the news business so decimating the staff is a major failure to protect and enhance the core competencies of the organization. This failure will not show up in the immediate future but, over time, he organization will become less and less able to fulfill its local news gathering responsibilities. After all, if something or national or international importance occurs in Boston, PBS and NPR will call upon GBH’s reporters. We also need GBH to keep our local politicians and businesses honest. It is a shameful decision.