WARNING: The following article contains bragging. (I´ll let you know when it´s going to get thick).
I was first introduced to the concept of the Single Quarter Manager in 1994 over lunch with Ben Rast; Senior Vice President of Morgan Stanley´s office in Columbia, South Carolina.
According to Rast, the Single Quarter Manager´s objective is to make himself look good in the short term, without ever considering the long term effect of his actions on the future of his company.
In an effort to boost cash flow he fires the Research and Development staff, along with the Maintenance staff.
He tells Sales that anyone who can´t meet his impossible sales goals will be joining their unemployed brethren from Maintenance and R&D. As you might expect, the salespeople cut every sleazy deal with every potential customer with no regard to the profitability to the company, without even regard for next quarter’s sales.
At the end of the first quarter, the Single Quarter Manager’s division boasts an all-time high profitability. In fact, the Single Quarter Manager has set such records that he´s immediately promoted to a corporate job at company headquarters.
Now, consider the plight of his replacement.
The division can´t sell any more stuff.
With the profitibility of these deals so low, they can´t show a profit offering the original products to any additional customers – not that there´s any additional product to be had. Between the sleazy deals pushing the demand curve and the breakdown of the equipment from lack of maintenance, there´s no extra original product to offer.
There´s no new product to offer existing customers, either, "cause the R&D staff departed without developing one.
The next manager of this division will fail in the most spectacular fashion, achieving the worst profitability in the history of the company.
Searching desperately for answers, the company will replace him. They will systematically replace at least two more just like him. None of the Single Quarter Manager’s successors will be able to turn the division around.
The company’s only solution is to hunker down, tough it out, and start growing new customers.
That takes time.
A lot of time.
I was reminded of Mr. Rast´s description in early June of this year when, like you, I first learned of GM´s "Employee Pricing For Everyone" promotion.
GM had just posted a loss of over a billion dollars. That´s billion, with a "B," in the first quarter of 2005.
This was followed by a thirteen percent decline in May sales, which was blamed on the increase in gas prices.
Dealers had a three-month inventory of "05´s on their lots. With the downturn in sales, it appeared that those units might not sell before the "06´s came out.
How did GM´s management react to the May sales slowdown?
They announced a workforce reduction of 25,000 and a new sales incentive, which they called the "Employee Discount For Everyone."
Ford quickly followed with a discount program of their own: "The Ford Family Plan."
Then Chrysler piled on with "Employee Pricing Plus" which gave customers the same price as Chrysler Group employees, plus additional cash back of up to $3,500.
The programs, said one analyst of the auto industry, "represent a desperate and necessary move for desperate times."
"Now that," said I, "is a spectacular example of Single Quarter thinking."
It came as no surprise to me on Monday of this week to learn that in the first nine days of October, U.S. auto sales tanked. It seems that the end of September coincided with the big three domestic auto makers ending their summer "employee discount" offers.
"GM’s sales fell 57 percent and Ford’s fell 45 percent as sales in the U.S. auto industry dropped 33 percent from a year earlier.
“The aftermath of the employee-pricing programs is having a dramatic impact on automotive retail sales in October,” Jeff Schuster, executive director of global forecasting at J.D. Power and Associates, said Friday.
"Ford’s chief sales analyst, George Pipas, said Thursday that October sales would likely fall because the employee discounts spurred customers to buy sooner than they might have."
Arizona Republic, October 14, 2005