March 27, 2009

Fiscal Responsibility

Let's chat a minute about this; on the eve of probably another article, news report, or panel discussion about a failing financial services company asking for more money, let's ask ourselves am I and my employer being fiscally responsible?

Being that I was recently invited to a "corporate-sponsored" vacation this is a bit of a subject I'm familiar. Since I'm such a "class act" as one of my colleagues put it; this won't be a platform to whine and gripe about any potential irresponsibility that happened to me. But rather focus on the things that employers may be (or should be) discussing and what employees should want to know (if given a chance to ask).

A Little Housekeeping

Before we talk about specifics and let's bring it up a level for those who may not be super-familiar with how companies and organizations operate. There are two types of companies public and private; public companies are traded and some of us own shares (a percentage ownership stakeholder) in them through our retirement plans. These types of companies are bound by law to disclose just about everything that has to do with their financial standings with the U.S. Securities and Exchange Commission (SEC). Anyone can access these public filings through the SEC's site, so employees do take a look at these to see what's going on if your company doesn't hold quarterly meetings. Private companies are just about the exact opposite; they answer to themselves and their financial investors which could be just about anybody with a checkbook.

In either case companies exist to provide services to their clients but in providing those services also have to make commitments on hitting various goals for their investors. By hitting the goals the investors keep investing and make a profit and everyone is happy; failing on the goals is effectively the exact opposite. Lastly, company health is often measured in terms that we use in everyday life but for other things. Here's a couple and their meanings: "churn", this usually refers to the company's ability to manage existing clients and retain and grow those relationships, "burn" or "run" rate, this refers to the expense to operate the company and do business with new and existing clients.

Why is this business 101 lesson so important?

It's simple, you are now equipped to read your company's health meter and really understand if it's "good times" or to be prepared for cost cutting measures. And by cost cutting measures I don't mean the coffee maker and water bubblers in the kitchen. Depending on the company you work for they may have different practices. In software companies which is my industry, they tend to look at research and development which is one of their most expensive operations then other departments like sales, marketing, and IT. Again this is in MY experience and not a traditional "fact" but tends to be par for the course I play on.

So if you are in these areas of practice it's simple; keep your head on a swivel, bust your hump, and try your best to be part of the solution and not the problem. If you are a salesperson and struggling this quarter don't be the person at the meeting asking questions about company "churn and burn". This raises an even bigger point about questions. Do ask your questions but people be willing to help fix it. For example, "What's our churn rate and how can I help sustain or improve it?" is much better than "What's our churn rate and do I need to start looking for a new job". Again my advice and you don't have to follow it but seems to be a smart suggestion to me.

Tying it all together

So as we wrap up on this ramble let's remember the reason why we find out these bits of information about our employers is so we too can assess and manage our OWN fiscal responsibility. If the company is cutting back, you should too. Be prepared and save as much as you can so in the event that you are laid off you don't have to worry about making the mortgage or rent in the coming months. I know it's tough, my wife will tell you I'm a spender, but luckily for me I married a hermit so while I'm currently in search of my next venture the lights will stay on.

In closing you noticed I didn't make mention or give examples of irresponsibility but simply the tools to decide for yourself. If a company is doing poorly with things like "churn" and "burn" but still hiring like crazy; buying odd stuff like foosball tables, free snacks like cookies'ncake'njunk'nstuff, then chances are you should know after reading this post its not good and should be looking for a new gig.

As a sidebar a little light read for those of us watching this debacle that is the "bailout"

See Article By PETER EDMONSTON March 20, 2009


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