Summary
The current financial mess was created by a group of bumptious individuals. We can’t continue to do business as usual or hide our heads in the sand hoping it will go away by itself. Or, allow the individuals that propagated the mess to correct it or create a new disaster.
Analysis
There are many corporations that are adapting the back to basic concept and are moving forward with revised business models. Recently an online article (CNNMoney.com) about how the heads of GE, Avon,AVP')">, Nalco (NYSE NLC) and Waste Management made a decision to guide their companies towards a solution rather than dwelling on the past.
Going back to basics is not a complex procedure. It’s a course of action needed to correct or eliminate business practices that have become embellished into their every day acceptable procedures. Any good owner/manager or COO/CEO that wants their company to be in business for the long term needs to adopt “Going back to basics” as part of their new or revised business model. They need to understand the mistakes of the past in order to set a course for the future.
Getting back to basics is a simple as correcting or elimination of accepted business practices that provides rewards for short term performance with no penalty for failure. It assigns responsibility for a course of action taken by a few that spreads like an epidemic once its profitability is discovered, that is, no document loans and credit default swaps. We obviously did not learn any lessons from the loans to third world countries in the late 70’s followed by junk bonds than the S&L’s and the web bust other than how to create a greater mess than all of them put together.
Everyone will question the concept because it will affect them in various ways. Their first line of defense is we have a right to make money. Getting back to basics does restrict that privilege. By the way making money is not a right it is a privilege. The next argument is I have a right to protect my risk. Again it’s not a right which is difficult for them to understand. Then we hear more regulations and less pay will force their top performers to seek greener pastures. So, let them maybe the second string or third team will do better than they did.
The bottom line is if they creators of the current and past financial messes don’t do something to control their profit (greed), it will be highly regulated by their Federal or Country’s government for their own long term survival.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
