Today another announcement regarding layoffs. This one in particular caught my attention for several reasons. First 7-Eleven’s press release disclosed it was cutting 10% of it’s non-store staff. It also disclosed it was suspending certain benefit contributions and it’s incentive compensation program.
Before continuing, please note I am not in any way associated with 7-Eleven. If I were the content would have been different.
In general, anytime I read about infrastructure layoffs, the ones at the support level, or enterprise level as it it sometimes called, I question, how these positions were justified in the first place. Every support position should be essential for the business and in retail there is trememdous leverage. Consequently I wonder what management was thinking when they allowed staff to grow by 200 extra people.
I wonder what percentage of the annual payroll cost was cut. That number is not necessarily and most likely not 10%. The operative question is what is 7-Eleven’s, or any company’s support structure cost target, as a percentage of projected related revenue? The related question is how is that going to be calibrated given revenues that could very well be lower than projected? At what point are support structure costs fixed given the size of the customer base? What is the strategy for increasing customer loyalty and revenue?
These and other related questions don’t seem to be answered in press releases or related public disclosures very well. They should be for public companies and any private companies where they are benefiting from community tax incentives while such insanity continues.
Now that I am warmed up, let’s look at the point on incentive compensation. I don’t know how a company can take away a properly structured incentive compensation program. In fact, the reverse of this decision should be implemented. Nearly everyone in the business should be on a pay for perfomance program. Incentive compensaton should be the catalyst for …well profitable performance.
In summary, the principle is you are in business to make a profit and and people who work in the business should be rewarded for their contribution to that profit performance. With some exceptions, everyone’s compensation can be tied to performance. In my experience with hundreds of companies, this is a hot topic that gets nods of approval and gets dropped like a hot potato as soon as possible. Why is that? Everyone feels they want the guaranteed income. As we have seen… there are no guranatees.
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Steve is the President of International Business Consulting Resources. His firm specializes in guiding companies to rapid increases in revenue and profits with a sustainable growth rate. Don’t miss my FREE Report: How To Make More Money With Your Business Now and Long Term
This report may be freely distributed without restrictions with the original content including this resource box remaining unchanged. Author: Steve Pohlit, Business Consulting Services, Executive Coaching, please visit www.stevepohlit.com