FSOutsider.com - - A Case Study In Corporate Ruthlessness

By Mike McCarthy
24 January 2009

Outsiders

That's what we FS enthusiasts are now - - outsiders. And so are the former employees of ACES studio, whose only sin was to knock themselves out on behalf of their employer to bring us customers the best flight simulator that they were capable of creating.

Don't get me wrong. I'm a strong supporter of capitalism and I can read the Wall Street Journal cover to cover. My rant here is not rooted in ignorance of economics, and it's not aimed at business in general. Instead it's aimed at Microsoft which, in my opinion, has now revealed itself as just another money making machine run for the benefit of its upper management and for the benefit of the mutual funds who are its major stockholders.

[I have to say "in my opinion" in order to head off any possible charges of libel here. The truth being a perfect defense in such cases, the contents of this article truly is my opinions.]

That's the attitude that got us into this mess, and it's the attitude that's going to ensure that economic recovery is going to be a long time coming. Because inflating the currency will not - - cannot - - put the humanity back into the stone hearts of the people who have zero risk of laying themselves off and who therefore have no problem firing loyal employees with just 32 hours notice (though apparently most of the former ACES people are actually in the group that has two months to find other positions inside Microsoft).

Management By The Numbers

Microsoft's decision to lay off thousands of people is probably the correct financial decision for the stockholders who, these days, are largely mutual funds. But in my opinion the funds managers don't give a rodent's rear about the companies in which they invest their clients' money. They don't care about the products of a given company, and they don't care about its customers. They certainly don't care about its employees, who are simply a cost line item in a profit-and-loss statement.

No, in my opinion all that the funds care about is the price of the stock at the end of the current quarter. (Forget the long term. Forget that once dispersed, the employees of ACES can never be brought together again.) And if company management is to receive its bonuses, or if their stock options are to retain any value, then management must dance to the tune played by the Pied Pipers of Wall Street - - and anything that maximizes shareholder value in the current quarter overrides all other considerations, including all notions of human decency.

So management does what the sharks tell them to do, and in the process they become sharks themselves. I saw it happen at Digital Equipment Corporation thirty years ago, and I've just seen it happen at Microsoft.

It's Only Money

And now for some fiction written straight from the heart...

Goodbye, Joe - - and all you other nobodies. Don't let the door hit you on your way out. What door? Well, the door that (surprise!) will be locked behind you six hours from now. We know you and your friends have families to feed but hey, we want our bonuses, and so do the managers of the mutual funds. If we pay you then we won't be able to pay ourselves and that wouldn't be right . It's not what they teach at the Harvard B school. You see, Joe, this company is run for the benefit of the senior managment, not for yours. (And forget the customers. All we care about is their money, not about keeping them happy.)

What's that? You say that we have $25 billion with a B in cash and can take some time to think this over? And to help cushion the fall for those who must be forced out after they've spent years putting in 80 hour weeks? $25,000,000,000?

Well, Joe, just how far do you think that would go in a company of 100,000 employees?

Let's see now . . . Twenty-five followed by nine zeroes, divided by 100 followed by three zeros. I get . . .

$250,000 per employee, in liquid assets.

That's not a lot, Joe. Given overhead it's only around 18 months' pay for the people of this company. We'd better lay off a few thousand of them today. Not tomorrow, not two weeks from now, but today. Because each hour we delay the RIF costs us about 80 dollars per employee, and we can't tolerate that. We need the money to pay ourselves bonuses, and to pay dividends to the mutual funds so their managers can collect big management fees.

[Note the use of the term "RIF" - - reduction in force. It's so much more pleasant than "Have a seat Joe. I hate to tell you this, and I know you've got a family to feed, but you're fired. So pack your stuff and get out because your badge will stop working at 5 PM".

It's really not a lot of fun to deliver that message. So you get your underlings to do it for you because . . . well . . . because you've got a meeting to go to and you can't expect the little people to get it from you face to face.

So you get your underlings to do the face to face firings for you . . . Oh wait, no need for face-to-face any more. We're smart techies, we can do it by email. That way nobody will have to see the pain on our faces - - the faces of the senior managers who ordered the layoffs.

By the way, Joe. You should not have expected a soft landing. Golden parachutes are for important people, not for nobodies like you and your friends. But best of luck anyway. We mean it.

You Must Behave As If It's Going To Happen To You

Don't feel smug that you haven't been fired yet. If it can happen at Microsoft it can happen anyplace. If they'll do it for you then they'll do it to you. You're probably thinking "I'm different. They're keeping me on because I'm different. I do a good job and I really do care about the company. There must be something wrong with the people who were fired. Otherwise they wouldn't have been the ones who got fired."

That's how you're supposed to feel. Indeed, loyalty to your employer is what is expected of you right up to the minute they show you the door.

This kind of thing is happening more and more in the current economy. Five years ago my wife left high tech to become a nurse, partly because a piece of her is still the little girl who always wanted to be a nurse, and partly because she was tired of being laid off from well paid positions in technology companies - - three times in six years.

Well, guess what? Even though she's now a highly skilled BSN/RN with an MBA she has been laid off three times in the past three months, each time because her employer had a falling patient census and had to cut the payroll. (As a junior RN she is the first to go. The most recent job lasted one week.) But no, I'm not complaining. My wife's decision five years ago was an excellent one because each time she gets laid off she's able to find another health care job within 2-3 weeks instead of 6-9-12 months. (Only the deity knows how long it would take to find a high tech job in Denver these days.)

We've Got It Made (We Really Do)

So no, we're not complaining. We're a lot better off than the people of ACES, who brought us one of the best products in the world, and who deserved better than 32 hours notice.

And for good luck, and because so many people are far worse off then we are, I make regular food donations at the food bank station in my favorite supermarket. There's never been one there before. But then there's never been a run on the Denver Food Bank before, not in modern memory.

Mike McCarthy
mike@pcgamecontrols.com

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