How Businesses Can Avoid Their Own Fiscal Cliff

Infighting, favors, sacred cows, self-preservation, grudges, power struggles, finger-pointing, grievances, cronyism — and that’s just the tip of the glacial behemoth we call the federal government. The American people have heard so much about bureaucratic swell and ineptitude that many of us wish the “fiscal cliff” was a real land feature that our politicians would walk over like lemmings. Unfortunately, that would take an act of Congress!

Last year, in a blog I wrote, “The Unseen Obstacle in Reducing Any Deficit, Government or Otherwise,” I offered some suggestions that I believed to be a viable path forward. These behavioral approaches, if implemented properly (or at all) could motivate federal employees to reduce spending without a disruptive effect on their families and essential government services. Apparently our representatives didn’t agree . . . or maybe the article wasn’t read by the right people. We’re still facing yet another crossroads to getting America back on the road to financial recovery.

So as not to repeat myself to an audience that isn’t listening and/or responding I’d like share it with business leaders, who could potentially face a similar situation in their own organization. Business structures and practices, after all, often mirror the aforesaid “qualities” of government — the bigger the organization, the more alcoves to hide incompetence, inflexibility and inexplicability. A primary difference is that most businesses are much more likely to hit the bottom of the cliff without the benefit of a rescue net or by raising their debt ceiling. As I stated in 2010, when not properly motivated, government will continue to grow in spite of current efforts to shrink it. Conversely, the charge of business is to grow — its customer base, its marketplace, and its profits. Growth for the sake of growth without fiscal responsibility doesn’t work for businesses either. That said, how can businesses avoid their own fiscal cliff? Here are a few basic strategies that easily translate to the private sector:

  • Provide incentives to employees who contribute to eliminating waste and fraud. Use a gain-sharing plan that rewards employees with a portion of the savings. Everybody wins except those who perpetrate waste and fraud. Provide a clear set of ethics and support it with evenhanded repercussions for any and all employees who violate those ethics — including those at the top. Remember to lead by example.
  • Cut departments when appropriate. This might seem drastic, and it’s painfully obvious that the government doesn’t like this solution. However, businesses can back away from the fiscal cliff by consolidating departments and reducing bureaucracy. Doing so doesn’t always mean letting people go. Cutting departments could mean putting people to work in more efficient ways. Probably every employee knows of a process or work requirement that could easily be improved upon or eliminated. They do the work, so it’s a good idea to listen to and implement their good-sense suggestions.
  • Reward the people who leave. Be generous with financial and benefit packages. When downsizing is necessary, remember the value of those who have helped make your organization successful. You actually may need to call on their expertise in the future. Not only is it a wise move to never burn your bridges, it’s the right thing to do. Hint: the financial rewards don’t have to be for life.
  • Reward the people who remain. Set up performance bonuses for the employees who remain after the organization has been re-sized. Organizations often struggle to maintain savings after a rightsizing because they continue business as usual. Make sure that the remaining staff is rewarded for working smart. This requires delineating specific and measurable behavioral strategies for all employees from the top down.

Bottom line, business leaders and employees can’t fend off the trickle-down results of government stalemate, but they can address their own struggles by coming to the table with the willingness to make some tough decisions. Decision makers should take into account the health of the business and employees first, rather than remain at loggerheads due to fears of political or personal gain. The national debt (as of Nov. 29, 2012) now stands at $16,323,083,449,604.98, so one thing is apparent: when it comes to fiscal responsibility, business leaders really shouldn’t look to the federal government for pointers.

For more on the government’s fiscal cliff situation, read Why Washington’s Debt Crisis Plans Won’t Work and What Will.