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|In: Business Ethics|Last Updated:

Target Corporation just laid off 1,700 of the 10,000 employees working at its Minneapolis headquarters, with more layoffs likely to come.

The buzz here in the Twin Cities is that Target headquarters was what you’d expect of a corporate headquarters — too many managers, too few of whom contributed tangible value, resulting in excessive overhead and a culture of complacency.

In principle, a company that’s become bloated, sluggish and complacent in an industry as vicious as discount retailing does have to do something drastic. Also, good for Target for laying off headquarters staff instead of starving its stores of employees and merchandise.

And, while pointing this out isn’t particularly kind, many large enterprises do accumulate employees who mostly “hide behind the herd.” They look just like productive employees except for not actually producing very much.

Sometimes layoffs provide a smokescreen for clearing out the herd-hiders. If that was part of Target’s motivation for its layoffs we’ll never know.

What Brian Cornell, Target’s CEO, and the company’s other top executives say is that this move and related steps should result in a $2 billion reduction in operating costs that would make Target leaner and more agile in an effort to better compete with Walmart and Amazon.

To give you a sense of scale, Target’s capital budget last year — a decent proxy for what it invests in itself — was $1.8 billion. $2 billion isn’t chump change. It provides much-needed funds for Target to invest in increased competitiveness and profitable growth.

How will Target invest it?

Discount retailing lives and dies on competitive pricing. Target sells about $73 billion in merchandise each year. So … let’s see … carry the 1 … its savings could finance a 3% across-the-board reduction in prices or a much bigger reduction if Target targeted (sorry) specific product lines, channels, or geographies.

Or, the $2 billion could finance Target’s planned expansion of its grocery business. This is hardly a blue ocean strategy … there’s nothing novel or particularly interesting about Target’s grocery section. And supermarketry has notoriously high competition and poor margins besides (2% is common). But it would at least be a strategy into which the company is investing.

Instead …

As the StarTribune’s headline explained without a hint of irony, “Inside Target’s growth plan, buybacks play a strong role.” How strong? Over the next five years, Target plans to buy back $14 billion worth of its stock — $1.5 billion next year, $2 billion per year for the following four years.

Target will save $2 billion per year and spend every cent of it buying back its own stock, leaving nothing at all … nothing … to increase its investment in profitable growth.

It’s financial engineering at its finest.

How can you benefit from these insights?

Put yourself in a Target manager’s place. Your company is planning a round of layoffs, and you’re told what your department’s share of the pain is going to be. Four suggestions:

  • Be discreet. As a manager you aren’t a free agent. Quite the opposite, you’re acting as your employer agent. So long as you accept your paycheck, your job is to carry out your employer’s plans, so long as those plans are legal. Disagree vehemently? Keep it to yourself.
  • Do lay off your worst performers. You probably have an employee or three on your teams who you’ve kept because they’re nice people, not because they contribute all that much. You no longer have that luxury.

Yes, it’s a shame. Nice people deserve to make a living. But for reasons I hope are obvious, the workplace has to be a meritocracy, not a … nicetocracy?

  • Don’t wait to tell them. Your nice employees deserved to understand, long before the layoff planning started, that first and foremost they had to be strong contributors and if they couldn’t be strong contributors in their current roles, it was up to them to find some other role in which they could be strong contributors. They’re nice people. You’re a nice person. Telling these nice people they aren’t succeeding in their current roles and need to do something to fix this might be an uncomfortable conversation, but it’s the nice thing to do.

So do it.

  • Plan your own departure. While there are exceptions, companies whose primary strategy is financial engineering usually continue to shrink. When you find out yours is one of them it’s a great time to start exploring your own alternatives.

Because failure is contagious. You can catch it from your employer.

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|In: Cloud|Last Updated:

I have a new set of hearing aids. In the instruction manual, well before the explanation of how to change amplification and programming, is this:

You are not allowed to operate the equipment within 20 km of the centre of Ny Ålesund, Norway.

There’s no explanation for the rule, just the fact, which is why my wife and I were briefly tempted to burn some frequent flier miles, just to break it.

But cooler heads prevailed. Actually, colder heads — we live in Minnesota, which we figured is bad enough (Google Maps reveals Ny Ålesund is on an island roughly 1,000 km due north of Lapland).

Which gets us to another disadvantage of relying on policies, standards, and enforcement to make sure how you want everyone to do things around here becomes how everyone actually does do things around here, beyond those mentioned last week: You have to explain your reasons, which makes your policies and standards burdensomely long. If you don’t, you’ll tempt employees to violate the ones that make no apparent sense, just to see what happens.

Changing the culture simply works better. When enough people internalize how we do things around here, peer pressure becomes your primary means of enforcement.

How to change it? You’ll find a detailed account in Leading IT: <Still> The Toughest Job in the World. Glad you asked.

The short version is to change your own behavior, because culture is the learned behavior people exhibit in response to their environment, and leader behavior is the dominant aspect of their environment.

Before you do, you have to describe the culture you want, and there’s a gotcha. The temptation in describing “how we do things around here” is to be procedural: “When someone contacts the service desk, we first identify the caller, next assign a ticket number, then get a description of their issue,” and so on.

But culture isn’t a matter of procedure. It’s a reflection of shared attitudes. Your behavioral description of culture should reflect this — something like, “When someone contacts the service desk we assume they’re experiencing a real problem, and we take ownership of it.”

<SnideComment>Given my experience with service desks, and in particular with my current mailing service after many subscribers received five copies of last week’s column, I’d say this would represent a radical cultural shift in far too many.</SnideComment>

To change your culture you have to describe both the culture you have and the culture you want. You have to figure out what about how you currently behave results in the culture you currently have, and how you’ll need to behave to get the culture you want.

If there are other managers between you and the employees whose behavior you want to change, you have to pay close attention to how those managers are behaving, how you want them to behave, and what you have to do so they’ll behave that way.

A few subscribers asked if there’s a way to change the culture quickly.

The answer is yes. Actually, there are two.

The first is to lay off a significant number of the employees you have and hire to the new culture. It’s unpleasant to say the least — unpleasant for you, more unpleasant for the surviving employees, and … and I hope this is obvious … even more unpleasant for the dear departed.

Although to be fair, on the pleasantness scale the employees you hire as replacements might very well find the change quite positive, all in all.

Anyway, massive layoffs are quick-culture-change tactic #1. The second one is slightly less draconian — fire all of the managers whose behavior seems to be driving the old culture and replace them with managers who seem to have the attitude you’re looking for.

Yes, it’s ugly. No, I don’t generally recommend it. But if you need to turn around a seriously dysfunctional culture quickly, this is your most efficient alternative.

Start with the ringleader, and perhaps his/her chief acolyte. Reason #1: Fire all the managers at once and the disruption will be too great. Reason #2: Persuading HR to go along will be a challenge. Reason #3: Do you really want to be that kind of person? And most important, Reason #4: Once you’ve fired one or two, the rest will usually figure out you’re serious and change their behavior to match what you’re looking for.

And, in case this isn’t clear, you still have to change your behavior (and attitudes) too. Otherwise, the culture will gradually revert back to the one you say you don’t like.

And you’ll have to go through the unpleasantness all over again.

* * *

Four years ago in Keep the Joint Running, Gartner predicted that in just two short years, 20% of all companies would have no IT assets of their own — it will all have moved to third parties and the cloud. KJR’s rebuttal was suitably pungent.

And eight years ago you read about a popular technique for manipulating people.

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