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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: Business Ethics|Last Updated:

The future got here a while ago. But thanks to IBM’s Watson, we can’t ignore it any more.

Some background: IBM is turning Watson into a diagnostic support tool. The FDA wants to treat it as a medical device. IBM disputes that categorization and is spending sums that are, shall we say, significant lobbying to avoid this regulatory roadblock.

Fortunately, KJR’s crack medical policy division has come up with a solution that should be satisfactory to all concerned.

IBM has created an AI diagnostician, and claims it isn’t a medical device? Fair enough. Force-fitting it into a medical-device regulatory framework is force-fitting a hexagonal peg into an elliptical hole.

But we don’t need new legislation to cover this. We already know how to certify diagnosticians. They complete medical school and have to pass tests covering each course in the curriculum. They then go through three years of residency before being allowed to hang out their shingle as a medical doctor.

Why should Watson be allowed to bypass any of this, just because it isn’t built out of flesh and blood? The solution is straightforward: Each Watson sold must first pass all medical school exams, then go through three years of as near a replica of actual medical residency as can be devised.

Problem solved. You’re welcome.

But of course, like most solutions to most problems, this solution raises new problems of its own.

Imagine you’re a physician, in a practice that’s acquired a Watson of its very own. Watson provides a diagnosis and recommends a treatment for one of your patients, and you disagree.

Now what?

You have two choices — allow Watson’s judgment to override your own, or override Watson’s judgment with your own.

And your patient later dies. Not only is your conscience torturing you, the absence of tort reform is torturing you with a malpractice action.

It doesn’t matter whether you followed Watson’s judgment or your own. You’ll be susceptible to the tort and torture whether you allowed Watson to override your good judgment, or you overrode Watson’s.

It’s Hobson’s choice. The question for medical ethicians is how to deal with this unresolvable question, and before they even start we know they’ll never come up with a fully satisfactory answer.

We can all thank our lucky stars we don’t have to deal with ethical questions this thorny.

Only, when we thank them we’ll be fooling ourselves, because we’re all dealing with this situation already. It’s the situation we face when our GPS gives us directions we don’t think make sense. We have to decide whether our GPS is routing us strangely because it knows more than we do about the traffic conditions ahead, or whether there’s a glitch in the algorithm and it’s pointing us in the wrong direction.

Not as ethically interesting? If you’re meeting someone for drinks after work, no it isn’t. But what if you’re driving someone to the hospital because they’re in intense pain and the cause might be grave?

It’s the physician and Watson, up close and personal, in real time.

It’s a question of who or what’s in charge, human beings or information technology. It’s a question with a simple answer: Humans, of course, both because we program the computers and because we’re ultimately responsible for the decisions, too.

Except that answer doesn’t always work. A computer-controlled traffic light is an easy-to-understand and inarguable example, because overriding the computer’s recommended course of action (stop before entering the intersection) isn’t merely a violation of traffic laws. It’s a decision with potentially lethal consequences.

When it comes to traffic lights we obey the machine.

The world of commerce is hardly immune from these challenges, starting with the requirement that humans are sometimes required to obey computers here, too. That’s what you face if you work in a call center. A computer (the ACD — automated call distributor) directs a call to your phone. What do you do? You answer it. You, the human, obey the ACD, a computer.

Or, you’re a manager, responsible for a decision that could be influenced by some form of automated support, whether it’s an old-fashioned Decision Support System, a no-longer-fashionable data warehouse, or ultrafashionable Hadoop-driven big-data analytics.

If the analytics indicate a course of action that doesn’t seem right to you, how is that different from the physician deciding about Watson’s diagnosis and recommended treatment?

There are no answers that are both easy and useful, and the questions are becoming more pressing as each day goes by.

Your phone is ringing. It’s the future, calling to let you know it just got into town and would like to meet you for drinks.

Time to get out the GPS.

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