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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: Industry Commentary|Last Updated:

Evidence has its limits.

Regular readers, good friends, casual acquaintances and just about anyone else I can trick into a conversation on the subject know I’m a strong proponent of evidence-based decision-making. Most of the time, compared to most of the alternatives, evidence should be a tool of choice when making an important decision.

But … (please don’t snicker) it’s a big but … evidence does have limitations. It isn’t always the right tool for the job:

  • Evidence here but not there: Sometimes you have to choose among alternatives when reliable evidence is only available for one of them.

Insistence on evidence is why large enterprises so often favor cost-cutting over revenue enhancement. Cut the cost of a business process and it’s [relatively] easy to follow the savings to the bottom line. Invest in revenue enhancement, on the other hand, and there’s rarely a reliable and trustworthy way to provably connect investment and results.

This is one of the biggest challenges with the M in so-called SMART goals (specific, measurable, achievable, realistic, and time-bound). SMART causes organizations to prefer goals that are measurable … for which it’s possible to collect numerical evidence … over goals that are important.

  • Of course that’s Gus: As Daniel Kahneman explained in his don’t-even-think-about-not-reading-it book, Thinking, Fast and Slow, when you run into your friend Gus, you don’t need evidence that it’s Gus. Unless you’re a schmuck or trapped in a horror movie, you see his face and that’s that.

It’s people who don’t know Gus who might ask to see his driver’s license.

  • The future: Those who plan for the future have definitely chosen the best period of time to plan for. Planning for the past is way too late; meanwhile, the present turns into the past before you’ve finished planning for it.

When you plan (for the future), evidence should be something you take into account, but cautiously. Your evidence is about the past, after all. When the future turns out to be like the past only more so, evidence is just the ticket. When the future turns out some other way, the evidence will have pointed you in the wrong direction.

Will the future look like the past? Good luck finding evidence to help you figure that out.

  • Confirmation bias: This is the formal term for when they accept without question evidence that supports what they want to be true while nitpicking to death evidence that supports your position.

They’re using evidence for ammunition, that is, not for illumination.

What’s harder is knowing when we are they. Here’s one clue: If you find yourself memorizing a point so as to win a future argument with one of them, you’re probably succumbing to confirmation bias. More to the point: If you’re reading about a subject and your goal isn’t to understand it more thoroughly, you’re turning into one of them.

  • Citing other people’s opinions: In the Internet age, someone else’s opinion often counts as evidence, and if not, someone else’s opinion about someone else’s opinion does.

An expert’s opinion is useful, when it’s based on original research or research the expert has carefully reviewed.

But often a “consensus of the experts” is little more than aggregating a bunch of dumb looks. The averaged opinion of people who are experts in other subjects isn’t evidence. It’s just what a bunch of folks who know something about something else think.

  • Survey monkeys: Some surveys provide useful evidence. The rest just tell you what a bunch of anonymous respondents say they think about a subject.

We’re talking about people whose qualifications you don’t know and most likely the surveyors don’t know either, other than the “qualification” that they’re willing to take the time to respond to a survey.

Even for honest practitioners, opinion research is a complex field fraught with evidentiary landmines. And they’re a vanishing breed compared to a growing population of push-pollers who do everything possible to get the results their clients have asked for. So accept survey results with caution.

Are these cautionary limitations enough to persuade you evidence-based decision-making is a bad idea? I hope not, because they shouldn’t be. When evidence that passes these tests is available, take maximum advantage of it when making an important decision.

But don’t pretend when it isn’t. Sometimes the best you can do is make explicit assumptions and apply careful logic to them. When that’s the situation, do your best with it.

And don’t worry that it’s the best you can do.

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