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Beware False Profits

For every loser there must be somebody who wins. This recession presents a golden opportunity -- for somebody.

Nobody said it would be easy of course, even for the potential beneficiaries out there. I imagine the enthusiasm of California gold prospectors was dented when they asked: "Tell me, why do they call it Death Valley?"

And so finding the gold among the gloom in this recession has proven tough going. But I think I've finally found out who is benefiting the most: neurologists and brick-workers, such is the ferocity with which many of us find ourselves banging our heads against brick walls in the face of other people's recessionary theory.

For an example, I think back six months to a board meeting where I was stuck in the political quicksand, making a case for why having too few staff represents a false economy, when I realised all I could hear was the thud, thud, thud of forehead against hard-baked brickwork.
"If we reduce headcount we grow our profits," I was told. "This isn't tricky stuff."

"But you're assuming we'll still bring in the same revenue with less staff."

And round and round the merry-go-round went as I realised my boss sees only elastic margins and inelastic revenues, with little connection between the two. This blind spot is brought on by panic and panic breeds short-termism.

Rely on revenue, plan for profit and you'll be fine, if we understand 'fine' to mean 'in all sorts of trouble' some time in the future.

The effect on staff is also problematic. Natural attrition -- the kind where you manage staff out of the business through poor pay and conditions -- is invariably followed by another form of natural attrition - the kind where your best staff move on at the first glistening sight of recovery.

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