Views from the Hills by R. E. Stevens, GENESIS II (The Second Beginning) E-Mail

Downsizing, Liquidating & Outsourcing -- In search of a better bottom line.

Recent events here in the Grater Cincinnati area have brought back memories.  Actually it has been recent events and a good book titled, Eyes on Tomorrow, by Pscar Schisgall.  The book which is devoted to the rise of the Procter & Gamble empire was written in 1981 and has been setting on my bookshelf for over 20 years.  Retirement gives you the time to catch up on your reading.  It is a great book about creativity in R&D and Marketing.  What makes it great for me personally is that I knew most of the people featured in the book.  I worked under many of them and had personal interaction with many of them.  I met Mr. Deupree, who is featured as the greatest CEO of the Company, when I was in my teens before ever going to work for P&G.  I was working at the time for Western Electric just down the street form the P&G building.

Unfortunately that P&G I got to know so well through 40 years of employment is no longer the same today.  It all changed in the 1990s and with the turn of the century first with downsizing, then liquidation and finally outsourcing.  The latest outsourcing move signaled what I consider the death toll of the P&G I once knew and loved.  I guess I could handle the selling of Oxydol, Crisco, Jif, Spic & Span, Lava, Duncan Hines and a number of other brands.  But how blasphemous to outsource the production of the IVORY BAR along with the selling of the IVORY plant?  I can now walk along Spring Grove and see behind the eight foot iron fencing the names of other companies on the buildings.  It is depressing to hear people talking about how their grandfathers, fathers and mothers worked for P&G and now they are being fired because P&G is selling out.  But, hey, it is progress.  We are evolving, we are moving into a new future, we will be more profitable.  It is just hard to see the stars falling from the trademark of P&G.  Maybe it was a sign of things to come when the new Twin Ivory Tower Building was constructed.  There on the towers, were large circles for the trademark, but they were never added.  Only the circles remain today.

Yes, I understand why this is all taking place.  It is survival in the world of profits.  Operating expenses have grown where the profits of the brands listed above cannot handle the overhead and remain profitable at least to the extent deemed necessary.  Outsourcing, the latest of the cost reduction moves, is meant to overcome the high overhead costs of today by hiring another company with lower overhead to do your work.  But how can they do it at a lower cost and are those practices in our best long term interest?  We gain lower operating costs, but at what expense?  And how might those expenses affect our business at a later date?

I remember one of the first outsourcing ventures of P&G.  It occurred in the early 1980s.  It was deemed necessary to reduce the maintenance costs.  One of the ventures was to outsource the night clean-up of the buildings.  The task was contracted out to a low cost bidder.  The result was a big increase in theft.  Now why might that happen?  Could it be because the contractor was using prison inmates to clean the building?  Yep, they really were.  I remember a time when we were having theft in one of my offices.  Corporate Security put in a hidden (?) camera.  The next day product and money were missing.  But so was the tape form the hidden (?) camera.  At least they left the camera.

Outsourcing has opportunities for both gains and losses.  We gain by reducing operating costs but what are the potential losses?  I think they may be in the areas of quality, security, skill development, loyalty, competitive advantage, task/product knowledge, etc.  Seldom is outsourcing given to someone more skilled.  Seldom is it given to someone who has your best interest at heart.  seldom is it given to someone who has employee retention as good as the parent company.  Where will outsourcing end?  Could a company like P&G ultimately be operated by five or six people sitting in a small office in downtown Cincinnati?

It is just my opinion. But then again I am pretty old fashioned.  Finally, the young lady I was waiting for at the P&G Cincinnati Corporate Office and I just celebrated our 50th wedding anniversary.  Yep, I am old fashioned.

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