Saturday, February 14, 2009

Perhaps it's time to get rid of Gerry Ritz...

Imagine you run a company. Your department managers, whiz-kids from one business school, execute a new business model over the course of three years which depletes your cash reserves. Your balance sheet bottom line is still black, but the number is lower than it has ever been in ten years.

The whiz-kids tell you not to worry. They can run each of their departments better if they can spend the money to reposition the company. In the end the company will be leaner, more competitive and, perhaps best of all, it will be feared by other companies - even bigger ones. They project a bright and promising future by using the money to make the company, in their eyes, more powerful. The need for a cash reserve will be overcome by the enormous projected revenue generated by the new business model.

As the next year's figures come in you realize that the whiz-kids have done exactly what they said they would do. They spent the cash reserves, shifted funds and reformed the company. The departments look considerably different. Some have grown while others have virtually disappeared.

One department, however, resisted the change to the new business model and continued, despite pressure from the whiz-kids, to operate under the old model with some minor adaptations.

The whiz-kids provide the latest numbers and to your horror it is a balance sheet covered in red ink. The department which did not change to the whiz-kid business model is the outlier. It has outperformed even its own projections. It is profitable and healthy. Workers are enjoying good pay, bonuses and a bright outlook for the future. The department has captured market share from other larger companies and stands to do better in the next year.

Then the whiz-kid in charge of that department comes to you and tells you to eliminate that department - because it doesn't fit the only business model they ever learned at their one business school.

Would that make any sense to you? No?

So why would anyone even consider getting rid of the Canadian Wheat Board in today's market environment?

Now go read Buckdog.

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