A case study in common repeated board room stupidity... HJ Heinz quarterly results.

[IceBergSLiM]

A company's responsibility is to it's stakeholders, and stakeholders want profits.

What are things that a company can control?
- manufacturing costs, PP&E costs, employment costs

What are things a company can't control?
- consumer confidence, commodity costs, economic uncertainty

I think you meant shareholders. Stakeholders can be multiple demographics of people. Shareholders are a kind of stakeholder interested in profits.

 

[Fern]

The inability for so many to go beyond mere basic economic theory is why we're here.

Edit: I'll go ahead and give the game away. We're in one huge prisoner's dilemma where everyone is pursuing rational self interest to their marginal detriment instead of cooperating for the most optimal outcome for the whole. That's what the OP and some of us are hitting on, and that's what the rest of you are completely missing.

Nobody is missing it.

The disagreement is in regards to the solution. Many of us just disagree that the solution is to expect individual companies to work altruistically in a collective fashion.

What is the solution? Where will it come from?

I've already written about my ideas using the SBA etc to stimulate the economy. But the stimulus (increased demand) could, and has at different times, come from different (foreign) countries and/or different/new products.

Fern

 

[Darwin333]

Those plant workers would have to be some ketchup eating mofo's to have any sort of measurable impact to the bottom line.

And I don't see the connection with commodity prices.

 

[Ns1]

I think you meant shareholders. Stakeholders can be multiple demographics of people. Shareholders are a kind of stakeholder interested in profits.

Indeed I did mean shareholders. Damn multitasking!

Nobody is missing it.

The disagreement is in regards to the solution. Many of us just disagree that the solution is to expect individual companies to work altruistically in a collective fashion.

this

 

[Darwin333]

Capitalism's modern goals of profit maximization is not sustainable.

You should not focus on target profits. Companies are making money, but not the money that they want. Not the money that was promised to the shareholders by their $50million a year Chiefs of Whatever.

No one is telling you to lose money on a business venture. But, do you honestly NOT see the shortfalls of gutting your operations for the sake of profit? But, how well does profit perservation work, when your income/sales is dependant on the very masses you laid off?

What is worse, the price of product X, that brings in income - is rising. So, the model of reducing costs is executed - but you are still charging the same (if not, more).

They are literally pulling the rug out from under their own feet.

They damn sure can't make the same or more money by keeping almost all of their expenses the same (in this debate labor) while absorbing the increased cost of raw materials.

So your option is to either eat the loss or to raise prices which would potentially cause a drop in volume and a further hit to their bottom line? You honestly think a sane company that has the option to do none of the above (maintain or improve the bottom line) should do the above because it "feels good"? You will see foreign made cheaper ketchup flying off the shelf of walmart so fast it will make your head spin. The company that did the "feel good" thing sees volume drop further and further until they are forced to lay off more people than originally planned.

We are in a "global" economy. If every single business in the US did as you suggest most Americans would buy the now MUCH cheaper stuff sold by foreign companies and we lose even more.

So I assume you are proposing some sort of trade war as well?

 

[Gonad the Barbarian]

Nobody is missing it.

The disagreement is in regards to the solution. Many of us just disagree that the solution is to expect individual companies to work altruistically in a collective fashion.

What is the solution? Where will it come from?

I've already written about my ideas using the SBA etc to stimulate the economy. But the stimulus (increased demand) could, and has at different times, come from different (foreign) countries and/or different/new products.

Fern

It doesn't take altruism to work cooperatively towards a better outcome for everyone- yourself included. What it does take is a reprioritization of stable growth and profit potential for the long term over immediate profit maximization. It takes a whole lot of trust between partners too, and that's where the real challenge would lie.

 

[Zebo]

It's slash and burn every man/woman for themselves. There's a reason our labor is not as good as German and Japanese and it starts at the top. You want trickle down? That trickles down. If company doesn't care about you why should you care about company, you're ONLY there for a check just like shareholders are ONLY there for profit.

Oh and that dog eat dog short sighted cultural issue is only part of the problem with US industry competitiveness and economy today. Main thing is banking crisis is not over or functioning. Which again get's back to every man for themselves. Simple profit decision to walk away from your loss mortgage. You were taught well Americans. Good job.

 

[Capt Caveman]

This is perhaps the funniest post I've ever read, and clearly highlights a total lack of economic understanding.

A business makes money by selling product. They need a certain amount of infrastructure to make that product. However, because of economy of scale, you need to sell a certain amount of that product to make a profit with a certain amount of infrastructure.

So when the market depresses itself, the first thing that a company does it start looking at projections. Where will we be in 3 years? 5 years? After all, a product lifespan can be up to 10 years, so we need to plan in advance. How much money do we need to launch new product and still be profitable?

So based on projections, they need to right-size their infrastructure (fixed costs) so that the volume they expect in the future will make enough profit to cover those fixed costs.

HINT: HJ Heinz is not cutting costs to become profitable. They are MAKING a profit. They are cutting costs because their projections show that the economy is going to REMAIN depressed, and they have too much infrastructure for the volumes they think they'll sell for the next 5-10 years.

OP is a fail, and so are the people agreeing with him who don't understand basic business economics and planning.

IF businesses were worried more about their workers jobs than they are about profits, well, we'd call them "government", and they'd be so deep in debt that they'd have gone out of business a long long time ago.

I agree. The OP and a few others here have zero clue on how to run a business and would fail at it.

 

[Zebo]

Are you completely unaware of a concept known as game theory? Each individual company (each participant) is acting logically in it's best interests, but that's not necessarily the best course of action as a collective. You can't fault each company for making rational logical decisions.

Yes I can. It's a retarded theory and has us in deep trouble today. Everyone should walk away from a upside down mortgage using your theory and many are which will destroy the banking system and all house values with it. Shotty workmanship abounds because workers will never go the extra mile when an employer is unwilling to go the extra mile for them.

This is all basic management stuff they teach in corp America. Problem is they don't follow it so much. Some companies do though like Google apple and other of "50 best places" to work lists. But many don't and only care about next quarter.

 

[Pulsar]

It doesn't take altruism to work cooperatively towards a better outcome

Bullshit. Giving away your money to people in the manner you're suggesting is altruism, clear and simple, and it doesn't happen in a market where competition is fierce. You continue to blindly ignore counter arguments and just keep throwing out that companies should help eachother and their workers.

It's pretty clear where you're leading. I'd avoided mentioning it until now.

Free market companies are NOT interested in helping other companies, or the economy in general. The only way that will happen is if they are forced to do so.

Of course, that's where your arguments have been going all along, since any rational person knows that a bunch of companies are not going to try to help eachother and the economy out of the goodness of their hearts.

So why don't you buck up and admit that what you want is government regulation forcing the companies to do so. Because you know it's not going to happen any other way.

Then explain how additional meddling by the government in free enterprise is a good idea and isn't a shortcut to more socialism. Go ahead. We're waiting.

Oh, and those "best places to work" companies? Just wait until they hit on hard times. See how wonderful they are then. Just because they've gotten lucky (Google with their search engine income, Apple with their I-phone) doesn't mean they're magic. The second they begin to struggle you'll see layoffs, firings, and the EXACT same thing you see at any other company that is fighting to survive.

 

[Pulsar]

Yes I can. It's a retarded theory and has us in deep trouble today. Everyone should walk away from a upside down mortgage using your theory and many are which will destroy the banking system and all house values with it. Shotty workmanship abounds because workers will never go the extra mile when an employer is unwilling to go the extra mile for them.

This is all basic management stuff they teach in corp America. Problem is they don't follow it so much. Some companies do though like Google apple and other of "50 best places" to work lists. But many don't and only care about next quarter.

Those companies are lucky, and have found a product that has brought prosperity to them in the short term. Apple has no magic. Last I checked something like 50% of their profit depended on the I-Phone. Oh yes. Here's some of Apple's "Magic":

http://lubbockonline.com/news/020197/apple.htm

You can directly track how 'great' those companies are to work for with when the last time they had to do a major layoff. How surprising.

 

[Gonad the Barbarian]

Do you check under your bed for liberals and your closet for socialists before you go to bed every night?

 

[rchiu]

Capitalism's modern goals of profit maximization is not sustainable.

You should not focus on target profits. Companies are making money, but not the money that they want. Not the money that was promised to the shareholders by their $50million a year Chiefs of Whatever.

No one is telling you to lose money on a business venture. But, do you honestly NOT see the shortfalls of gutting your operations for the sake of profit? But, how well does profit perservation work, when your income/sales is dependant on the very masses you laid off?

What is worse, the price of product X, that brings in income - is rising. So, the model of reducing costs is executed - but you are still charging the same (if not, more).

They are literally pulling the rug out from under their own feet.

And socialism or communism is sustainable? What a fvcking joke.

Capitalism may have a downturn, recession once every 10~15 years and a big depression once every 50 years, but communism IS a recession everyone fvcking day.

You all complain about how stockholders/investors are too greedy, too focus on profit, but you forget without profit, without greed, 90% of the companies won't even exist today, and those jobs won't even exist in the first place. People would just be happy putting their money under their pillow and nothing would gone into capital investments that is creating all your jobs.

Yes we get it, there is a recession going on, you are not getting paid, you are not getting the 6 figure you deserve and all these CEO make you feel less than a man. You need to vent, but at least don't bite the hand that's feeding you.

 

[Gonad the Barbarian]

Here's a nice tangible counter-example to immediate bottom line cut throat capitalism:
http://www.nytimes.com/2011/11/13/b...own-department-store.html?_r=1&pagewanted=all

 

[Matt1970]

LOL, idiots. If sales are down, you don't hire more people to make more product.

 

[Pulsar]

Here's a nice tangible counter-example to immediate bottom line cut throat capitalism:
http://www.nytimes.com/2011/11/13/b...own-department-store.html?_r=1&pagewanted=all

I don't need to look around for liberals. I know many and get a long well with most of them. Likewise I know many conservatives. Most of the liberals I know don't believe in socialism. So I'm not actually sure why you are connecting the two here.

Probably the most humerous part is your assumption that I'm right wing. I won't even go into that though.

At the same time, you have completely avoided answering the question. You suggest this utopic world where companies help out each other and worry more about their workers than the bottom line, yet you haven't even begun to suggest how to make something like that happen.

Now you're bringing up a feel-good story about a community (not a company) helping themselves to live a better life. While it is certainly a nice idea, you conveniently failed to mention the part of the article that explain it's been tried elsewhere and failed as well. Oh, and their donations to that store? Pure out and out altruism. No serious investor would plunk down $800 of his own money for a return that is $75 on that first $800 over 10 years, which is a direct contradiction of your earlier statement that altruism isn't required. You try living on a $75 dividend over 10 years (from an $800 investment). Let us know how that goes for you.

On top of all of THAT, you conveniently ignore the pretense of the first post. That HJ Heinz is stupid for maintaining their infrastructure at a level appropriate to their projected returns.

You continue to fail to answer any questions.

The comment in your signature about free markets says more than enough, I suppose.

 

[Gonad the Barbarian]

You, rightwing? Let's see, you hate altruism, hate regulations, complain that the US doesn't manufacture anything anymore while defending the very free market "values" that brought that about, equate socialism to being the bogie man, and come off as just generally disagreeable. The thought hadn't crossed my mind.

 

[charrison]

I don't need to look around for liberals. I know many and get a long well with most of them. Likewise I know many conservatives. Most of the liberals I know don't believe in socialism. So I'm not actually sure why you are connecting the two here.

Probably the most humerous part is your assumption that I'm right wing. I won't even go into that though.

At the same time, you have completely avoided answering the question. You suggest this utopic world where companies help out each other and worry more about their workers than the bottom line, yet you haven't even begun to suggest how to make something like that happen.

Now you're bringing up a feel-good story about a community (not a company) helping themselves to live a better life. While it is certainly a nice idea, you conveniently failed to mention the part of the article that explain it's been tried elsewhere and failed as well. Oh, and their donations to that store? Pure out and out altruism. No serious investor would plunk down $800 of his own money for a return that is $75 on that first $800 over 10 years, which is a direct contradiction of your earlier statement that altruism isn't required. You try living on a $75 dividend over 10 years (from an $800 investment). Let us know how that goes for you.

On top of all of THAT, you conveniently ignore the pretense of the first post. That HJ Heinz is stupid for maintaining their infrastructure at a level appropriate to their projected returns.

You continue to fail to answer any questions.

The comment in your signature about free markets says more than enough, I suppose.

Yeah it also states that the debate basically kept walmart from coming to town as well and that would have cost them nothing.

 

[Pulsar]

You, rightwing? Let's see, you hate altruism, hate regulations, complain that the US doesn't manufacture anything anymore while defending the very free market "values" that brought that about, equate socialism to being the bogie man, and come off as just generally disagreeable. The thought hadn't crossed my mind.

Still not answering any of the questions huh? So now we've moved on to making accusations about the other person. At least you finally admitted you like socialism and dislike the free market. It's a start, I suppose.

 

[Jhhnn]

Yeah it also states that the debate basically kept walmart from coming to town as well and that would have cost them nothing.

That's not really accurate. A town of 5000 won't support a WalMart supercenter, so most of the customers would necessarily come from the surrounding towns, creating issues around traffic & infrastructure.

Pulsar's comments wrt investment in the town's community owned department store aren't really on target, either. Having to otherwise go out of town to buy the products in their new store has costs of its own in terms of time & transportation, which need to be factored in. And it's not really an issue of making money, but rather more one of conveniencing themselves while maintaining the flavor they want in their community. Sometimes it works out, sometimes it doesn't.

Ns1's slip wrt "stakeholders" reveals a certain weakness in the American version of capitalism that isn't universal. Germany, in particular, recognizes that business has obligations beyond execs & shareholders- obligations to communities & loyal workers, obligations that cut both ways-

http://www.washingtonpost.com/wp-dyn/content/article/2010/11/23/AR2010112306280.html

 

[Paul98]

Bullshit. Giving away your money to people in the manner you're suggesting is altruism, clear and simple, and it doesn't happen in a market where competition is fierce. You continue to blindly ignore counter arguments and just keep throwing out that companies should help eachother and their workers.

It's pretty clear where you're leading. I'd avoided mentioning it until now.

Free market companies are NOT interested in helping other companies, or the economy in general. The only way that will happen is if they are forced to do so.

Of course, that's where your arguments have been going all along, since any rational person knows that a bunch of companies are not going to try to help eachother and the economy out of the goodness of their hearts.

So why don't you buck up and admit that what you want is government regulation forcing the companies to do so. Because you know it's not going to happen any other way.

Then explain how additional meddling by the government in free enterprise is a good idea and isn't a shortcut to more socialism. Go ahead. We're waiting.

Oh, and those "best places to work" companies? Just wait until they hit on hard times. See how wonderful they are then. Just because they've gotten lucky (Google with their search engine income, Apple with their I-phone) doesn't mean they're magic. The second they begin to struggle you'll see layoffs, firings, and the EXACT same thing you see at any other company that is fighting to survive.

This right here is the very problem in thinking that is getting us in trouble in the long run. Should a company try and make a profit? of course that's what it's there for. You state these things but ignore the problem because of "socialism" and "capitalism." We need to stop looking at ideologies for what we should do and look at the reality.

What is happening here is that people are trying to solve two different problems. One side tries to figure out how to keep profitable in the short term. Other side trying to figure out how to grow and keep profitable in the long term. The problem is that the short term profit is killing the long term growth and profit.

Is this not a problem?

 

[Jhhnn]

What is happening here is that people are trying to solve two different problems. One side tries to figure out how to keep profitable in the short term. Other side trying to figure out how to grow and keep profitable in the long term. The problem is that the short term profit is killing the long term growth and profit.

Is this not a problem?

Not if you're one of the very, very few reaping enormous rewards in the short term, a la Wall St- then it's all good. It's even better when you can engage in private equity financialized looting-

http://www.nytimes.com/2009/10/05/business/economy/05simmons.html?pagewanted=4&_r=1&th&emc=th

When the Vandals looted Rome, they used swords. Today, it's done with paperwork.

 

[Pulsar]

This right here is the very problem in thinking that is getting us in trouble in the long run. Should a company try and make a profit? of course that's what it's there for. You state these things but ignore the problem because of "socialism" and "capitalism." We need to stop looking at ideologies for what we should do and look at the reality.

What is happening here is that people are trying to solve two different problems. One side tries to figure out how to keep profitable in the short term. Other side trying to figure out how to grow and keep profitable in the long term. The problem is that the short term profit is killing the long term growth and profit.

Is this not a problem?

Absolutely paul, and you echoed something I've talked about with others many times. However, even loyalty to your workers and vision toward long term success doesn't always work: look at the Japanese as a case study.

Germany has it right in many ways. Perhaps the biggest being that their unions ALSO look toward how to profit and the long term.

I think though, that just like Japan, those differences are largely cultural. I don't know how we can translate that culture to our own and make it successful.

 

[Jhhnn]

Absolutely paul, and you echoed something I've talked about with others many times. However, even loyalty to your workers and vision toward long term success doesn't always work: look at the Japanese as a case study.

Germany has it right in many ways. Perhaps the biggest being that their unions ALSO look toward how to profit and the long term.

I think though, that just like Japan, those differences are largely cultural. I don't know how we can translate that culture to our own and make it successful.

I think thatat the NUMMI plant in California serves as an example of how Japanese management style gets the best out of American workers, as do their highly successful assembly plants in other parts of this country. As Deming offered, workers aren't the problem- management is the problem.

Their domestic malaise is very much the result of their own housing bubble, collapse, and zombie banks, along with offshoring. Yeh- Japanese workers got offshored, too. While the Japanese housing bubble was poorly understood by most people in this country, it was intensely studied by our own financial elite, apparently serving as a template for our own...

Anybody who thinks that this was all just some sort of accident isn't really thinking... the takings were immense, and the Greenspan put was firmly in place, after all...

 

[the DRIZZLE]

I think thatat the NUMMI plant in California serves as an example of how Japanese management style gets the best out of American workers, as do their highly successful assembly plants in other parts of this country. As Deming offered, workers aren't the problem- management is the problem.

Their domestic malaise is very much the result of their own housing bubble, collapse, and zombie banks, along with offshoring. Yeh- Japanese workers got offshored, too. While the Japanese housing bubble was poorly understood by most people in this country, it was intensely studied by our own financial elite, apparently serving as a template for our own...

Anybody who thinks that this was all just some sort of accident isn't really thinking... the takings were immense, and the Greenspan put was firmly in place, after all...

I would frame it a bit differently and say the relationship between management and workers is the problem. If you look at the German style governance Pulsar mentioned they get the incentives for the workers and management somewhat aligned. The UAW has shown they clearly don't care about the futures of US automakers.

As a matter of policy I would be willing to give unions more power at a company level in exchange for restricting industry wide unions like the UAW. IMO this would result in better outcomes for both capital and labor.