I will get back to content that is closer to what I usually write in a little bit. However, a while back one of the members of the AOM (Academy of Management) put out a call for "dark side" case studies -- studies of failures, misapplications or mistakes that could be learned from. Management classes generally study cases, the idea being that the students can gain experience and skills second hand by studying how something was done right. His thought was that there is also something to be learned from things that go wrong.
I thought of several cases that made for excellent cautionary tales.
The first is historic. General Motors was in financial trouble. They approached their unions for concessions and wage cuts and got them. Then, at the end of the year, a story ran that management bonuses related to the cuts were almost twice as much as the cuts themselves. That story has been a long standing disaster for General Motors. It illustrates metrics problems (how do you measure success in cost cutting -- and should the bonuses related to cost cutting ever exceed the cost saving?!; how do you account for long term toxicity of an action?).
More recently, in response to financial problems, several air lines ended up transferring stock to their unions. The pilots unions tend to be better organized and more management oriented. In at least one air line, the pilots union was able to obtain disproportionate gains from the input into management that the stock gave it. When financial problems arose, they then attempted to push a disproportionate share of the pain onto the other unions and avoid giving back the gains. You can track the result of that process in the lack of health of the air line involved. The only thing that the pilots union managed to avoid was a derivative suit by the other shareholders for disgorgement (you could treat the disproportionate gains as an unfair discriminatory dividend, which is what it was). Concepts of capture, fiduciary duty to all shareholders and other issues all rise, especially as worker interests in corporations only seem to be more likely in the future.
Texas Instruments makes for another great study, especially as they are actively trying to recover from an interesting mistake. They adopted merit only raises for engineers. They then gave bonuses to individuals for cost savings. The cost cutters went through and started firing the highest paid engineers and replacing them with "fungible" lower paid engineers. TI is attempting to recover from the morale effects and the obvious inability to recruit and retain top talent. There were other side effects as well. The best example I can think of was an engineer attached to a research team who kept specialty equipment running that allowed the team 140+ hours a week of uptime on their research. He was fired, after a confrontation between his manager and a cost cutter. Uptime dropped to 36 hours a week, and the engineer had to be replaced with contract service at a cost of over $30k a month. The cost cutter did not have to account for either the R&D losses or the contractor expenses, he only got the bonus.
Finally, and this is what got my attentiont ot the topic, Microsoft did something with a very successful division, Ensemble Studios, which has a major product release scheduled. As you might expect, the success of the division has drawn some "successful" management changes. The new manager is going to get bonuses based on net revenues. So, as soon as the next product is released, he is basically firing everyone except for a small stump. That way he will get credit for all of the revenue without any reduction for R&D for new or continuing products. So, Ensemble is closing its doors, the product release is jeapordized (not from lack of quality, no one is being fired until it is released, but from public perceptions) and two years from now instead of having new products, all of the signigicant employees will be working for competitors. Imagine what will happen if he gets assigned to operating systems for his next assignment? Given the amount of the bonus he can expect, look for Microsoft to gut out R&D in every area of the company if it doesn't adjust and to be out of business in 3-5 years if other managers get away with following his example.
