The difficulty is in determining what should be cut-back to get through the immediate crisis with least effect on the future prospects of the business. While Telco was in the midst of a large
capital expenditure program to expand its design and production facilities in Pune in the early 1980s the truck market went into recession. Finances became tight. The board had to consider whether to reduce the bonus to employees or reduce dividends to shareholders. One view was that since the company could not disappoint investors whose support it needed through the crisis, dividends must be maintained and cuts made elsewhere — in the bonuses and benefits of employees perhaps. An opposing view was that the company needed the dedication of its employees more than ever in tough times and hence the company could not afford to demoralise them.
The lesson was that, in a crisis, the company must retain the support of all its stakeholders. Continue reading “Leadership Innovation – Crisis of aspiration”