Friday, September 5, 2008

A tale of a corporation

Once upon a time there was a giant automobile corporation. The corporation was so large, and grew so fast, that it confidently told its employees, “We will take care of you and your healthcare needs long after you have retired from our services”. The market seemed to have no limits, and its growth seemed to have no end, that no thought was ever given to what would happen, years down the line, when its employees started calling on the corporation’s generous promise.

Of course, this pleased its employees greatly, and they worked hard for the corporation. Pretty soon, people all over the land wanted to work for the corporation. Other companies tried to emulate it. Commentators praised it. Everybody was saying that the organization of the future, the one that will supplant the government, was to be the corporation.

When the corporation was growing fast, it had no other major competitors besides another similar corporation across from it. All the other faraway lands were busy trying to rebuild themselves after a long series of costly wars. But the people who bought the products of the corporation were prosperous, and enjoyed the highest standards of living in all the lands.

Years passed by. Then the years turned into decades. The corporation continued to sell its automobiles. And it continued to pay for the healthcare needs of its valuable employees. Year after year, loyal old employees retired from the payroll. But they were immediately replaced by eager new ones willing to provide their services to the company that took good care of its subjects. And the corporation continued to pay for the healthcare of its retired employees.

The ranks of the retired swelled throughout the years. Though they no longer made cars for the company, they continued to share in the bounties and profits the corporation enjoyed through their generous pensions and healthcare benefits. For as long as the selling margins of the corporation continued to be wide, and its products continued to roll off into a willing market, everything continued as they had always done.

Then, from the horizon, there appeared a new abomination. New competitors suddenly pounced on the scene, and slowly took market share away from the corporation. From across the seas, coming from faraway lands, these foreign!!! automobile companies produced superior cars at a fraction of the cost it took our erstwhile hero to come up with its own.

First to go was the volume enjoyed by the corporation, as ranks, and then legions, of its once-loyal clientele began to swarm into the competition. Then next to go was its fat profit margin, as the corporation tried to compete by re-evaluating its once formidable pricing strategy.

Yet its clientele continued to shift to the competition. No matter how hard it tried, the corporation just couldn’t manage to bring its prices down as low as the new upstarts, for – and this was the abomination – these competitors did not, did not!!! support similar swelling ranks of its retired in their retirement and healthcare. What a disgrace! But an even greater disgrace, the corporation started questioning its own generous policy. Perhaps they shouldn’t be shouldering the personal needs of its employees, particularly those who had long gone on to other pursuits.

“Madness!” the former employees would reply in indignation. Promises had been made. They needed to be kept. Years of hard work had been given. How dare the corporation now hold back on its promise during the time of need of its employees. Shall it allow a trifle, such as the arrival of a brash but low-cost competitor, to compromise the integrity and gallantry of a decades old pact with its employees, who toiled long and hard to put the corporation at the top of the world? No!

Benefits couldn’t be cut. These had already been factored in by the retired as part of their retirement income. The corporation needed to find alternative ways to cut costs. So it decided to cut those of the existing employees, those to whom the promises have not yet reached the level of an incontrovertible pact. In addition, the company decided to scale down on its hiring of new employees, those it deemed would only further swell the ranks of the corporation’s entitled, years down the road.

These cuts worked as a stopgap measure. The profit bleeding was controlled. Costs started to go down. Cars made by the corporation began to sell at prices closer to those of the competition. Commentators cheered. Management began to heave a sigh of relief. Perhaps the corporation will survive this crisis after all, as it had many other difficulties in its storied past.

But the cracks had already been made, and they will only grow bigger in the coming years. Existing employees were no longer as happy as they were, and no longer as loyal. How could the company betray its own employees, its soldiers in its fight against the infidel foreigners? These employees no longer enjoyed the same benefits as the old employees used to, and they can no longer look forward to enjoying the same amount of benefits in retirement as those blessed with having retired at just the right time, before the arrival of the infidels.

Costs of the corporation still continued to spiral. Year after year, its ranks of the retired continued to grow. Year after year, the fastest-growing expense of this automobile company continued to be medical expenses. Its new retirees began to draw on their pensions and medical, and its much older retirees began to incur ever-bigger medical costs. Before long, the company was right back where it started, tethering on the verge of bankruptcy.

On the production front, it still couldn’t compete against the infidels. They have much younger workers, management would gripe, and they were more docile and loyal. How could they expect their own employees to be the same, when in fact their own employees were becoming more and more disgruntled with each new cut in benefits?

Yet the problem continued to be, glaringly, in its medical and retirement expenses. These expenses did not contribute at all towards producing cars, and yet they continued to be the most damaging item on its finances.

With each successive cut that resulted from the pricing wars, or from productivity increases by the competition, the corporation cut back on hiring new employees, and on the benefits it used to provide. The cutback in employees made it much harder for the corporation to increase its own productivity from a human standpoint. The cut in benefits made it much harder for the corporation to attract the same level of talent and commitment, as other, more generous corporations appeared on the scene. Mother of all shockers, even the infidels started to set up permanent facilities in the corporation’s own backyard, and started dipping into the same talent pool!

How could these workers go to the infidels, who did not promise retirement and healthcare benefits, bemoaned management. Ah, but the corporation no longer promised the same, and it was a free-for-all for every competitor. It would now be a foregone conclusion, though it would be years in the making, and the corporation would continue to deny it, especially during those years when it surprisingly made good money, but its years were already numbered.

Years passed by. Years turned into decades. The company continued to pay its legacy costs. But then, the infidels were by now paying their own legacy costs, though at much more modest amounts. The corporation was already in its last throes. Profits were already a thing of the past, and still, clients continued to abandon the corporation’s products.

Then one day it finally happened.

The corporation, no longer able to maintain its charade, finally gave up the ghost. Bells tolled for the once mighty competitor. Commentators took a break from their criticizing, and paid their respects. Even the infidels silently paid their respects.

It wasn’t everyday that a formidable company folded up, and it wasn’t everyday that a great one was born. The corporation, a product of its times, the once great future of organizations, the one that was supposed to supplant many of the functions of government, was no more. And with its demise, it entered into legend.

Songs and stories would be told of its great legend, and, multitudes of generations later, people would look back and wonder. Was it all true? Could it all be based on real events? Could there have been a real company behind this wonderful legend? The legend continued to be passed down. For indeed, it was the stuff of wonder – the legend of the healthcare provider – that tried to finance its goodness – by trying to sell automobiles.

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