Saturday, January 31, 2009

The NEW Austerity

(Obama's shoes captured by Time photographer Callie Shell)

Last week, Obama critiqued Wall Street for keeping their engines lubricated with large year-end bonuses. The president wants to make sure that more transparency, accountability, and responsibility exist in corporate culture, before the next 350 billion of the economic stimulus plan is distributed. As the White House continually tries to illuminate hope on the current global recession, how will the NEW austerity affect 2009 and the years ahead?

In economics, austerity refers to when a "national government reduces its spending in order to pay back creditors." Today, the term seems applicable to the millions who struggle to keep up with mortgage and credit-card debt and consequentially resort to cutting back on retail purchases. Last year's photograph of Obama wearing seasoned shoes on the campaign trail reflects today's mindset of saving more and spending less (see image above).

Reward with Institutional Ownership
Warren Buffett became one of the world's richest men NOT by receiving large forms of annual financial compensation, but by receiving compensation in the form of Berkshire Hathaway stock. In fact, Buffett's annual salary was $50,000 for most of his career. Buffett made his fortune by working hard to improve the value of his company's stock for the long-term.

(Warren Buffett by Tiner)

If Wall Street still argues that year-end bonuses are necessary to maintain key performers, why not reward managers with company stock to motivate for the long-term? ...But require the employee to keep the stock for the long-term to help guarantee continual performance and pride in the organization.

This weekend, I visited one of my favorite restaurants. To attract more patrons, the restaurant reduced portions and pricing on the menu. It may sound like a step backward, but management learned that their clientele enjoy sharing leaner orders and find the menu priced within today's budget.

Results? The restaurant was completely booked and the chef was grinning from ear-to-apron. Smells like his innovative plan is cooking success.

As many retailers and small businesses struggle to survive in the current recession, the long-term performers will be the businesses that successfully implement new models to attract and maintain a loyal customer base.

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