The engineering outfit hadn’t been doing so well over the past few years, and all of the odd goings-on in the Eurozone hadn’t helped either. Company revenues had dropped dramatically, and along with it the share price of the company and the size of the dividends that it paid its shareholders.
No one was very happy about the situation, not in the least the board of the company. So to rectify the matter, they hired a new chief financial officer, who immediately decided to make some changes to the organisation that he believed would put the company back on the road to recovery.
First off, he decided to take a long look at all the activities that the company was involved in where potential savings could be made.
In the good times, the middle management of the company had been only too eager to farm out a lot of their activities to firms of consultants and third parties, who for substantial fees would perform all number of different tasks, none of which were particularly core to the company’s business.
The new chief financial officer discovered that the number of such consultancy firms was quite substantial – it seemed as if they were involved in all aspects of the company’s business from writing lengthy marketing proposals, producing in-house magazines to organising team-bonding activities.
It wasn’t all that difficult for the chief financial officer to see where he could make some cuts in those rather expensive activities that weren’t delivering value for money. And so that’s exactly what he decided to do.
Initially, the company employees were a little worried by the new chief financial officer’s plans. They believed the cutbacks that he had planned might see them heading for the unemployment line too.
But as quick as he was to make the cutbacks to the non-essential areas of the company, which admittedly did mean that the company’s managers had to pick up some of the slack, the chief financial officer also made substantial investments in the engineering activities of the company in order to accelerate the flow of new products into the market.
Five years later, the chief financial officer’s frugal approach to the company’s finances has seen the company share price rise and big dividends paid to its shareholders once more. And no one is happier than the company’s employees, who now recognise how detrimental the wasteful laissez-faire attitude of their former financial officer had been to the success of the company.
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