If you voted for Obama you probably won't like this idea much.
Subject: Business Decision
Fellow Business Executives:
As the CFO of this business that employs 140 people, I have resigned myself to the fact that Barrack Obama is our next President, and that our taxes and government fees will increase in a BIG way.
To compensate for these increases, I figure that the Clients will have to see an increase in our fees to them of about 8% but since we cannot increase our fees right now due to the dismal state of our economy, we will have to lay off six of our employees instead. This has really been eating at me for a while, as we believe we are family here and I didn't know how to choose who will have to go.
So, this is what I did. I strolled thru our parking lot and found 8 Obama bumper stickers on our employees' cars and have decided these folks will be the first to be laid off. I can't think of a more fair way to approach this problem. These folks wanted change; I gave it to them.
If you have a better idea, let me know.
9 hours ago
7 comments:
Hmmm. Interesting perspective. My conclusion: You are not a very good CFO. Here's how I know this:
First, you claim that by laying off 8 employees, you will save expenses to help make up for the loss of profits caused by the increase in taxes. For illustrative purposes, let's say that laying them off saves you $400k per year. OK?
Now, the only way this would make sense is that, in the process of laying them off, you do not lose more than $400k in either lost revenue or added expenses. For example, it wouldn't makes sense to lay off the sales guy who brought in $2million last year unless you knew that revenue could be handled by other reps. Also, it wouldn't make sense to lay off the HR manager if you have to outsource those duties to a 3rd party and end up paying more. Makes sense, right?
OK, so the conclusion is that laying off these 8 people will increase the bottom line profits to help offset the additional tax burden. Right?
Well, my question is, why the hell did you not lay off these 8 people last year? Clearly, your company makes more money without them than it does with them. And I know you are a for-profit firm, so your job is to maximize profits. You are the CFO for Christ's sake! Your shareholders should fire you because you've knowingly sacrificed profit just to keep your buddies employed. That, my friend, is the sign of a bad CFO.
mba guy has a good point. The layoffs should be done independent of any potential tax increases.
Besides, I suspect there'd be something illegal about choosing layoffs based on politics.
I am confused here. Wasn't the stock market at around 13000 just a few short months ago.
Lets assume that I am correct on that assumption and then check out what the CFO actually experienced and then responded to.
A few month ago, the sky was the limit and the prospect of making more and more money was all too real. Why lay off people when you are anticipating such unbridled growth in sales and profits.
Today is another story. The stock market is near 8800 and there is serious talk of a depression.
Any CFO worth his/her salt would be looking for ways to prepare for any eventuality. Since the biggest chuck of expenses in a business is the labor expense it is only logical for a CFO to choose to reduce the work force.
Frankly, choosing the Obama supporters was an excellent choice. They chose to support a concept where the government is the nanny to which everyone is expected to look for guidance and survival. After all the individual cannot possibly live out their lives without governmental hall monitors making the decisions for them.
As a business owner, the CFO would naturally want to weed out those who had such a negative mentality that would surely cause a drag on the new endeavors of the company as it prepared for the next few years of tax increases and Marxist thinking ie From each according to their ability...to each according to their needs.
I'm not a business executive. I'm a psychotherapist. I just posted the article. Geez!
Aristotle,
Sorry, the way the article was posted, it sounded like it was coming from you.
The bottom line is that a slight increase in taxes at the top end will not cause a business owner to lay off people that he/she should not have laid off even without the increase in taxes. Anyone who claims this and tries to make you afraid of an Obama presidency is being disingenuous. They are just trying to trick you. Don't let yourself be fooled.
Regarding "Anonymous's" comment, layoffs may happen when other externalities occur (e.g. stock market drops, recession, etc.) but that's a totally different issue than a tax hike. Clearly he/she just has a political axe to grind that has little to do with the original post.
MBA Guy,
Thanks for helping to keep this blog accurate.
NOTE: I make this reply will the full knowledge that it is very unlikely that anyone will read it. Regardless I must reply, if for no other reason than to not let misinformation go unchallenged.
Obviously MBA doesn't stand for a business degree, otherwise you would have known better than to make such a claim that taxes couldn't have precipitated a layoff.
With 140 employees, assuming that the labor expense was 50%, a simple three percent tax increase would easily equal the salaries of eight employees.
An eight person reduction of a work force of 140 equals 5.7% of that work force. Simple math makes the rest of the story easy to see.
Which points back to my original response that the employer was justified in retaining the work force levels while the economy was in its upward spiral. Likewise he was justified in anticipating the need for a work force reduction with the foreknowledge if a tax increase.
Smart CFO pure and simple.
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