 Investment
is critical to your company’s success
The stock market is slowly
recovering, the Dow Jones Industrial Average
hit a five-year low in October 2002, unemployment
is also falling, and there is at least limited
optimism about the future for many companies
– what does the future hold?
The challenge now is investing
a company's resources successfully for the future
while learning from past experiences. Business
surveys have proved that there have been failed
IT investments, failed mergers and acquisitions,
failed human resource management, failed offering
of services, and failed research development
efforts from the late 1990s to today. There
has been a similar trend in these failures,
such as the loss of several factors like efficiency,
career growth opportunities, incentives and
the desire to invest in their company’s
future! It seems as though managers today just
look at everything as “expenses”
– and conjure up a fear to spend. Simultaneously,
most companies need to generate revenues to
survive – let alone prosper. Growth in
revenue and profits are accomplished by investing
in capital goods (equipment, computers) and
people (employees). Avoiding these investments
might be a narrow minded way to manage any company.
Research studies have shown that
many companies, both publicly traded and closely
held, are not making investments for the future,
or even attempting to improve efficiency today.
Although data on spending for the last part
of 2002 was very encouraging, surveys of executives
indicated that overall investment activity is
likely to be very volatile, particularly when
interest rates rise. Statements by business
leaders say they are "still waiting"
for capital spending to pick up and "don't
see" the need to hire more employees, indicates
that investment activity is likely to remain
relatively low, particularly when compared to
the late 1990s.
Of course some companies are
beginning to invest, but these companies are
the exception, not the rule. With the exception
of a selected set of companies in a few economic
sectors, companies are not investing in capital
equipment and goods to enable greater efficiencies
and growth. The decline involves much more than
just technology-related investments; it is pervasive
across nearly all types of capital goods and
equipment.
Employment growth is also at
a down. In the past many of us felt that we
could leave our jobs and find something better
relatively quickly, however today most people
are happy just to have a job. Layoffs continue
to spread, and even profitable companies are
cutting back on employees. Where will it end?
People today are concerned about the future,
and with good reason, particularly after suffering
the pain of a downfall in the economy. No one
wants to waste their money while difficult economic
times are still fresh in their minds. Nothing
focuses the mind like fear, and the reminder
of pain from recessions past is present in our
thoughts.
Corporate decision makers apply
the same logic to business investments - the
hangover, long and painful, is still with us;
it just seems to make sense to delay or avoid
investments for growth and efficiency right
now. The concern is survival, not growth. Finance
departments at many companies seem to know only
one word – no – a response taken
to critical investment requests.
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