Growing Pains

By Bennett, Linda | Management Review, December 1997 | Go to article overview

Growing Pains


Bennett, Linda, Management Review


Getting and keeping the best people takes center stage for American executives as the U.S. economic expansion continues and the year 2000 looms.

We're within striking distance of the record for the longest U.S. economic expansion in this century. Business leaders on the AMA Finance Council say they expect the current U.S. economic expansion to continue for at least another year or two, maybe even into the year 2000, which would break the record.

Real growth for the last three quarters has actually been around 4 percent, which is "almost running double what the models say is sustainable," a Council member noted. Corporate profits have expanded faster than most estimates, and productivity has been higher than what has been reported. But "how long can you keep that up?" several Finance Council members wondered. The longer the expansion, the more productivity gains will diminish and corporate profits will start to feel it. Already, the rate of increase of corporate profits is slowing.

But very few were talking downsizing or layoffs at any of the Councils that met this past summer and early fall. In fact, many Council members had tales of rapid, even explosive growth, which brings its own set of problems. Here are a few of the questions Council members asked of their fellows:

Staffing. How do you find and keep good employees - especially in management and technical specialties? How do you train an influx of hundreds of new employees each month? Where do you find global talent, and how do you achieve diversity in the employee population at home as well as globally?

Leadership. Where do you find good executives who can lead a rapidly growing company? Current leaders may not have the skills to take the organization into the next century. How do you phase out these long-term, higher-level employees who may not be right for the future?

At the same time, members reported struggling to manage mergers, acquisitions, sales, spin-offs or initial public offerings. The spate of mergers and acquisitions is producing problems with blending corporate cultures and standardizing benefits, said members, particularly when one organization has much richer benefits than another.

As they look inward to reorganize, organizations also face outward challenges. Here are some of the issues on the horizon.

A Single Currency In Europe

The "euro" is coming. "I was stunned at how unprepared U.S. financial officials are at the introduction of the European Monetary Union (EMU)," commented a European speaker at the International Council. He believes the EMU will come off on schedule with 11 European members. However, the real problems for the EMU will begin afterward, he commented. The environment will include new, lower interest rates, more competitive economies and simplified financial operations. Another speaker added that he expects "the emergence of a huge market for the euro. We will be attractive for investment again. The euro and the dollar will be comparable."

What does the EMU mean for companies that have operations in Europe or that export to Europe? "You need to talk to your customers and suppliers," the first speaker urged. Some of the unknown questions: Since all operations in Europe will have the choice of using the euro or local currency for three years, when should they make the change? Will financial institutions be able to handle dual systems and conversions? When should companies begin paying in euros? When will local governments collect valued-added taxes in euros? What about tax returns in euros?

"Most of the major companies in Europe are well on the road to being prepared," noted the European speaker, but U.S. companies "are not asking themselves these questions." Not being prepared for the euro "is not an option," he added, yet "there is little awareness of what is needed."

Technology Investment And Development

The move to a single European currency will also have a tremendous impact on information technology investment, both hardware and software, predicted a member of the International Council. …

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