What Is Management?

In October 1929, a worldwide panic erupted, set off by the New York stock market crash. This was the celebrated Black Tuesday. In Japan alone, many banks went under and businesses collapsed one after the other, or were forced to shut down factories or lay off workers. The unemployed filled the streets. Panasonic (Matsushita Electric at the time) was no exception. Unable to sell product, its inventory turned into a mountain. At that point, the top management counseled president Konosuke Matsushita to weather the hard times by laying off half of his employees. Considering the circumstances, it was a justifiable suggestion.

But, Konosuke Matsushita responded like this. "I'll cut production in half, but I won't reduce employees or salaries. Instead, I'll have all employees give up their holidays to do their utmost to sell some inventory." Hearing this, employees who had been afraid of losing their jobs were jubilant, and an atmosphere of solidarity grew within the company. As a result, just two months later the inventory was cleared and the company had recovered to the point where the factory had to resume full time production. Today Panasonic has become a major corporation and home to 300,000 employees worldwide.

As the world economy cries out for help these past few months, layoffs are taking place as a matter of course. Just like a deja vu of the world panic. Many companies and academics say complacently, "Business does not exist for the purpose of employing people." They certainly have a point since this is a capitalist society. Their idea is based on the perception that labor costs are not fixed costs but variable expenses. People are something that you obtain as cheaply as possible and only when you need them. Some companies only have employees that are like cheap disposable gears. Other companies only have employees that work with an energetic goodwill, each one for the good of the company and the good of the customer. I wonder which one will succeed.

Businesses that do not care about their employees cannot be expected to care about their customers. That is because management is an activity performed by people for the purpose of making people happy.


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