Rainbarrel Products, a diversified consumer durables manufacturer, was coming off of a couple unproductive quarters due to a slowdown in consumer spending. Hiram Phillips was brought on as a CFO and chief administrative officer to reverse the fortunes of the company. Hiram stepped in and implemented a new corporate budgeting and performance management strategy that appeared successful by the numbers but had several consequences.
Hiram came into a highly unorganized situation that was full of uncertainty. "Look, none of us fights very hard at budget time, because after three or four months, nobody looks at the budget anyway" (Kerr, 4). Rainbarrel's executives had no idea of the corporate budget and spending but they still went forward in funding and developing new products. The company spent freely and without any concern which was a concern for Hiram.
Hiram was an individual that was concerned strictly with numbers and thus wanted to rectify the budget of the company. Hiram immediately wanted to reduce the labor costs and thus offered a buyout package for the bottom quartile of performers throughout the company. When that was not successful he "imposed an across the board headcount reduction of 10% on all the units." Although overhead costs were reduced who was going to account for the work to be handled bye these dismissed workers? A company is similar to a totem pole. If the bottom is taken away the entire structure will be compromised. If a company is to downsize it must be sure that all tasks can be accomplished with the reduced labor force and this is one thing Hiram did not make sure would occur.
Hiram was in charge of a company that ...