Monday, December 20, 2010

Save a nickel, save a dime

Imagine you are running BAA, the company that maintains London's Heathrow airport - the largest airport in Europe.  You have two options:
1.  Spend a lot of money on snow/ice removal equipment and hurt your short term profit.
2.  Don't spend the money, pad the profits and hope there is no major snow storm.

If you chose 2. you think like the management of BAA.*

The result?  Over 100,000 may not make it home for Christmas.  I had previously decided to do what I could to avoid flying through London and now I think many will join me.  Business history is replete with examples of companies going cheap and losing in the long run... The Ford Pinto is the classic example.  (Hit from behind Pintos would explode.  An $11 fix would have prevented it but Ford calculated the cost of paying off the families of dead victims would be cheaper.)  And the classic example of a company forgoing short-term profits to do the right thing was Johnson & Johnson with Tylenol.

*****
While researching for this post I discovered that the short-term thinking permeated the British government as well.  Last summer there were 43 recommendations - including a suggestion to stockpile salt - that went unheeded.

* Earlier today I read the story that explained how little was spent on snow removal equipment.  Tonight I've tried to find the same story and couldn't, but the link I provided describes the incompetent management.

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