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Reality check

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One big news in the business world last week: Microsoft missed its earning estimate for this quarter and guided down its earnings for next quarter and next year. It caused the Microsoft stock (MSFT) to drop more than 10% on Friday. It was the largest drop in one trading day in 5 years. I did not own MSFT stocks. But I was expecting MSFT go up from its trading range in past 3 years (24 to 28) because its upcoming new products: Windows Vista and new Office suite. This news kind caught me in surprise. I have similar feeling for Intel and Dell because every time when Microsoft releases new OS, it will spur the upgrade of PCs.

Obviously I was wrong. The convention wisdom does not work any more in today’s business environment. The competetion is intense in the new areas of growth for Microsoft: online services, game, media, etc. Nowadays even Microsoft is talking about sacking. This reminds me the GE “20, 70, 10” rule which invented by Jack Welch. Basically GE will get rid of bottom 10% of its work force every year. A lot companies followed the suit, but some did not get the soul of this rule. In the talk given by Jack a few weeks ago at Washing U. at St. Louis, Jack explained why: at GE the managers are honest (or direct) to its employees, they will point out what the employee needs to improve constantly. If the employee did not improve performance as recomended by his/her manager, he/she already knows about the situation and will not be surprised if told to let go. He pointed out in some companies the managers are too nice, they would say “everything is good” until hard time comes, in which case they have to lay off lots of people. The sad thing is in that case, those employees are already in their 40s and 50s and it’s hard for them to get new jobs.

So much for the managers. I think most Chinese working in the US are professionals (or individual contributors) and we should also do some “reality check” to avoid this situation. Sometimes we just focused too much on the field we are working on and we should also pay attention to the financial strength of the company, the competition landscape of the industry, the outsourcing pressure, etc. Is my company making the numbers expected by the Street? Do we lose market share to our competitors? How about the pricing power and profit margin? Can my job easily be transferred to somebody fresh out of college? As an old Chinese saying goes “One need to think about future to avoid the worry in near term” (人无远虑,必有近忧). If you think only CEOs or your boss need to think about this, you may be wrong.

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