by Real Business - Thursday, 30th August 2007

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I can't imagine why you are tired," said Alex as I wearily sank into my chair. "Another easy day at the office with loads of people to help." Before I could reply she turned to watch Brookside with a "do not disturb" look on her face.

It's not just wives who don't realise what businessmen do to earn their living. Doctors and civil servants think we sit behind a desk shouting orders down the telephone. Once, I discussed management problems with a headmaster. "It's alright for you," he said. "You can fire people." To the outside world, chief executives are fat cats and ruthless vultures, smoking cigars, giving orders and firing every fourth employee.

Many other people are out of touch. Three years ago, I met a merchant banker who told me how he ran a business. "I put in a professional manager," he said. "If that doesn't work, I find another one." Just after he appointed his fourth chief executive, he himself was fired and the business went into receivership.

Serial sackings are a common feature of companies in trouble. The Sears' subsidiary, British Shoe Corporation, which dominated shoe retailing for 25 years, went through five chief executives in quick succession. The first handed over a 25 per cent market share, the last sold the ten per cent that remained.

There is a three-year cycle in this management merry-go round. In year one, the honeymoon, the new broom sweeps away the past (good and bad), recruits new talent and launches a cost-cutting campaign. In year two, the hangover, when sales fall well below budget, he starts spending money to back up business. Things get worse rather than better, so in year three, the hanging, he is replaced with a new whizz-kid who starts the cycle over again. Something similar is happening at Marks & Spencer. I don't wish to worry Luc Vandervelde, but he is approaching year three.

History shows that you seldom make money by firing managers. And you don't solve fundamental problems by cutting costs. When a downturn comes (and it seems one is coming) ask, "Is it me or is it the market?" "Is the problem management, or the business I am in?"

When demand dies, it takes courage to stand up to an accountant who wants some ritual bloodletting to appease the bank. Nordstrom, the respected US retailer, gives this clue to its success: "During trouble times, we didn't get flustered. Fearful retailers got rid of people and slashed expenses while we invested in the future."

The adverts announced Brookside was over. Alex spoke: "What are you thinking about? Key-cutting I suppose."

"I was thinking you can still be nice and run a business."

"But when I rifled through your briefcase," confessed Alex, "I saw the staff changes, you fire people every week."

"We only fire people who shoot themselves in the foot," I said pompously. "Most leave due to poor timekeeping, or gross misconduct. I don't respect companies that dismiss staff who have done nothing wrong. It's not their fault they were in the wrong job."

"Are you so clever at picking people that you never have to dismiss or demote them?"

"You know that's not true," I replied. "Remember those sleepless nights worrying whether I should demote George and building myself into a frenzy before we fired that dreadful Dave?"

The decisions are seldom tough - the hard part is implementation. In the seventies I employed a buyer who was so bad, the business was at risk. She lacked fashion flair but possessed a talent for finding suppliers who ripped us off. The result was low margins, low sales and high mark-downs. You didn't have to issue written warnings in 1972 but it still took me six weeks to grasp the nettle. I waited for the problem to solve itself - hoping she would discover some charisma or even hand in her notice. The problem didn't disappear, she had to go. I rehearsed the meeting meticulously but when I suggested she could be far happier elsewhere, she burst into tears. Tact has never been my strongest suit.

Since then I have been thankful for people in personnel who take pride in a fair dismissal. For years I relied on Geoff who turned sacking people into an art form. He helped me implement lots of tough decisions - all good for the business and often good for the employee. Within a week you wonder what all the worrying was about.

I haven't lost much sleep recently, because we promote our own people. I learned my lesson when I imported a "superstar", thinking he would solve all our problems. It didn't work out and I haven't been tempted since. I promote to fill every vacancy. I know their strengths; they know our culture. If we pick the wrong person, they can have their old job back. It means a drop in salary but we make a one-off payment to compensate.

Alex rose from her chair. "You care for your employees more than your family," she said. "Why are you so nice to them?" I answered at once: "They are the people who look after our customers."

By John Timpson
For a copy of John's book, Dear James, priced £12.99 contact Sarah-Jane Bagnall on 020 7828 0706 or you can e-mail sjb1@caspianpublishing.co.uk

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