90 miles east of San Francisco lies the city of Stockton, California. You may not have heard of it and you may not know anything about its current situation, but it serves as a reminder of how any organization, not just big businesses, can severely decline if the proper management is not followed. From Collins’ “Five Stages of Decline” we see examples of famous companies, such as Circuit City, Motorola, and Delta Air Lines, that have encountered serious adversity at some point, many of which have failed. Stockton is an entire city which has exhibited the same ill-advised behavior as these companies: undisciplined pursuit of more and the denial of risk and peril. It is now in danger of becoming the largest American city to go bankrupt.
How did this happen? This is so often the question asked by leaders once hard times have arisen. Stockton’s mayor, Ann Johnston, is the first to admit that excessive spending was a bad idea.
“We went on a real spending spree and built the arena, the ballpark, a lot of community infrastructure,” said Johnston.
The city spent over $300 million on these structures with money it didn’t have, but wasn’t worried because the housing boom had made Stockton such a valuable city in terms of Bay Area housing.
“Stockton had become the affordable housing for the Bay Area, so we saw an influx of many Bay Area residents coming to Stockton, buying brand new homes at very reasonable prices,” Johnston said. “And the city leaders thought this was going to continue forever.”
Sound a little like the Toll Brothers situation? It definitely sounds like Stage 3: Denial of Risk and Peril to me. It is amazing that Stockton kept spending money with the belief that the housing boom would never end. When Stockton was in Stage 2: Undisciplined Pursuit of More, it wasn’t just spending and expanding its city, but also offered ridiculously generous salaries and retirement plans to government employees. City officials, along with the police and fire department workers, could retire after short tenures and have the city pay for themselves and their spouses’ insurance for life.
Stockton currently has an unfunded liability of $450 million from its retiree health program, and a $20 million dollar deficit in its $160 million budget. Johnston says that other cities in California are comparing themselves to Stockton, asking themselves if the same thing could happen to them. This is such a serious situation that has crept up on Stockton in a very short period of time. The city is currently making every effort to combat the possibility of bankruptcy. In the last three years, nearly 100 police officers have been let go. Stockton is in the midst of a state-mandated mediation process with bond holders and employee unions now that the city has stopped paying its creditors. Unfortunately, it may be too late.
Collins’ five stages of decline are visible now that Stockton has dug itself into such a deep hole. The city was overconfident in its ability to take advantage of the housing market and erroneously believed the boom would never cease. $300 million of spending and some extravagant retirement packages later, Stockton is in Stage 4: fighting an uphill battle to stay out of bankruptcy. From this example we can see that the stages of decline are very real and applicable to all major organizations. Stockton’s situation has been a wake-up call to other cities around the country, and yet another example of a “business” whose overconfidence and hubris has led it to take outsize risks and deny the consequences of those risks. Whether it can come back from this setback remains to be unseen.
Source: NPR
Tidak ada komentar:
Posting Komentar