The Gold Watch

This morning I heard more debate about cutting the cost of government and how the additional government spending saved the jobs of many teachers, police and firefighters. It brought back many memories of budget resolution problems we had as I worked my way up the management chain throughout my career in Boeing.

My first boss taught me about the gold watch. He said that when management wants to cut our budget, what we do is to make sure that the first thing to go is what the boss wants badly, that is, his gold watch. Today, I would translate that in political terms to tell the public that the first thing that has to go are teachers, police and firefighters.

That was a good lesson for me in my early days because, as I worked my way up the ladder, I learned to ignore the gold watches and ask to see all of the elements in an organizations’ budget. I learned to ask, “Why can’t you cut this instead, or why do you need so much of that, or sometimes, more importantly, why did you need that in the first place?”

The excuses were often lame, but sometimes they would respond that some company or government rules required those efforts. Then I would dig into the possibility of changing or reinterpreting those rules, sometimes an easy thing to do, sometimes requiring the cooperation of government administration, and sometimes being irreconcilable. Those actions together with budget cutting performance rewards brought loss positions into very profitable ones.

I also learned that it helps for leaders to set a good example. One of Boeing’s most powerful leaders was T. A. Wilson. During my early service with him I watched him set the example during one of our budget crises by cutting his own compensation, reducing his personal administrative staff, and eliminating his own perks to illustrate that we were to cut all kinds of expenses.

I was with Wilson during of a number of budget crushing exercises including one where all of us faced a 40% reduction in manpower without distinguishing whether one organization or another was more important. That meant a 40% cut in all levels of management as well, not just the lowest level worker. Wilson called us in and told us that if we did not do this ourselves, he would be replaced by a person with pince nez glasses and ice-water in his veins. We just had to be a smaller company to survive a much smaller market.

One of the most effective demonstrations of eliminating gold watches was led my Mal Stamper, president of Boeing in those days. Wilson said that there would be no such thing as fixed (as opposed to variable) expenses. Everything was to be cut and buildings sold if necessary. Stamper took on the capital budget review himself and got down to some of the lowest levels of supervision in the process. Gold watches fell easily by the wayside as people realized their own judgment was at stake before this commanding figure.

Where do we see similar actions in government today? Where is the leadership that sets an example? Where is the leader who says we have to cut government by a large percentage to meet our revenues? Where are the leaders in federal and state government who personally get themselves dirty in the details of budgets? Where are the cuts in large staffs and administrative costs? Where are the cuts in buildings, equipment, materials, supplies, communications, travel, perks, wages, benefits, and so on? Where is the relief in overburdening regulation requiring both government and commerce to add what are often large costs to products and services?

The forecast is for deficits without end. Our national debt is on its way to $13 trillion without counting what may be over $100 trillion in unfunded and unreported entitlement liabilities. State governments are struggling just to overcome current deficits not to mention the inevitable blow coming as generous retirement benefits loom, and the population ages. Heritage Foundation data shows that the median household income had increased 32% since 1970 while government spending is up over 221% in the same period—and increasing exponentially. Surely this is the time for responsible leadership to bloom instead of continuing this farce that government’s best efforts have saved some of the gold watches: teachers, police and firefighters.

Henry K. (Bud) Hebeler, 4-25-10

Mr. Hebeler was president of the Boeing Aerospace Company 1980-1985 and currently heads Analyze Now, Inc. The Boeing Aerospace Company was responsible for most of Boeing’s military and all of Boeing’s space efforts. He also reported to the chairman for six years as Boeing’s chief planner. www.analyzenow.com offers many helpful articles on personal and national economics and retirement planning in realistic environments.