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The issue of "encrusting"

by Roger Bourke White Jr., copyright November 2012

Introduction

As the Hostess debacle, that gained such high profile in late 2012 with the failure after the 2nd bankruptcy, has so poignantly demonstrated it is easy to spoil even rock-solid success. In the Hostess case the brand identity is rock solid, but the management, investors and workers trying to exploit that icon failed. To explain that failure there's been a lot of public finger pointing between management and various unions. (I'm sure the investors were doing just as vigorous pointing, but that didn't get into the media.) Each said in the months leading up to this final failure that they were giving up too much and various others haven't given up enough. Each side sounds justified to itself, but the reality is this failure has been going on for more than a decade. This is, just to belabor the point, the second bankruptcy.

What we are witnessing here is "encrustment", as I will call it for this essay. Over many years of success the brand and the company acquired so much dead weight that continued success first became difficult, then impossible. The lesson to be learned here is not the specifics of which weight at Hostess was the dead weight, but the process under which all that weight was acquired, and in way that made the dead weight so difficult to lose when harsh reality -- lean times -- called for it.

The most insidious way is that during successful times, -- fat times -- people involved with the successful organization say, "We've got a good thing going here, let's add some emotionally attractive features to the basic mission. We're doing well so we can afford it." These neat features are added, then sadly, taken for granted not long later. They become "givens" of the environment, "Of course we have [X]. Why wouldn't we have [X]?"

This kind of encrusting is a constant threat. Any organization controlling the movement of resources is threatened, right down to the personal level. At the individual level impulse buying is an example of encrusting. When it gets out of hand, the individual, and those around him or her, don't get full value for their efforts. Hostess is an example in the business scale range and on the regional scale we have what I call the "Midwest Disease", which I have written about in in other essays. And at the state and federal level we have entitlements being handed out today that our children and grandchildren will have to pay for.

Update: Encrusting at The Met

New York City's Metropolitan Opera has always been about being a showcase for philanthropy. This is a symbiotic relationship. It offers a high class place to give to and it must be sensitive to what pleases high class givers. One of those sensitivities of givers is to help workers where they can. The result of that is vigorously supporting unions at the Met. The dark side of being so pro-union is supporting encrustment. The following article reveals this quite well in describing the work rules that have evolved and the workers taking them for granted.

This 27 Jun 14 WSJ article, A Modern Opera: Fat Unions May Kill the Fat Lady: Chorus members get extra pay if they wear their costumes at any break, including lunch, and for costume fittings. by Eric Gibson, describes encrustation at the Metropolitan Opera.

From the article, "An epic confrontation is playing out at the Metropolitan Opera, only it isn't the familiar one between star-crossed lovers. The famed opera company, which opened its doors in 1883, is in a life-or-death negotiation with its unions—15 of them.

That's right, 15 labor unions, with more than 2,000 workers. Stripped of its high-culture context, the Met finds itself in a battle that sounds eerily similar to the fiscal realities many big-city mayors are now confronting when negotiating overtime, work rules and health-care benefits with sanitation workers. It's not entirely similar, though: The average singer in the Met's 80-person chorus makes between $145,000 and $200,000 annually. The curtain could fall at the end of July, when the Met's contract with 15 of its 16 unions expires."

"The American Guild of Musical Artists and other unions are pushing back, with one charging that Mr. Gelb has "declared war" on the Met's employees. The unions also accuse Mr. Gelb of profligate spending for the Met's productions. That last is a relevant point. The art form, after all, is called grand opera, and what's at issue is whether that tradition can continue or whether it will have to become not-so-grand opera.

But could it be work rules, not extravagance, driving those costs? A recent article in this newspaper reported that of the $169,000 spent on a poppy field made in-house for this season's production of "Prince Igor"—the unions' Exhibit A in their Gelb-as-budget-buster indictment—nearly 90% of the money went toward labor.

As the Met's management tries to move the opera back toward a real-world model where the bottom line matters, its unionized employees have to this point seemed to see themselves as a strange hybrid of artistic professionals and transit-union workers, treating the Met's donors like city taxpayers: Pay what we want, or we'll go on strike.

Right now, it's looking as if the Met's "taxpayers" are willing to accept a strike. And who can blame them? What had been New York City's primary economic driver and source of philanthropy —- banking and finance —- has shriveled beneath the weight of regulation and prosecutions. The city's former arts-funding base doesn't have the time to do culture because it's doing compliance.

On top of that, "philanthropy" itself is being turned into a dirty word. The New York Post reported earlier this month that more than half the members of New York's City Council had signed a letter to Wal-Mart demanding that the retailer stop donating to New York City charities. The council members even called on the recipients of Wal-Mart's largess, which provides meals to the homeless and other social services, to return the money. Then there was a recent Financial Times interview with Bill Gates in which he criticized donors who would choose to give to an art museum over a hospital that treats blindness.

So the Met is swimming against strong financial, political and even cultural tides. It remains a great cultural institution that instantly evokes New York City's global status. That won't continue, though, if the Metropolitan Opera has to operate like the Metropolitan Transportation Authority. Absent a settlement, it's Götterdämmerung at Lincoln Center."

Conclusion

Encrusting is easy to slip into, and because it becomes taken for granted it is difficult and painful to slip out of. It is hazardous because it makes adapting to lean times hard to do. We all must be aware and vigilant.

 

-- The End --

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