Monday, November 12, 2012

Sad News for Kodak Employees

I have followed the recent woeful tale of the Eastman Kodak Company with great interest and sadness. There is a local connection since a nearby Colorado town, Windsor, has a large Kodak facility … or, at least, it WAS once a large facility. In addition, I’ve been interested in photography since an early age and my first 35mm camera was a Kodak. I also used a lot of Kodak film before switching to digital about ten years ago. Ironically, Kodak was an early pioneer in digital photography and has some of the most fundamental patents at the basis of digital camera success. Sadly, like many similar stories in the past, Kodak didn’t recognize that the the film business was about to become the latest example of buggy whip manufacturing, and they failed to be the pioneers in digital photography that their basic research would have enabled.

Now as they approach bankruptcy it appears that, according to the bankruptcy court, the retirees may be left holding the bag … an empty bag at that. Employees of Kodak have learned that what they had earned from a grateful company, "retiree medical, dental, life insurance and survivor income benefits," may be lost. Recently, 56,000 Kodak retirees got a rude jolt when a bankruptcy judge agreed with the company's request for the termination of those benefits, effective December 31. (Why is it that all the layoffs, termination of benefits, and other Grinch events occur around Christmas time?)

Kodak in a pre-ruling statement said it could not "support continued payment of retiree benefit" even after initiating several cost-reduction actions that included laying off "nearly 4,000 employees this year and exiting or winding down several businesses and the proposed sale of our Personalized Imaging and Document businesses."

Kodak is clearly a troubled company, and its many problems are spilling over to all employees — current and retired — suppliers, customers, and shareholders. The once-mighty photographic equipment, printing, and imaging company is fading slowly into oblivion with sales dropping sharply each of the last four years, and net losses piling up in the hundreds of millions. The company's market value has dwindled to less than $60 million, and its shares now trade as a penny stock on the PINK exchange. Sadly, the company that gave millions worldwide the photography equipment to record their memorable moments today is lacking even a smidgen of its own previous glory.

By the time Kodak emerges from bankruptcy — if it perchance achieves even this moderate goal — it would have a tiny footprint. The company's management is reorganizing Kodak as a "much smaller, leaner enterprise focused on commercial, packaging and functional printing and enterprise services." It will also have lighter debts and a much reduced retiree obligation, thanks to bankruptcy court judge Allan Gropper who agreed Kodak should terminate many of its obligations to retirees," according to a report in USA Today. "Individuals may see their life savings lost or lose their jobs," the judge said. "Bankruptcy can have a particularly painful effect on retirees."

Really? Tell that to Kodak's retirees who counted on the company to continue providing generous benefits long after they had left the company, and who must now seek alternative medical and survivor obligations. Many of the ex-employees cited in news reports blamed Kodak's management for mismanaging the company's affairs and for failing to anticipate or foresee the major technological changes that ended its domination of the photography market.

The news that Kodak's current management wanted to ditch many employees and substantially cut retiree benefits hit me hard initially as I thought about all the naïve folks who based their lives on two wrong assumptions. The first was that the company would continue to be the undisputed leader in its market segment, and second, that it would unfailingly stick with the agreement to provide those benefits. They were wrong on both counts.

Kodak and other troubled companies may not see anything wrong in terminating benefits to employees, but there's a larger lesson here for American enterprises and workers. While one part of me would like to side with the retirees and blame Kodak, the more enlightened (or cynical)  part of me, recalling the words of Intel ex-CEO and ex-chairman Andrew Grove, I am aware that employment and, unfortunately, promised benefits are "at will" in the United States. This means your employer only owes you wages for work already done and does not owe you guaranteed employment or lifelong benefits beyond what it is able to pay, even if it promised much more. Employees therefore have an obligation to ensure they secure their retirement by whatever means necessary and independent of past, current, or future employers.

Turns out it is true … there are only two things certain in life … death and taxes. Except maybe for CEOs. Guess which one doesn’t apply!

Grove's observation may be coming too late for many Kodak employees, but I would like to restate the six points he emphasized in his book here for current workers. He said:
  1. Nobody owes you a career
  2. Your career is literally your business. You own it as a sole proprietor.
  3. You have one employee: yourself
  4. You are in competition with millions of similar businesses — i.e., millions of other employees all over the world
  5. You need to accept ownership of your career, your skills, and the timing of your moves
  6. It is your responsibility to protect your personal business of yours from harm and to position it to benefit from the changes in the environment. Nobody else can do that for you.
There are implications for businesses, too. Executives must understand that as Grove noted in his book Only the Paranoid Survive: How to Exploit the Crisis Point That Challenge Every Company, employees will become more mercenary in their actions and will not always put company interest first. You may not like the implications, but that's what the Kodak bankruptcy ruling has reinforced.

I used to be the most loyal of IBM employees. As such I was not alone. A super majority of old-time IBM employees would have told you that their blood was IBM blue and that IBM was the greatest company in the world to work for. IBM had a "full employment practice," which meant no layoffs. I was in charge of IBM's Programmer Retraining Program which was an integral part of that full employment practice. If your old job went away, IBM would train you for a new job. I was proud to be part of that process and very proud of IBM's benevolence as well as its technical prowness.

I was certain that I worked for the greatest company in the world. At that time, it was true. But how things can change. I still have a high regard and respect for IBM, but no longer think it is the best company in the world to work for or to buy from. It’s still a damn good company, but things have changed. Just ask the former Kodak employees. I suspect they considered Kodak the best company in the world too. Ask not what corporate America can do for you. Ask what you can do for corporate America. "All cruel people describe themselves as paragons of frankness." — Tennessee Williams.

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