Do no harm. It's a doctor's mantra, but why can't those three little words be universal—especially in the cutthroat corporate world? In business, it's important to carefully consider the repercussions of every decision, since hundreds of lives and livelihoods usually hang in the balance. In 2001, Enron's financial collapse stole thousands of pensions and triggered the chain of events that led to the passage of the Sarbanes-Oxley Act. Last fall, Citibank's $11 billion write-off in the aftermath of the subprime debacle was one of the first in a wave of such confidence-shattering financial news. And in March, somewhere between the calls for a New York governor's resignation and the conversations of race, religion, and politics that usurped the airwaves, another quieter piece of bad news hit the wires.
This corporate misconduct was noteworthy, though on a much smaller scale. Turns out the key players in a regional multifamily firm with properties primarily in the Southwest came face to face with their own transgressions—the heads of the firm have been charged with various crimes, including bribery, and face significant fines and jail time.
A simple case of greed, right? Yes, but if I were to venture a guess, I'd suppose that this woeful tale will likely be repeated as the economic shakeout takes shape over the next few months. Still, I wonder if these multifamily fallouts are more than a mere case of money grubbing. Perhaps this is what happens when good people, put in bad situations, make the wrong decisions. Just consider the situation of developers across the country, many of whom are being slammed with lawsuits requesting the return of deposits on condos that they're unable to deliver now because their liquidity is in jeopardy.
Today's marketplace has created a unique set of circumstances that will force many business owners to make tough choices. Some of those leaders will be unprepared for the dilemmas they face. Those who ran blindly after the next great building opportunity and did not prepare for the inevitable slowdown are now finding themselves ill-equipped to deal with the realities of a recession. They are scrambling to turn a profit, float a project, or salvage their over-extended credit. And they choose to take action—the wrong action—at the expense of those around them.
This predicament bodes especially poorly for the multifamily industry. For decades, apartments and condos were considered second-class, mom-and-pop operations with little to offer discerning consumers. Today's professionally managed portfolios are a far cry from those days. Residents have come to expect top-of-the-line customer service alongside their luxury finishes and on-site fitness centers.
Unfortunately, when business owners make poor decisions that lead to criminal activity and public outcry, the entire industry loses. Consumers begin to doubt the industry's ability to deliver on its word. That would be a giant step backwards, and the effects would be difficult to undo.
Yes, times are tough, but there are many strategies for rightsizing your organization that will help you manage costs, stay limber, and compete in the game longer. This month, we identify three of those strategies in our “Toning Up” feature, written by Larry Maloney (see page 46). The piece recognizes that the preemptive strike to save money can help save much more in the long run.
So take your time, think through the tough decisions that all companies will have to make in the near future, and do no harm—the entire industry will be watching.