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Other Views from Those in the Know
DeVoe Moore
Tallahassee-based land developer and real estate entrepreneur
Business principles should apply to government, too

The presidential election is over, but the debate rages on between advocates of free enterprise and those of government. Two recent articles in my hometown paper vividly illustrated the divide that remains between these two philosophies, and they make me wonder how the pro-government crowd expects to create a prosperous future.

Published a day apart, the two articles highlight the stark difference between a visionary free-enterprise company that successfully managed its finances during an economic crisis to remain solvent and a local government – unburdened by such worries as “staying in business” – that took a decidedly different approach. 

The two examples involve specific organizations, but they represent a discussion going on all across Florida.

The reality is that a free-enterprise company is obligated to manage its finances during trying times in order to remain in business. Governments are not and will continue to exist no matter how unwise their fiscal practices may be.

In the first article Colin Brown, CEO of Deerfield Beach-based JM Family Enterprises Inc., outlined the downward trend in the automobile business that caused market volume to decrease from, typically, $16 million to $17 million, to approximately half that. Brown had two options, each with important ramifications for his more than 3,800 employees.

The first option was to continue along his existing course, allowing the company to go into bankruptcy or making tough decisions to adjust to the new economy. The second option involved modifying business operations to bring them more in line with new economic realities. As an initial step, Brown chose to cut expenses and preserve cash flow rather than raise prices on services, thus taxing the existing customer base. Immediately, Brown sold a core business unit to generate enough revenue to weather the storm.

JM Family Enterprises also reduced staff in some areas, instituted hiring freezes in others, temporarily discontinued bonuses programs and cut back retirement plans in order to balance the budget. 

Employees who stayed agreed to pay cuts and to forgo bonuses and pay increases that had been common practice at JM.

Later, when sales improved and market strength returned, the CEO rewarded those who had sacrificed by providing pay increases and restoring pre-crisis schedules for those who had been asked to forfeit hours. Brown’s forethought and effort kept the company viable and maintained employee standards of living during a difficult time in the automobile industry.

A strict adherence to core principles and understanding hard times — not increasing expenses on customers — paid off for employees and company. 

The second article described some of our local government’s budgeting decisions, prompting one to ask whether local governments should be spending or trying to balance without cutting services that citizens have become accustomed to. In Tallahassee, the question is whether our city government should be spending money on what it calls a “world-class park” while promising a 2.5 percent pay raise for 2,800 city employees, though municipal coffers lack reserves to fund important city services.

It’s all about prioritizing, and nothing makes an executive confront harsh options like the battle for survival. When governments fail to face that dire outcome, they more easily approve fancy parks and unsustainable pay raises.

“Doing more with less” has become a standard business practice in the private sector. Successful businesses realize they must in order to survive in times of lower revenue.

It has become critical for some businesses to turn to a more innovative approach do doing business in such hard times.

The tax base must grow in the private sector, not through government projects people pay for with fees and taxes. The private sector needs to invest in the local and state economy to build and expand businesses and create a strong national economy.

Governments could take the same approach as businesses in these hard times. No one says parks are not valuable or government employees don’t deserve decent salaries, but those cannot come at the expense of essential core services or common sense in tough times.

DeVoe Moore, a Tallahassee-based businessman, started out as a farrier, then became a land developer and real estate entrepreneur. He may be reached at [email protected]

© Florida Voices

Published Monday, November 12, 2012

by Dr. Radut.