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ASK ARIEL: When will in-country managers be taken off financial probation by their headquarters’ bosses?

Business Jargon

In this series of guest columns, Ariel Adams, owner and editor-in-chief for aBlogtoWatch, answers questions on behalf of WatchPro readers. Click here to Ask Ariel anything you like!

Ariel replies: A pressing problem facing the wristwatch industry is the fact that managers and directors outside of Swiss head offices cannot spend any money. The situation is so dire that at most company departments are having their finances micro-managed so heavily and so arbitrarily the behavior is akin to punishing their in-country employees. If the watch industry is to have any large-scale hope of recovery, it better start spending like it wishes its customers would. 

Spending in most all areas at watch brands –including human resources, marketing, advertising, and communication – is being cut because profits in general are down and future forecasts look murky based on current models. People responsible for making prudent financial decisions (designed to protect cash flow) have rightly come to the conclusion that in the next few years it doesn’t look as though the global market will allow for the watch industry to grow.

This may be true, but logic doesn’t follow that the answer to three to five years of revenue uncertainty is to strangle current brand operations and restrict investment of budgets that will take advantage of current market opportunities and stimulate necessary morale building for team members.

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Three signs point to the fact that many watch brand branch offices and departments are being treated as though they are on financial probation.

First is the fact that many brands are requiring subsidiary teams to justify in advance the reason for spending in a large variety of areas. The practical reality is that any employee who brings up a new idea must first dedicate large amounts of energy and time (with skills they may not have) to present their idea to upper management.

The employee is then generally held responsible for the outcome of the investment, not only being asked to report on the outcome, but to also face the music if they do not meet the forecast or target they set for themselves in the first place.

Such a system of proposal creation, proposal delivery, and ROI measurement has almost never been proven to effectively reign in spending or increase productivity. It does however immediately demoralize employees and stifle any remaining essence of creativity left in the building.

The second sign that watch brand teams are being unfairly punished by top management is the fact that most in-country managers and directors – no matter their title – aren’t allow to make impacting spending decisions.

Discretionary budgets for daily spending needs are almost non-existent, leaving brand managers and directors outside of headquarters’ top leadership positions unable to actually help run the company. Most luxury watch brand employees are mere executors who are assigned tasks from above and are often reprimanded for deviating from plans which often do no have the best interests of all markets and all clients in mind.

Such severe restrictions of decision making by centralizing all power at a brand headquarters is another sign that trust is absent between management and staff, and that brands do not feel as though any spending “waste” is justifiable given poor future outlooks.

Finally, watch brands appear to be under financial probation because many of them are being asked to improve performance with smaller budgets, before being given additional budget to keep growing. This state of affairs is akin to an unwise game of “chicken.” The implied sentiment being that subsidiary and regional watch brand offices have misused marketing dollars and must thus clean up their act with “reasonable” remaining budgets before being rewarded with updated budgets to keep momentum going.

This isn’t actually what is happening. Certainly, there are examples of rogue watch brand managers who used company money for unscrupulous deeds. Outside of such rare instances, watch brand regional offices are being asked to increase sales and market demand without even remotely adequate budgets. Nevertheless, they are expected to perform as though they had sufficient budgets… all in mediocre consumer confidence markets, congested with competitor messaging, and still saturated with unsold inventory. Market conditions such as those facing most watch brands now merit spending, not further belt-tightening.

Companies certainly cannot spend money they don’t have, but the reported cash positions of the major publicly-traded groups (which own many of the world’s most popular watch brands) all report strong balance sheets when it comes to cash reserves. They can spend, or at the least not cut-back budgets, but they are choosing to do the opposite.

Some argue that purse string-holders at many luxury watch brands are acting in a manner that prevents brands from doing even basic business, resulting in a slow death and a winding down of brand equity.

Owners of important watch brands would be remiss to negligently destroy the brand equity luxury sales rely on when consumers make decisions. A luxury brand without a luxury reputation isn’t worth very much as a money-maker or an asset.

For this reason, big groups who own loss-making brands still have a practical financial interest in spending enough money to make sure a brand has enough global awareness and high-quality products to prevent its reputation being damaged too greatly.

The vast majority of the people in management and director positions at luxury watch brands have serious passions for their company and on a daily basis consider fresh and relevant ideas to escort their companies into modern times.

At the precise same time, many of these voices and souls are stunted and outright silenced because of a strict culture of approval and justification that utterly detracts from many forms of productivity.

Whether they know it or not, the relatively small number of people who control budgets in the luxury watch industry have instituted a system that makes team members feel as though they are guilty until proven innocent when it comes to original thinking.

Such a practice mistakenly hinders otherwise creative decision making on an independent manager level which any healthy brand needs in generous amounts on a regular basis.

The wise approach in my opinion for any luxury watch brand today is to consider an at least 10 year outlook for stability or growth. In that decade a brand should heavily invest in developing motivated managers who are celebrated for their ability to independently solve problems and grow brand appeal.

Vastly slowed marketing for luxury brands has left advertising space cheaper to buy and consumer attentions more capable to grasp. Managers with vision will take today’s times and build the luxury watch brands of tomorrow – but not if they are forced to explain how they are supposed to perform their tricks in advance to a table of sour faces.

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Ariel Adams

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