A Christmas Message from the CEO of Spotify

Yesterday, in a   memo to employees, Spotify co-founder and CEO, Daniel Ek, announced a 17% reduction in force, equating the move to “being lean”, thus adding his voice to the executive echo chamber in which Lean stands for “Less Employees Are Needed.”   The timing of his announcement, close to the Holidays, evokes another Lean executive, IBC Television’s Frank Cross – in particular, this scene: Have a look.

In fairness, Mr. Ek’s motives may not be so malevolent as Mr. Cross’s. As Ek notes “Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities.” CEOs are, in fact, accountable to customers and shareholders – but not so much to employees. That’s business.

But it’s not Lean business, at least not as I understand it. Here’s a problem: Sitting in a Zoom meeting recently, I heard a report from a thoughtful researcher that she had documented twenty-two different Lean definitions: Lean for healthcare, for software, for construction, for service, for government, for this and that. From this potpourri, Ek has apparently selected one high on value to customers (a hallmark for Spotify), but one in which employees are NOT, as I have learned as an operating manager, “the most valuable resource.”

One of Shigeo Shingo’s beefs with management accounting was (and is) its view of employees as a cost to be increased or decreased according to projected earnings. I’m reminded also of a response from 20 years ago (three years before Spotify’s founding) given by my teacher, Hajime Ohba, when asked why TPS had not been more impactful for American manufacturers: “American manufacturers do not receive the full merit of TPS because management does not understand what TPS is, and because they are driven by quarterly earnings.” This appears exactly to be Daniel Ek’s challenge, as it is for every other public corporation CEO.  As Ek noted in his memo to employees, "Spotify is not an exception to these realities."   What he and Frank Cross have in common is a belief system that is not easily shaken. What’s different is that Mr. Cross had help from three ghosts to understand the consequences of his actions.

Best wishes for a Happy Hannukah and a very Merry Christmas.

O.L.D.

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