What led to my lay-off part 2

When we last saw our heroes, it was 2005. The business was doing $140 million in net income and believed by 2008, it would hit $200 million. Along the way, some things started to go wrong.

My company is a company built on measurements. The Holy Grail of these is net income. And our business will do anything to hit their quarterly net income number. The other big metric is volume. Volume is a leading indicator for net income. Think of it this way: net income is the food you put on the table and volume is the food that's in your fridge and in your pantry.

An interesting thing was happening within my company -- we were continuing to hit our net income targets, but falling far shy of our volume targets. This is a RED FLAG. You can't keep dining like a king when you're not re-stocking the fridge and the pantry. How were we doing it? By selling our lease portfolio to third party investors. You may have had this happen with your mortgage. Selling off your portfolio is to trade any future "end of lease" profits for a quick fix. We were selling the black Angus side of beef in our freezer and the wine in our cellar for some McDonalds and Red Bull. All the while, we were forecasting 30% growth year over year. This also probably should have been seen as a RED FLAG.

By this time last year, we had significantly cannibalized any future earnings from the portfolio. Our forecasted net income for 2007 was only $80 million. There was a lot of other lenders getting into the market place, and then the Deficit Reduction Act hit. The DRA limits the amount of medicare reimbursement for diagnostic imaging procedures. If a doctor is going to get paid less to do an MR on you, he's less likely to get new equipment -- and perhaps even likely to go out of business. Suddenly we had even less volume, and write-offs were going up.

By first quarter of 2007, the business was already calling off the $80 million figure. The new number was $60 million. When I was let go last week, they had a new number for 2007: $40 million. For 2008, I heard the number they are calling is $20 million. When your business is doing 10% of what it had staffed itself to do, that's a pretty big RED FLAG that the winds of change will soon be blowing.

I don't know if there's an HR handbook that says who goes first during a headcount reduction. I can tell you that they released the 5 people with the most time with the company and a combined 69 years of experience with the business. They kept 2 single moms with kids under a year old and a woman with only 2 years with the company -- a combined 10 years with the business.

Alright, this will be my last blog on the subject. It's been cathartic and I appreciate you tolerating it. Hopefully it will all be upbeat blogs from here on out.