Pick n Pay CEO Sean Summers warned that saving yourself into prosperity is impossible and that investment is needed to continue growing a business.
Before Summers returned to Pick n Pay, the retailer embarked on a cost-cutting process which included retrenching many employees.
These cost-cutting measures and retrenchments devastated morale, making it difficult to grow a company.
Commenting on the issue, Summers said he looks at expenses like a tail on a dog. When a business struggles, people start cutting the tail. Eventually, there is no tail left to cut.
“Maybe the problem is not the tail. Maybe it is the dog. How about go and get a bigger dog,” he said.
He said momentum is extremely important to create a successful business. “I don’t care what business you are in – momentum is your friend.”
“As long as the momentum is maintained in the business, you can do all the good things a corporation needs to do.”
Even if you are really successful and the business is cruising along, there is no such thing as perpetual motion.
“No matter how successful you are, you must remember that your car is going up. You need to perpetually put in diesel to keep going,” he said.
However, many companies which do well think they can cut back on expenses to take more money off the table.
“All of a sudden, the growth starts to slow down. And then gets to a horrible point where it hangs, and it then starts to go in the opposite direction,” he said.
Summers said when a company starts going downhill, there is no amount of cost-cutting that will save you.
“You cannot save your way to prosperity. You cannot cut costs to prosperity. You have to trade your way to prosperity.”