In short, it told the story of an old man with a horse-drawn pushcart, selling his wares in a town. His son thought they could increase profits by cutting the horse’s oats by 25%. Thinking that his more modern son was smarter, the old man agreed.
Their profits did initially grow. The son then suggested if the horse could work on 75% oats, then they could scale back to a 50% oats diet. Things slowed a bit, but by cutting the horse’s food bill, the little business still enjoyed profits.
You know what came next. The son convinced the father to further decrease the horse’s meals to 25% oats, filling in with straw. Soon, the horse collapsed and died, leaving them unable to transport their goods and make a living.
The moral of the story is that good businesspeople should limit their cutbacks before sacrificing quality and risking the company. There is a balance between waste and the point when trimming the fat is both counterproductive and destructive.
Merger mania has hit many American gaming companies. Following a buyout or merger in most businesses, new owners often bring in their own personnel artillery to replace existing employees. However, replacing does not equal releasing. Head honchos who use the “layoff hatchet” would be wise to see the big picture.
Case in point: last January, Columbia Sussex – a privately-held family company – bought the Aztar Corporation, owner of the Las Vegas and Atlantic City Tropicana resorts, plus two other sites. Columbia Sussex bought its first casino hotel in 1990 in Lake Tahoe, Nevada. With Aztar, they own 12 casinos in six states.
Layoffs were immediate – several hundred in Las Vegas, and 896 employees, from January through September, in Atlantic City. Combined with the 2006 terminations, Atlantic City job losses totaled 1,531 jobs in 21 months.
The company’s 80 American, Canadian and Caribbean non-gaming hotel operate under different guidelines than casino venues. Some hospitality analysts cite inexperience with a gaming property’s labor-intense infrastructure. Casino hotels function in a specific format that often requires more personnel.
Columbia Sussex’s layoffs affect marketing and amenities without immediate return. However, by offering minimal attractions and acceptable gambling odds, they may be “gambling” that the Tropicana venues will attract and retain customers. They are investing in certain amenities and dining that need upgrading, but will limit others.
After several months of staffing fallout, revenues have dropped, but profits are up. Some gaming analysts have labeled what has happened at the Tropicana as a “Wal-Mart approach” to management, comparing it to the multi-billion dollar retailer.
What are the repercussions? Many cite serious negative consequences. For example, the International Union of Operating Engineers, Local 68, forwarded a letter on September 27 to the New Jersey Casino Control Commission (CCC). It stated that Columbia Sussex has ignored safety issues since staffing has fallen to “unprecedented levels”. The union estimates that 60 of it 68 member employees have been released.
Tropicana has also accounted for 22% of negative health inspection reports during the first half of 2007, though it totals only 10% of total casino floor space.
A massive layoff of Tropicana security personnel was reportedly blocked by New Jersey gaming regulators who cited public safety. A rare occurrence, the CCC raised concerns that additional security cuts would jeopardize safety and violate regulatory requirements.
A growing union influence throughout New Jersey is opposing Columbia Sussex. As of press time, some union officials allege they have persuaded key legislative support to oppose Columbia Sussex’s final licensing approval at the November CCC meeting. I’ll let you know the outcome.
Some former employees are suing Columbia Sussex for age discrimination. The lawsuit states a majority of terminated employees are over 40, allegedly replaced by younger, less experienced, cheaper personnel.
The lesson is clear. In business, a company can overdo itself as a ‘lean machine’. Tropicana, and others, need to address the growing threat from neighboring Pennsylvania’s racinos and slot parlors. They have already generated $1billion since late 2006, causing a slight decline in Atlantic City’s income.
A.C. isn’t sitting by idly either, and city leaders are taking steps to combat this competition. More on that later.

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