Evolving Excellence

GM, NASA and Sigmund Freud

In a recent post I teed off on a guy named Schwartz for citing the movie, Silkwood, as an example of corporate decadence.  In the comments to that post, Kathleen Fasanella took full responsibility for sending me Schwartz' book in the first place, but added that he did make a few good points.  She is absolutely right.  She did send it to me - sent me two copies, in fact, probably anticipating that I would try to duck out of the reading assignment by claiming that the dog ate the book - and Schwartz does make a couple of very important points.  The book is so thoroughly drenched in psycho-babble that it is almost unintelligible and it is certainly not for the faint of heart.  However, beneath the sympathy for Meryl Streep's plight and adulation for Sigmund Freud, there are a few nuggets of gold.

The book is called Narcissistic Process and Corporate Decay - The Theory of the Organizational Ideal, and the author is Howard S. Schwartz from Oakland University in Michigan.  What he actually does is to provide logical explanations for some of the nonsense all of us have experienced working for big companies.  He touches on why the most blatant 'yes men', 'boot lickers' and 'brown nosers' get ahead no matter how obvious their lack of talent may be.  He puts flesh to what is often described as 'politics'.

In Rebirth of American Industry I wrote about the practice at a men's clothing store in Cincinnati to wait until the P&G annual report came out to do their annual buying.  The people in charge knew that all of the thousands of junior managers at P&G would rush out to buy either blue or white shirts, and plaid or pinstripe suits, depending on what the senior guys wore.  They knew that being out of uniform could hinder their career.  Schwartz explains this sort of foolishness.

The book was written way back in 1990 and what gives it credibility is the accuracy with which Schwartz predicted the demise of General Motors.  "... the ideas that the organization needed in order to have avoided its present hopeless state may have been on the scene a long time ago.  But the individuals who had them might have been passed over for promotion because they were not 'team players', or perhaps they were made to feel uncomfortable because they did not fit in, or maybe they were scapegoated whenever the organization need a victim.  Indeed, ironically, the very ideas that were needed might have been laughed at or ignored because they 'were not the way we do things around here'."

He makes the point that senior management egos cause them to live in a dream world in which they and the company are perfect, and failure is always the fault of some external force or some incompetent lower in the organization.  Finance reigns supreme because finance lives in a world where everything and anything that is mathematically possible is viewed as actually possible; while operations people live in reality where lots and lots of very real constraints limit possibilities.  As a result, the finance people support the senior management illusion of grandeur, while operations people are seen as naysayers and defeatists.

He attributes NASA'a tragic Challenger fiasco to organizational malfunction.  In NASA, as with many organizations, only positive attitudes and commitment to meet stated organizational goals is tolerated.  The defects in the O-Rings were widely known among lower level engineers and the supplier, but the message that the Challenger was not technically sound and should not take off on schedule was not one anyone wanted to carry up the chain of command.  The bearer of such bad news would be seen as somebody who did not have the "right stuff" and NASA's cultural 'can-do' attitude.

An important point I believe he fails to bring up is the competitive culture traditional organizations breed - and it is not healthy competition to be better than another company in the same market, but internal competition between employees to for the next promotion.  I can easily picture a bunch of GM production managers sitting around the table with their boss who has no understanding of or interest in lean manufacturing and believes that improvement can only come from making production folks work harder; or a bunch of NASA engineers sitting around the table with their boss who has committed to the organization that the Challenger is technically sound and that it will launch on schedule.  The person who stands up and tells the boss that he is flat out wrong might as well do as he heads for the door because he has just put himself out of the running for the next promotion.

In every vertical organization the boss has his values, priorities and his agenda.  He demands that his staff support that agenda.  That is their job - to make his vision a reality.  There is little room in most organizations for  someone who is concerned about how that agenda might affect other departments, or how the customer might want a different agenda.  Theirs is not to reason why ...

Schwartz does not have all of the answers, or even know all of the problems, and a lot of what he writes is way over the top; but he does make a couple of very good arguments against the traditional pyramid, vertical, functional organization.  What I find especially disturbing about the whole matter is that Schwartz made good points about organizational structures and behavior in 1990 that are still valid in 2006.  The entire Human Resources profession has apparently been out to lunch during that entire time.

Some say that one of Toyota's pillars is 'Respect for People'.  Maybe it is and maybe it isn't, but there is no debating that they approach people and organizational structure in a completely different manner, so where is the Human Resource profession on this?  Why haven't they delved into lean organizations, lean employee compensation, and creation of multi-skilled workers and multi-skilled managers?  As much as I get after the accounting community, the 2006 Lean Accounting Summit is getting lose to being sold out.  When is there going to be a sold out Lean Human Resources Summit?  Or even two or three HR guys getting together over a couple of beers to talk about it?  From what I can see, the HR crowd is so steeped in agonizing over health care benefits, keeping up on anti-discrimination laws and working on how to steal good engineers from each other to get around to thinking about human resources.

... and by the way, for all of you folks over on the psychology blogs who are up in arms about my criticizing Schwartz for using the movie Silkwood as an example of corporate decay, you're going to have to roll up your sleeves and work harder than that. Your best shots have been cream puffs compared to the hailstorm I am usually under from Detroit and the MRP crowd. I work in manufacturing where brutal reality reigns supreme; and I have got a couple of pretty clever Asian bloggers who stay up nights thinking of more creative ways to insult me in in more languages.  Even the economists have wittier and sharper tongues than you guys. 

McChips

To the right is the cover of the latest Intel human resources manual - at least it is the manual Andy Grove is writing.  When the folks at Intel were given all of those high fallutin' Best Places To Work awards, they must have been looking only at the engineers - oops - I mean Envisioneers.  Factory workers , thanks to Mr. Grove, have been turned into Zombies. 

In one of the most ridiculous manufacturing schemes I have ever read about, Intel explains their "Copy Exactly" strategy of optimizing manufacturing.  An Intel Plant Manager describes Copy Exactly:  "It's not just [that] there's a specification or a recipe or a program you put into a machine," he says. "It also is what the human being does and how they interact with the machine."

This is the McDonald's of manufacturing.  It is making McChips - straight from Ray Kroc's instruction manual.  All that remains is for Intel to toss out their "Leap Ahead" slogan and adopt Quality, Service, Value and Friendliness.  And they ought to scrap the "Our success depends on talented employees around the world who are passionate about technology. Are you ready to make the most of your mind?" nonsense on their web site while they are overhauling things.

Kroc (that's him smiling to the left), of course, created Hamburger University, where every detail involved in slapping a piece of meat between two pieces of bread is honed to an art form before it is rolled out for teenagers around the world to duplicate.

Andy Grove and his #2 man, Craig Barrett, must have done a lot of power lunching at McDonald's to have cooked up Copy Exactly.  Only they are not trying to get teenagers under control.  Their philosophy is applied to adults.

"Intel Corp., the world's biggest chip maker, is unique in the way it rolls out new manufacturing methods, perfecting it in a laboratory and then painstakingly duplicating it at factories around the world."

"Under Copy Exactly, researchers spend more than four years perfecting a new manufacturing technique in one of Intel's development factories in Hillsboro, Ore. Once they are satisfied with the results, they work to meticulously import every last detail to half a dozen or so chip factories around the world."

This scheme is the polar opposite of engaging and involving employees.  It stands continuous improvement on its ear.  Engineers working in remote laboratories decide everything down to what color gloves the workers will wear to the paint scheme on the walls.  Ostensibly it is to be sure they control every variable.

So how's it working?  Andy Grove and Intel neither know nor do they care. (The thoughtful gent to the right is Mr. Grove, the man in charge of the whole scheme.)  Richard Doherty, research director at the Envisioneering Group, says the technique is "rooted in Intel's corporate culture and there's no scientific evidence that it gives the company an edge".  Translated, this means, "We don't know if it does any good and we don't care how degrading it is to our employees to be told to shut off their brains and sleepwalk through their jobs like Zombies, it is just the kind of guys we are.'  Some culture you guys got cookin' there at Intel.

Intel proudly boasts that they have achieved "pretty good" status as manufacturers.  I would think that the journey from 'pretty good' to even 'very good' will be like climbing Mount Everest in high heels so long as they have disengaged the minds of the entire production workforce.  Going all the way to 'excellent' or 'world class' is out of the question.

"All Intel cares about is that a chip comes out and is electronically the same as every other chip coming out." - Intel philosophy

"It’s the job of Hamburger University to ensure that those results get replicated each day in every country where McDonald’s operates" - McDonald's philosophy

Can I get fries with those chips, Andy?

We Don't Get No Respect

Thirty pages into a painful book on organizational behavior by an academic named Howard Schwartz, I came to a chapter in which he expounds on the anti-social behavior of large organizations - and the examples he cites to make his case are from the movie Silkwood.  I hope Mr. Schwartz gets a chance to read this because I want him to know that, at last word, Meryl Streep is fine.  She did not really die from radiation exposure propagated by evil business people.  In fact, she is probably lounging in some spa as you are reading this.   For that matter, it may come as a surprise to Mr. Schwartz to know that neither John Travolta nor Gene Hackman are really attorneys, and neither of them actually saved the world from evil manufacturers. In fact, I cannot think of a single movie ever made that comes close to reflecting manufacturing as it is.

Mr. Schwartz is hardly the only one who takes popular culture as a legitimate source for intellectual argument.  Consider this from a prominent George Mason University economics wizard: "Service-sector jobs are the most desirable" and "Ever hear a parent say 'I want my boy to grow up to be a pipe-fitter!'"  Th term 'manufacturing job' is synonymous with 'dirty', 'dangerous', 'oppressive' and the term 'manufacturing manager' is on par with a pre-Civil War plantation overseer in the common culture.

Until manufacturing is viewed with the respect afforded just about any other line of work, it is hard to imagine that lean manufacturing will be taken seriously.  Of course, the opposite of the Western disdain for manufacturing is the Toyota view.  Fujio Cho, in the unlikely event he would ever care about them, is apt to need someone to explain stock derivatives to him when he takes over as Toyota's chairman next month, but he won't need anyone to explain manufacturing.  Respect for the importance of manufacturing and the value placed on people who have done it well at Toyota goes a long way toward explaining their success compared to its competitors.

The practical fallout from the cultural disregard for manufacturing is all around us.  The University of Arizona has a very aggressive program for turning its leading edge research in optics technology into entrepreneurial endeavors, bringing in wheelbarrows full of venture capital and spawning over 1,000 small manufacturers over the last few decades.  At the same time, there is virtually no manufacturing management taught at the U of A.  For that matter, there is no MEP in the Tucson region.  Very few of the 1,000+ manufacturing start-ups have survived.

From the academic scientists who conjure up this Star Wars stuff, to the University administration to the venture capitalists, the prevailing attitude seems to be that if you dream up a great product, manufacturing will somehow take care of itself.  Any collection of unemployed bums can be gathered off the street corners to make the whiz bang innovations.  The U of A model is just a small scale example of national policy in the U.S. and the thinking that is sweeping through Europe.  Innovation is the new rallying cry!  Dream up more and better inventions - the higher tech the better!  What we need are more engineers and scientists to do more of the sort of work the U of A has been churning out.

Who is going to make all of these innovative products?  I suppose the plan is to round up all of the out of work extras from Silkwood, Class Action, A Civil Action and the rest of the Hollywood play list and have them run it.  What else are we to think when the 'Manufacturing Czar' is a former marketing manager from a small carpet making company?

As I have often pointed out, lean manufacturing is almost non-existent in the colleges and universities - at least in the mainstream programs.  An accounting professor at Georgia Tech recently explained that Lean Accounting is not part of the curriculum because the school has to respond to job requirements for its graduates, and there is no great call for lean manufacturing skills.  I think he may be misreading the market, as evidenced by the fact that the MEP run in conjunction with Georgia Tech is one of the best and the busiest in the nation.  Manufacturers in Georgia can't seem to learn about lean fast enough.

That scenario plays out everywhere.  MIT and Michigan run great lean education programs - but not for mainstream students.  Manufacturing is all but ignored in the standard business curriculum.  Wharton publishes operations management advice - almost exclusively devoted to outsourcing management.  The universities establish these adjunct programs in responce to enormous pressure from the manufacturing community , while the tenured faculty rolls on viewing manufacturing as work for lesser intellects.

In many companies, lean manufacturing does not take hold because manufacturing is viewed with a combination of ignorance and disdain.  The notion that manufacturing can be the greatest source of profits, rather than finance and brand management, is inconceivable to people who think that having your kids work in a factory for a living is a sign of bad parenting.

In Japan, China and throughout Asia, manufacturing management is viewed as a respected, honorable profession.  The people who have positions of authority and influence in factories are admired.  In the West, manufacturing people are described as "the slugs making turbines and lightbulbs".

If we do not work to restore manufacturing as an honorable profession, soon enough all of the 'slugs making turbines and lightbulbs' - and cars and furniture and just about everything else - will be Asian where the 'slugs' get the respect they deserve.

MRP Versus Lean

Over the past several months, we have published a number of articles and blog posts concerning MRP, its origins and its role - if any - in lean manufacturing.  More than any other topic we raise, it brings out comments and opinions, as the manufacturing community wrestles with the role of this huge driver of how manufacturing has been managed over the last few decades.  With over a billion dollars expected to be spent on ERP systems in the next year, and with thousands of MRP/ERP applications already in place, the significance of this discussion is great.

While we will eventually organize the material concerning MRP in a more structured manner, for now I am using the blog pages to bring together the various MRP related articles, as well as some of the more interesting emails I have received on the subject.  In particular I want to thank Gene Thomas of Configuration Management Solutions and Joel Wisner from the University of Nevada - Las Vegas for their valuable additions to the discussion, which you can read in the comments below.

I would like to invite the entire manufacturing community to weigh in on the subject.  The goal is to eventually compile the best of all of our thinking into a comprehensive white paper on the role of MRP in lean that can be of value to us all.

Following are links to the documents that we have published in the past:

Farewell To APICS - my blog post discussing the decline of APICS in their influence on manufacturing which I ascribed to their reluctance to replace MRP with lean manufacturing as the core of their body of knowledge

Kevin's Recent post The False God of the Almighty Algorithm

My article MRP R.I.P.

An excerpt chapter from Rebirth of American Industry entitled The Illusion of MRP

I urge everyone to read the insightful additions made by Gene Thomas and Joel Wisner in the comments, and to add any comments of your own that might advance all of our understanding of this very important topic.

The Ugly Executive

How about if we move all of the suspected terrorists from Guantanamo Bay to regular federal prisons and convert the pens at Gitmo to a special prison for executives?  The first inmates can be the boys from Enron, followed quickly by the fellows from Volkswagen and Hyundai.  It would have to be a co-ed gulag in order to ship the Boeing folks there.  Former execs from WorldCom, Tyco and from firms all up and down Wall Street would easily fill the available space.  I am sure that all of the uproar and protest over inhumane treatment of prisoners would come to a halt.  No organization would care how they were treated, including many of these people's own families.

There are increasingly two distinct business communities in the world.  There are the privately owned businesses dominated by smart, hard working managers with a great deal of character and integrity; then there is the cesspool of greed and corruption of the publicly traded firms.  Unfortunately, most people only know of the second group.  What passes for business news in the press revolves almost exclusively around Wall Street.  When government officials contemplate business and economic matters, they gage the magnitude of a problem or the results of their decisions by the Dow Jones Average.  The worst part of it is that the increasing public awareness of just how greedy and corrupt the leadership of the public business community is spills over to taint the conscientious people in the private community.  Businesses in general, and manufacturers in particular, are viewed more and more as institutions without concern for employees, communities, the environment, or the well-being of the countries in which they operate, which is far from the truth in the vast majority of cases.

I would think that as someone makes more and more money, the drive for cash would start to ebb a bit, and other priorities - like family, for instance, or a desire to improve the community one calls home - should start to move up in the priority scheme.  I would think that building something of lasting value, such as a business, a school, some community resource, or a church might seem like a good thing to do.

I cannot understand, then, how someone like Gary Rodkin would leave his job at Pepsi in New York, with its $2.28 million paycheck, and commute to the top job at ConAgra in Omaha, with it's $3 million paycheck (plus the continuation of his old Pepsi salary as part of a severance package for a couple of years).  The stated reason is that his children are in school in New York and he did not want to move them, but he promises to move to Omaha some day.  If his family is so important, why take the job in Omaha and be gone from home five days a week?  It seems to me that the man should either commit to Omaha, or not.  He should either commit to his family and stay in New York, or move them to Omaha if they mean that much to him.  How else can anyone interpret this but to believe that $2.28 million was not enough for him to elevate family or community up to the same level as cash in his priority scheme?  How much does he need to make in order to decide that it is enough, and to make a commitment to his family and a community?

Jim Kilts ran Gillette in Boston, sold out to P&G in Cincinnati, worked for them there for a while, laid off north of 6,000 people and put $153 million in his pocket - all the while never moving from his home in Rye, New York.  Exactly how is this supposed to be interpreted as anything other than pure, unadulterated personal greed?  Is anyone in Boston, Cincinnati or employed by Gillette one iota better for Jim Kilts having been on this earth?  Or is it just Jim Kilts who is better off, and a few folks on Wall Street who made out like bandits on the multi-billion dollar deal?

Every day in America there are families that face layoffs and downsizing, who decide to tighten up their belts, get a second job, learn to live on less, because the communities in which they live and the schools their kids attend are more important to them than the money they can make by relocating.  That mentality seems to be completely foreign to the wheelers and dealers at the top of the Dow Jones feeding frenzy.  It is almost certain that they cannot begin to appreciate how little respect the average American has for them. 

It is nothing short of appalling to read the legacy of Jack Welch at General Electric.  He is proud of his 'alumni' and watches like a proud father as dozens of former GE execs have moved on to run some of the biggest publicly traded companies.  The business press carefully scrutinizes their performance to see how effectively they achieve Welch-like results at places like Home Depot, Allied Signal and Albertsons (on balance, it has not been very good).  The most noteworthy element of this Welch legacy I see is a complete lack of loyalty to General Electric.  Dozens of execs, all making north of a million a year jumping ship for more millions elsewhere? It speaks volumes about the value scheme and culture engendered at GE.  But it should come as no surprise, except perhaps to thousands of loyal GE employees naively following leaders who see them and the company as nothing more than a springboard to personal riches. 

The hallmark of Welch's tenure at GE was a massive hollowing out of GE.  "Every time we have an outsourcing forum, it's like a GE and McKinsey alumni association meeting," says Sunil Mehta, vice-president of NASSCOM, India's software industry association.  Welch demonstrated no regard for GE employees, GE communities or GE customers.  His loyalty was to himself and the investment community that made him fabulously wealthy.  That he created a culture of executives ready to jump ship to the highest bidder and begin hollowing out their new employers should be expected.  The common trait of these people is no commitment to their employer or their employees, and often an unwillingness to live even in the same town as the company they run.  Some legacy there, Jack.

As Gary Rodkin soars over Sterling, Illinois in the corporate jet on his way to and from Nebraska to pick up his loot, I wonder what he sees when he looks down at the Wahl Clipper company - or at hundreds of other towns with hundreds of other similar companies.  Can he possibly fathom Greg Wahl running the family business, just like generations of Wahls before him, struggling to maintain the 500 jobs that are the lifeblood of the city in which he was born and raised?   Can he even fathom how it has never occurred to the Wahl family to sell the whole thing for a vast amount of money tomorrow and retire in luxury in any glamorous location they want, even though they easily could?  Most likely he doesn't even know they are there.  If he thinks of them at all, I suspect he views them as GE alum Gary Wendt, who would not even discuss taking over Conesco unless they paid him a $45 million bonus, and who, while running GE Capital, looked with disdain at "the slugs making turbines and lightbulbs".

There are exceptions, in the public sector, of course, but they are fewer and farther between.  The shame of the big corporate culture is that the 90% of global business that is good, decent, dedicated and goes about their job with character and hard work gets splattered by the Wall Street executive mud.  If I could write one line in one blog post that gets picked up and spread throughout the media, it is this: Wall Street is a greedy and destructive freak show and not the heart of business in America or anywhere else; and 90% of America's businesses would not pay minimum wage to a Jack Welch alum.

The Lean Accounting Assault

There is no aspect of lean more important than Lean Accounting.  When you boil it all down, the reason many of you are having a hard time getting support- upper management or otherwise - for lean is because people cannot see the savings.  The reason people agonize over how to justify kaizen events or six sigma projects aimed at improving quality or customer service is because they cannot see the financial benefit.  That is never going to change unless you get your company involved in Lean Accounting.  Simply put, it is an accounting procedure that connects cash more closely with profits and losses; it drives metrics directly aligned with manufacturing excellence, and it collects cost along the value stream, rather than through some hierarchical cost accumulation and allocation scheme.

If you have a traditional accounting system, and your lean efforts are not showing savings, it is most likely because the accountants can't find it in their bizarre costing processes.  If you have Lean Accounting and you cannot find the savings, it is most likely because there aren't any.

Tired of battling the financial world alone, the Lean Accounting thought leaders have banded together to launch an all-out assault on the financial community.  A real Who's Who in Lean Accounting has joined the effort, including Brian Maskell, Orry Fiume, Bruce Baggaley, Jean Cunningham, Jerry Solomon, Robin Cooper, Tom Johnson and Frances Kennedy.  Jim Huntzinger, Mark Deluzio and Larry Grasso put together a grand conclave of sorts last week at Central Connecticut State University.  Some of the people way out in front of lean have also joined the effort, including Doc Hall (who is as strong an advocate as any of the pure accounting folks), Richard Schonberger, Michael Bremer, Jamie Finchbaugh and Norm Bodek.  They even let me join the fight.

This chart gives a pretty good picture of the mmagnitude of the task:

Different people have volunteered to after each of these groups.  You can see it won't be easy.  But it is critical.  If lean is going to take hold and turn our companies into long term survivors - long term winners, in fact - everyone engaged in lean in any capacity has to get up to speed on what Lean Accounting is all about.  Just abut everyone of those names listed above can help you out with training or literature - or at least they can steer you to someone who can.

More important, you need to get your controllers and CFO's to the Lean Accounting Summit:

Click HERE to find out all of the details.

Lean Accounting really is critical to the lean transformation.  I am quite serious when I tell you that without it, your lean efforts simply will not work.

Lessons From An Itinerant Manufacturing Bum

Just about everyone is familiar with the story of Alfred Nobel, inventor of dynamite and namesake of the famous Prizes - or at least they are familiar with one version of it.  The standard version of the tale is that he invented dynamite for construction purposes, then, shocked at how the world was using it to blow each other up instead of to build things, he bequeathed his fortune to establish the Prize to promote world peace.  Maybe that's how it happened and maybe not.  Al's old man was a military contractor for the Czar of Russia and the family fortune was made as a result of Immanuel Nobel's insight into good ways to blow people up, so how bothered Alfred was is a bit questionable.  In any event, whether it was a fit of conscience or, more likely, a futile attempt to score points with a woman named Bertha von Suttner, he changed his tune.

Gary Hamel seems to be in the midst of a similar journey, although I have no reason to think his motives are to impress some woman.  Hamel, for those who do not know of him, is regarded as perhaps the greatest management wizard alive - the heir apparent to Peter Drucker.  He describes himself as "the world's most profound business thinker", so modesty is obviously not one of his strong points, but there are plenty of other folks around who share that view of him.  The Economist calls him "the world's reigning strategy guru."  This mantle of genius has been placed on him largely on the strength of an article he wrote for the Harvard Business Review back in 1990 titled "The Core Competence of the Corporation".  The one sentence summary is that a company should figure out what it is good at and concentrate on doing that thing very well, and not worry too much about getting good at the rest.

Just as the invention of dynamite for construction purposes inadvertently made Alfred Nobel the Father of Weapons of Mass Destruction, the origination of the concept of core competency turned Hamel into the Father of Outsourcing.  I don't think Mr. Hamel intended for just about every big corporation to take him so seriously that they would use his theory to outsource every company function except the one thing they figured was their 'core competence', but that's what happened.  I especially don't think he expected them to decide that their true core competence was finance or advertising, instead of value adding activities like engineering and manufacturing.  Regardless, Hamel's theory of core competence has probably hollowed out more factories than Nobel's dynamite ever did.

Hamel's scheme was so wrong - at least the standard corporate application of his scheme - that even the fellows at Wharton are questioning the idea of breaking up value streams to isolate and only worry about core competencies.  It would have saved the whole bunch of them a lot of time and effort (not to mention a bit of inconvenience all of this caused for a few million people who lost their manufacturing jobs) had they all just read a couple of articles about lean.

Better late than never, however.  Like Nobel with his Prize to atone for some of the damage done, Gary Hamel is opening up a 'Management Innovation Lab' at the London Business School this Fall so they can rethink the whole mess.  I think that he is going to get it right this time.  I think that Mr. Hamel may be in the right position at the right time to have history remember him not as the guy who gutted manufacturing with his hair brained core competence notions, but as the guy who tossed Alfred Sloan out of manufacturing once and for all.

I am not a "profound management genius", nor am I a "strategy guru".  Anyone who would pay me the ridiculous sums that Gary Hamel and his peers get to give a speech is out of their mind.  When asked what I am, my typical answer is that I am itinerant manufacturing bum.  I have worked in just about every kind of factory at every level from machine operator to plant manager.  I write, I consult and I speak from time to time to just about anyone who wants to talk about manufacturing.  My formal education is pathetic.  My success with lean manufacturing has been little more than standing on the shoulders of giants like Ohno and Shingo and taking credit for their genius.  Rebirth of American Industry is nothing more than a compilation of the logical and obvious conclusions I came to from trying to understand why so many good, smart and conscientious manufacturing executives have failed to succeed in lean transformations.  I want to make this clear before I launch into the real point of this post.

The impetus for creating the lab is a series of brilliant insights - that Toyota actually deploys a different management system, not just a different factory operating scheme - that the Sloan model has some weaknesses, including insanely trying to boil something as incredibly complicated as a factory down to a couple of simple equations - that business schools and their graduates know next to nothing about the origins and assumptions behind the management principles they memorize - that Henry Ford actually was the innovator of management principles and not just assembly lines.  I know that just about all of this comes right from the pages of my book.  The lesson to take, however, is not that I am a genius on par with Gary Hamel.  No, the lesson is that it has taken this long for the leading guru among all of the leading strategic gurus to figure out what is patently obvious to me and all of the other itinerant manufacturing bums out there.

The bottom line: I am not a deep thinking wizard - I merely write and say what many, many manufacturing people know to be true.  CEO's can save themselves an awful lot of time and an awful lot of money by just going out into the factory and asking all of the itinerant manufacturing bums already on their payroll what is wrong and what needs to change.  The alternative, I guess, is to wait a few more years, then pay Mr. Hamel's fee to tell them.

Excellence, and Lack of It, Are Universal

In going through my morning routine of perusing the news in search of interesting developments in the world of manufacturing, I encountered nothing unusual.  There was an interesting story about seven execs arrested for rigging bids on government contracts, and a story about another exec going off to prison for three years for tax evasion.  There was an editorial expressing concern about the increasing wage gap as huge groups of workers have experienced the job affects of manufacturing 'restructuring'. Business at Toyota is, of course, booming.  A high ranking trade guy received a death threat for selling out to China and, while things are tough for manufacturing, business is thriving for bankers, insurance companies and others in the money juggling business.  Of course, the usual non-business stories were there also - a mayor in trouble for 'groping' a woman, a murder or two, safety concerns on the transit system and so forth.

Perhaps I should have mentioned that this is one day's news in the Japan Times.

How about if the lean community, once and for all, gets over the notion that manufacturing excellence is somehow a function of Japanese culture?  I could have picked just about any country in the world and written the same piece.  The temptation to cheat and take shortcuts overcomes a few business people everywhere.  The allure of cheap labor is universal.  The challenge of committing to a workforce in the face of dynamic market conditions is a manufacturing problem - not an American, or even Western, problem.

Lean experts who suggest that manufacturers must adopt elements of Japanese culture to succeed are misleading their clients.  Manufacturers who rationalize their lack of lean success to the difference between their country's culture and Japan's are merely making excuses for management failure.

Manufacturing excellence is not about culture.  It is about management.

Another Strategic Problem Solved With A #2 Pencil

Here I go bashing software again.  Really, I think computers are great tools.  I obviously use one quite often to write the blog. I use one even more often in the course of running my consulting practice.  Factories would be lost without them.  But what on earth is wrong with us to be so quick to leap at a digital solution to everyone of life's problems, usually stomping out all of the simple solutions in our path to get to that techno-fix?  The problem this time: As manufacturing is shrinking, the average age of the worker is increasing.  All of us baby boomers are on the fast track to the Happy Hills Retirement Home. 

What is the manufacturing world going to do when we take all of that pent up knowledge and wisdom with us?  The more cynical among you will answer that question by pointing out that us baby boomers, from floor sweepers to CEOs, are the ones who orchestrated the destruction of American manufacturing, so the sooner we pack up all our wisdom and get the hell out, the better.  I will take the high road, however since cynicism goes against my grain.

Instead of heaping more useless hardware and software on top of the existing useless hardware and software, how about if we take a hard look at standardized work and cross training?  One of the most glaring weaknesses of just about every factory I have been in is the herd of guys who have worked their way into being indispensable by being the only one in the entire company who knows how to do this maintenance job or set up that machine.  We let these guys get away with convincing the organization that machines are mysterious black boxes, and only Harry Potter and his fellow alumni from Hogwart's School of Witchcraft and Wizardry can make them perform.  If we continue to allow this to be the norm, the software peddlers are right - at least so far as they have defined the problem.  When they leave, the factory is in trouble.

How about this for a starting point before you run out and buy any whiz bang technology:  Find a local swap meet or yard sale this weekend and buy an old Chilton's Manual for $1.  It doesn't matter what car or what year it is for.  It is the form we are after.  Thumb through it to just about any repair job you want.  The folks at Chilton's have reduced replacing transmissions to a job for seventh graders.  If you can read and you can turn a wrench, you can do anything.  The key is to have their step by step instructions, along with pictures, in front of you.  I know from personal experience that even a mechanical moron such as me can do anything to a 1997 Taurus with 200,000 miles on it.  Whatever machine you have was surely designed with much more common sense than my 1997 Taurus.

Step two is to get Mr. Potter from the maintenance department and have him set up the mystery machine.  You sit there with a digital camera, a pad of paper and a number two pencil.  Write down what he does and take a close-up picture of all of the really interesting stuff.

Step three is to use your beat up old Chilton's manual as a guide, use your notes and your pictures to create a Chilton style/seventh grade guide to setting up the machine.

Step four is to test your work by having someone who does not know the machine, but passes the reading and wrenching criteria, use your guide to set up the machine by himself.  If he struggles, go back to step two and update your guide.

Step five is to schedule the retirement party for Mr Potter, secure in the knowledge that he can live out his days in peace, while life in the factory goes on.

Step six is to get a handful of people who also pass the reading and wrenching test together and challenge them to unlock their creative juices and crunch the time to do the set up or maintenance job down as low as they can. (You ought to give them a quick primer on 'inside exchange' and 'outside exchange' first)  Use you camera, notebook and pencil to record what they come up with.

Step seven is to go back to Step three (although you can skip the retirement party on all of the subsequent iterations).

The lean objective is to get all of the specialized knowledge out of people's heads and onto standardized forms.  Not only does that broaden the base of people who can do any job, but it establishes a standard baseline for improvement.  One of the real big problems with all of these folks walking around the plant with secret knowledge of how things are done is that they usually don't really know either.  They never do the same thing the same way twice.  It is impossible to improve on a one time project.  By the time you know what to improve, the project is complete.  If it will never be repeated the same way, all you can do is criticize how it was done.

Frank Gilbreth - the Cheaper By the Dozen guy who was just as fanatical about efficiency at home as he was on the job - really pioneered this idea.  As an apprentice bricklayer he was struck by the fact that every master bricklayer taught him a different 'best way' to lay brick, and not one of them even followed his own advice.  His reaction, after he owned his own bricklaying company, was to distill all of those 'best ways' into one truly best way, teach it to all the brick layers, then watch productivity and cycle time skyrocket.  The only difference between Gilbreth and lean is that we are not as smart as he was and it behooves us to have the production folks determine the 'best way', rather than to operate like Gilbreth and devise it on our own in some back room.

So if you are worried about the old guys movin' on to greener pastures, or inconsistent maintenance procedures and erratic set up times, you can declare a corporate strategic emergency and justify IT resources, calculate the ROI, embark on a software implementation and training regimen. Or you can grab a pencil and a beat up old Chilton's manual and go out in the factory and fix the problem.

The Manufacturing Odyssey

I spend a lot of time reading about lean manufacturing, looking at what companies are doing - both successfully and not so successfully - and looking at what governments around the world are doing with manufacturing.  The unavoidable conclusion I draw from all of this pondering is that lean manufacturing is inevitable - in ten or fifteen years it will be just about impossible to find a manufacturer anywhere on the globe that is not lean.  What remains to be seen, however, is how many people will be hurt and how many billions of dollars will be wasted getting from here to there.

The economists - both the die hard free trade advocates and the ones staunchly in favor of government control and protectionism are all dead wrong (good luck getting any of them to realize that).  The protectionists are wrong because their whole premise is built on ignoring the concept of value.  A country can force people to only buy things manufactured in that country, but if the stuff is not made well or cost effectively, then it turns out to be nothing more than squandering a big chunk of the country's wealth on waste.  The U.S., for example, could pass a raft of restrictive laws and effectively kick Toyota and Honda out of the U.S., making Ford and GM your only car options, but the net result would be for all of us to spend more of our paychecks on cars of lesser value, helping no one but the auto workers, and hurting everyone else.

The free traders are wrong because they are as oblivious to economic reality as their close cousins on Wall Street and in the corporate accounting offices.  All of them have a simple minded fixation on labor cost that no amount of pompous, multi-syllabic driveling can make sound intelligent any longer.

Consider the clothing retailer who is stuck at the end of the season with a warehouse crammed with millions of dollars worth of inventory that is out of season, out of style, and the owner of it is out of luck.  Where could he have possibly gone wrong?  He had the clothes made in some place you have to get to by hacking your way in with a machete.  The clothes were made by people willing to work for fifty cents and a handful of rice a day.  The free trade economists blessed the whole scheme for its conformance to Adam Smith's age old theories about having everything made in the country with the lowest cost.  His company stock shot up when he told Wall Street that he was going to close the U.S. plant and outsource it all, saving a boatload of money.  His accounting department not only blessed the scheme, but were its strongest proponents. He did everything right, only now the only management decision left to make is which chapter of the bankruptcy code to file under.

What the whole bunch failed to take into account was time.  From the accountants to the Wall Street analysts, the execs to the economists, the only value of time they understand is the interest rate on money.  But the cost of all that dead inventory sitting in the clothing retailers warehouse is a lot more than 4 or 5% interest on what was paid for it.  It is more like 90% as he scrambles to find some Dollar Store somewhere to take it off his hands.

I had an interesting talk with Kathleen Fasanella yesterday at Fashion Incubator who knows about such things and, according to her, if a retailer wants to get a batch of clothes made in the U.S. in a big hurry to catch the next fashion wave, that retailer is probably out of luck.  The clothing manufacturers in this country are booked solid.  They can't add capacity fast enough to keep up with demand.  That makes sense.  Seasons and trends come and go.  To think that a clothing retailer can ignore that bit of common sense, and go to the market in Columbus, Ohio with a container ship full of product ordered from some Asian apparel maker 8 or 9 months ago and make any money is just plain dumb. 

Is their marketing slogan really, "You have to look at last year's fashion magazine to find it, and you will look just like 75,000 other people in Columbus wearing the same thing because I ordered in bulk, but buy it anyway because it is cheap"?  In fact, the marketing campaign really is something like that because the marketing and finance driven companies have long relied on their ability to con people into thinking if they do not look just like everyone else, then they simply are not attractive people.  More and more, however, consumer rejection of that sort of manipulation, coupled with a great deal of competition in the message about what to wear to be cool, makes that a tough business sell.  Retailers are finding that the only way to win is to find out what customers want and give it to them, rather than play the silly mind game of controlling customer wants.

First the clothing manufacturers shut down their U.S. plants, devastating hundreds of communities and tens of thousands of lives in order to placate Wall Street and comply with Adam Smith's directives, making everything in what their misguided logic determined to be the 'lowest cost country'.  As they took more and more of a beating having production in bulk on the other side of the world fail to meet the pace of consumer demand, they hauled their globes back out and had production moved closer - to the Caribbean or Mexico or Central America - assuming that paying the outrageous labor rates of almost a dollar an hour to save distance would solve the problem.  Only the problem was their business model, and geography only compounded it.  Today, a lean clothing manufacturer in the U.S. writes their own ticket.  Retailers still beating their heads against the wall agonizing over cost - oblivious to time - are falling by the wayside.

The same is true in consumer electronics which is so dynamic that a nine month life makes a product a superstar.  Giving up a fourth of a product's life to manufacturing and logistics lead times to save labor cost - especially when direct labor is apt to be less than 7-8% of the product cost - is turning out to not be a particularly smart business strategy.  So the big accounting driven manufacturers outsourced manufacturing to Asia, then bailed out all together.  Now, quietly and mostly below the radar screen of the Wall Street Journal, very lean contract electronic manufacturers in the U.S. are doing a brisk business.

The same process has repeated, is repeating, or will repeat in every manufacturing sector.  In the end, manufacturing will inevitably take place close to the market by lean companies.  Any other approach is inherently wasteful and cannot compete in the long haul.

This destructive manufacturing odyssey is occurring at various stages over the globe.  A manufacturer in a developed country - the U.S., Canada, Germany or japan or the rest - can either become lean or outsource to a cheap labor country and eventually die.  Eventually the manufacturing work will come back to the country where the demand is; but it will come back to a lean manufacturer.  A manufacturer in a developing country - China, Malaysia, Viet Nam or the rest - will not ride the 'global batch production on the backs of cheap labor' horse for long.  In the end, they must find a way to produce in a lean manner for their own regional economy.

The upheaval and waste of lives and money as manufacturing everywhere converts to lean has been enormous already, but it is likely to become worse.  States and communities that pour millions of tax dollars into incentives to keep or attract ineffective manufacturers are merely pouring money down the drain and delaying the inevitable.  It is a shame that so many good people working in manufacturing - first in the U.S., then in Asia, and soon in Central America - have lost their livelihoods and had their lives so disrupted simply because the financial and economic leaders have been unwilling or incapable of pulling themselves up the lean learning curve.

When old Adam Smith wrote about pin factories and the notion that the underlying value of products was based on the labor it took to produce it, the idea that pin technology would change monthly never crossed his mind.  Woody Allen once said, It is not what you know that counts.  It's what you think of in time."  The corollary in manufacturing is that "it not the labor value you add that counts, it is the labor value you add in time to meet the market".   When David Ricardo expounded on 'Comparative Advantage' he did not address how buying cloth and wine in Portugal could be good for England if the cloth was outdated and the wine had soured by the time it got to England.