Cutting Costs or Slow-Motion Suicide

January 28, 2010

What factors cause business failure? Certainly there are many external burdens such as our draconian corporate taxes and regulation that depresses American companies against foreign competitors who pay little or no taxes.  But beyond that, America has a wildly popular and successful internal business management recipe for putting our own companies out of business: shift focus from getting more profitable, to “cutting costs”.

It’s a subtle yet critical difference.  “Cutting costs” seems harmless and sounds sooo responsible.  But it tends to ignore the value and necessity of essential core technical expertise and instead mislabels them as financial liabilities that could be trimmed.  Is it a matter of ignoring, or of ignorance?  Instead of pressing groups for ideas and project execution to improve profits, they press for input on which essential business functions to cut. The mantra is usually “we all hate to do this, but we don’t have any choice.”  The result of this lose-lose is a painful decision to eliminate the very expertise that drives the effectiveness of Continuous Improvement, visionary process quoting, training, process stability, IT systems, and much more.  In short, it creates a top-down management culture of plant-closing through “slow-motion-suicide”.

In a superb article, noted industry expert and author  Bob Sproull summarized it like this: “It was also evident that operating expense had a functional lower limit, and once you hit it, you could actually do more harm than good to the organization by reducing it further.”

I’m not talking about whether you can trim your controls engineers from four to three positions.  I’m talking about trimming from two to one, or even eliminating the position completely – without any analysis of the ROI of value-added cost-reduction projects, or of the critical production support roles that could double or triple downtime and late shipments because of the six dozen automated systems out there on the plant floor. Sounds crazy because it is, but some company executives are crazy enough to do it.

Unfortunately, if you embrace a path that cuts the costs of the assets that produce income, you are essentially downsizing the future profitability of the company.  Cutting profit-generators will make it impossible to remain competitive: the company will  go out of business.  I hope my thoughts can spark a good discussion and some effective ways to recognize and resist these suicidal business practices in your company.

One example of this is the trend I’ve noticed toward trying to hire “jack-of-all-trades” engineers.  They want a trained engineer who works like a tech (“hands on”, “bias toward action”) and yet can do CAD drafting, IE functions, Six Sigma, Lean, PLC programming, robot programming, welding systems, program launch management, capital appropriations requests, and executive powerpoint presentations.  Apparently they want to hire a messiah like this (for the pay of a mediocre one-discipline engineer) to handle their 80-robot process automation and launches, because they don’t have quality or control or welding or maintenance engineers to do the work and can’t get approval to hire them. They might as well post for an engineer who walks on water and has a standard 12/6 work-week. What will it take for them to realize that while they can hire someone who lies about having all those skillsets, the extremely rare one who actually might is either being paid $85k+ (USD) as an engineering manager, or has started his own systems design and integration company?

Ken Payne of The Columbus Group recently pointed out to me that while classic Industrial Engineering (IE) breaks everything into the Man, Machine, and Material categories, most companies have lost sight of a simple overarching fact: everything in a company – including Machine and Material – is driven by the Man factor. Payne and Demming both point out that manpower is the source of all value streams.  So the value streams are ultimately driven by the human energy in the form of work, passion, expertise, inventiveness, entrepreneurial drive, and cohesive teamwork of the company’s manpower.  That manpower is a combination of individual expertise and passion, and company culture.

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The Fall Guys

January 7, 2010

Scapegoating – the practice of selecting a “fall guy” to take the blame, thus deflecting deserved outrage away from those at fault, and saddling the (mostly) innocent with undeserved suffering, penalties, and a mud-smeared reputation.

When it’s more fully defined like that, hinting at some of the abusive downside, it’s easier to see how damaging this ignoble practice really is.  Of course the most dastardly versions of scapegoating fire the fall-guy so that they can’t defend themselves or correct the concocted stories.  And if his boss is too noble to go along with the ploy, well, you have to fire him too.  But one of the most neglected aspects is illustrating the penalties and costs paid by the people still at the company… however long it might survive its’ management malpractices before workers are laid off or plants close.

Last year (not long ago), a consulting engineer mentioned to me that he had lost track of how many times executive staff had used him as a scapegoat.  And not long ago, I was inspired to write a poem that I suspect many can relate to.  I’ve decided to publish it here, as my tip of the hat to all those talented, honest and dedicated engineers who have suddenly found themselves struggling for breath and blinking at the sky as the Fall Guys.  May it inspire better decisions, greater boldness, more nobility, and a more wisely wary outlook for all.

The Manufacturing Company

There was a certain company, that welded many things,

and yet their questions rarely held an engineering ring.

Customers often urged them – hire a welding engineer.

But those sciences and physics were shunned without a fear.

.

Yet eventually the time would come from management-ly choices,

when a string of poor decisions drowned the ignorant wise voices.

These two sharp guys will likely do, from MIT and LeTourneau too.

We’ll hire them to do some magic, wait briefly for a furry rabbit.

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This might be hopeless, it’s certainly bleak –

How long do we need an engineer you think?

When customers grow too irate, let’s fire the engineers we hired of late,

and hide our failures as their missed dates.

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Ignorant of the lurking plan, yet alarmed at how the meetings ran,

the engineers were disturbed to find the obvious needs dismissed.

Then grave alarm set in, when contract terms were pushed aside

and executives announced a plan to sell their customers a lie.

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Shouldn’t it be obvious – the deeper hole they dug

Was more desperate and impossible than fibbing with a shrug?

Why not face the growing stench of putrefied decisions,

And root out the unwillingness to replace fantasy with vision?

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What do you do when you face a chasm with an uncompleted bridge?

Do you slow the train and rush ahead with the rails and spikes and girders,

Which were needed but never purchased because you gave those orders?

Or do you stoke the fire still hotter and yell ahead to hurry,

And throw off the patient bridge designers and blame them for the dirty

wreck you’ll soon be in,

When car after car goes sailing off the cliffs that you have chosen?

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Ah, pretending all is simple and the answer’s “git ‘er done” –

Taxation’s cursed sea of MBA’s who can’t even make part one.

.

Brian Dobben – 2009

I know several people who can personally relate to that.  I’ve also met a few who claim that such unethical, abusive behavior is only wrong if you get caught.  That shouldn’t be surprising.  Harvard Business School and other “higher education” circles are reportedly gripped by moral retardation and long ago turned their “business ethics” classes into studies rationalizing how to separate low-risk fraud from high-risk fraud. The underlying assertion is that the only unethical decision is the one you publicly got caught in, which crassly ignores the penalties to the company in lost profits, missed business, and vital human talent assets jettisoned or crippled. So “wrong” and “evil” have become concepts as slippery as the meaning of “is” in the Clinton Administration, or “American citizen” or “bailout” or “terrorist” in the Obama regime.

I assert that real men are more grounded in reality than that, and that noble behavior is not dead. Even nobility like stepping up and admitting that you didn’t listen and made a poor decision, and committing to do much better.  But with nervous manufacturing staff feeling more at risk in a depression economy, has scapegoating now become a more widespread problem in engineering and management circles?

If so, what are the causes?  And how can we work to prevent or avoid such situations?

And if you’re an HR manager, or a Recruiter, or engineer that finds yourself an unwilling party to such professional abuse, what are your options?  What do you do?