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.