The Goal: A Process of Ongoing Improvement (30 page)

The next morning on the fifteenth floor of the UniCo building, I walk into the conference room at a few minutes before ten o’clock. Sitting at the far end of the long table is Hilton Smyth and sitting next to him is Neil Cravitz. Flanking them are various staff people.
I say, "Good morning.’’

Hilton looks up at me without a smile and says, "If you close the door, we can begin.’’
"Wait a minute. Bill Peach isn’t here yet,’’ I say. "We’re going to wait for him, aren’t we?’’
"Bill’s not coming. He’s involved in some negotiations,’’ says Smyth.
"Then I would like this review to be postponed until he’s available,’’ I tell him.
Smyth’s eyes get steely.
"Bill specifically told me to conduct this and to pass along my recommendation to him,’’ says Smyth. "So if you want to make a case for your plant, I suggest you get started. Otherwise, we’ll have to draw our own conclusions from your report. And with that increase in cost of products Neil has told me about, it sounds to me as if you have a little explaining to do. I, for one, would particularly like to know why you are not observing proper procedures for determining economical batch quantities.’’
I pace in front of them a moment before answering. The fuse to my anger has started a slow burn. I try to put it out and think about what this means. I don’t like the situation one bit. Peach damn well
ought
to be here. And I was expecting to be making my presentation to Frost, not his assistant. But from the sound of it, Hilton may have set himself up with Peach to be my judge, jury, and possibly, executioner. I decide the safest bet is to talk.
"Fine,’’ I say finally. "But before I go into my presentation of what has been happening at my plant, let me ask you a question. Is it the goal of the UniWare Division to reduce costs?’’
"Of course it is,’’ says Hilton impatiently.
"No, actually, that is not the goal,’’ I tell them. "The goal of UniWare is to make money. Agreed?’’
Cravitz sits up in his chair and says, "That’s true.’’ Hilton gives me a tentative nod.
I say, "I’m going to demonstrate to you that regardless of what our costs look like according to standard measurements, my plant has never been in a better position to make money.’’
And so it begins.

An hour and a half later, I’m midway through an explanation of the effects of the bottlenecks upon inventory and throughput when Hilton stops me.

"Okay, you’ve taken a lot of time to tell us all this, and I personally can’t see the significance,’’ says Hilton. "Maybe at your plant you did have a couple of bottlenecks and you discovered what they were. Well, I mean
bravo
and all that, but when I was a plant manager we dealt with bottlenecks wandering everywhere.’’

"Hilton, we’re dealing with fundamental assumptions that are wrong,’’ I tell him.
"I can’t see that you’re dealing with anything fundamental,’’ says Hilton. "It’s at best simple common sense, and I’m being charitable at that.’’
"No, it’s more than just common sense. Because we’re doing things every day that are in direct contradiction to the established rules most people use in manufacturing,’’ I tell him.
"Such as?’’ asks Cravitz.
"According to the cost-accounting rules that everybody has used in the past, we’re supposed to balance capacity with demand first, then try to maintain the flow,’’ I say. "But instead we shouldn’t be trying to balance capacity at all; we need excess capacity. The rule we should be following is to balance the
flow
with demand, not the capacity.
"Two,
the incentives we usually offer are based on the assumption that the level of utilization of any worker is determined by his own potential,’’ I tell them. "That’s totally false because of dependency. For any resource that is not a bottleneck, the level of activity from which the system is able to profit is not determined by its individual potential but by some other constraint within the system.’’
Hilton says impatiently, "What’s the difference? When somebody is working, we’re getting use out of him.’’
"No, and that’s a
third
assumption that’s wrong,’’ I say. "We’ve assumed that utilization and activation are the same. Activating a resource and utilizing a resource are not synonymous.’’
And the argument goes on.
I
say an hour lost at a bottleneck is an hour out of the entire system.
Hilton
says an hour lost at a bottleneck is just an hour lost of that resource.
I say an hour saved at a non-bottleneck is worthless.
Hilton
says an hour saved at a non-bottleneck is an hour saved at that resource.
"All this talk about bottlenecks,’’ says Hilton. "Bottlenecks temporarily limit throughput. Maybe your plant is proof of that. But they have little impact upon inventory.’’
"It’s completely the opposite, Hilton,’’ I say. "Bottlenecks govern both throughput and inventory. And I’ll tell you what my plant really has shown: it’s proved our performance measurements are wrong.’’
Cravitz drops the pen he’s holding and it rolls noisily on the table.
"Then how are we to evaluate the performance of our operations?’’ asks Cravitz.
"By the bottom line,’’ I tell him. "And based upon that evaluation, my plant has now become the best in the UniWare Division, and possibly the best in its industry. We’re making money when none of the others are.’’
"Temporarily
you may be making money. But if you’re really running your plant this way, I can’t possibly see how your plant can be profitable for very long,’’ says Hilton.
I start to speak, but Hilton raises his voice and talks over me.
"The fact of the matter is that your cost-of-products measurement increased,’’ says Hilton. "And when costs go up, profits have to go down. It’s that simple. And that’s the basis of what I’ll be putting into my report to Bill Peach.’’

Afterwards, I find myself alone in the room. Messrs. Smyth and Cravitz have gone. I’m staring into my open briefcase—then with a fist, I slam it shut.

I’m muttering to myself something about their pigheadedness as I exit the conference room and go to the elevators. I press the "down’’ button. But when the elevator arrives, I’m not there. I’m walking back up the corridor again, and I’m heading for the corner office.

Bill’s secretary, Meg, watches me approach. I stride up to her desk, where she’s sorting paper clips.
"I need to see Bill,’’ I tell her.
"Go right in. He’s waiting for you,’’ she says.
"Hello, Al,’’ he greets me as I enter his office. "I knew you wouldn’t leave without seeing me. Take a seat.’’
As I approach his desk I start to talk, "Hilton Smyth is going to submit a negative report about my plant, and I feel that as my manager you should hear me out before you come to any conclusions.’’
"Go ahead, tell me all about it. Sit down, we’re not in a rush.’’
I continue to talk. Bill puts his elbows on the desktop and his fingers together in front of his face. When I finally stop he says, "And you explained all of this to Hilton?’’
"In great detail.’’
"And what was his response?’’ he asks.
"He basically refused to listen. He continues to claim that as long as cost of products increase, profits eventually have to go down.’’
Bill looks straight into my eyes and asks, "Don’t you think he has a point?’’
"No, I don’t. As long as I keep my operating expenses under control and Johnny Jons is happy, I don’t see how profits can help but continue to go up.’’
"Fine,’’ he says, and buzzes Meg. "Can you call Hilton, Nathan, and Johnny Jons in here please.’’
"What’s going on?’’ I ask him.
"Don’t worry, just wait and see,’’ he says calmly.
It’s not long before they all enter the room and take seats.
"Hilton,’’ Bill turns to him, "you heard Alex’s report this morning. You’ve also seen all the financial results. As the productivity manager of the division, and as a fellow plant manager, what’s your recommendation?’’
"I think that Alex should be called to order,’’ he says in a formal voice. "And I think that immediate actions should be taken in his plant before it’s too late. The productivity in Alex’s plant is deteriorating, cost of products is going up, and proper procedures are not being followed. I think that immediate actions are in order.’’
Ethan
Frost clears his throat, and when we all look at him he says, "And what about the fact that in the last two months that plant has turned profits rather than losses, while releasing a lot of cash for the division?’’
"That is only a temporary phenomenon,’’ Hilton states. "We must expect big losses in the very near future.’’
"Johnny, do you have anything to add?’’ Bill asks.
"Yes, certainly. Alex’s plant is the only one that can produce miracles—to deliver what the client needs in a surprisingly short time. You’ve all heard about Burnside’s visit. With such a plant backing up sales, they can really go out and blast the market.’’
"Yes, but at what price?’’ Hilton reacts. "Cutting batches to far below optimum size. Devoting the entire plant to one order. Do you know the long-term ramifications?’’
"But I haven’t devoted the plant to one order!’’ I can’t contain my anger. "As a matter of fact, I haven’t got any past-due orders. All my clients are pleased.’’
"Miracles exist only in fairy tales,’’ Hilton says cynically.
Nobody says a word. At last I cannot hold back, "So what’s the verdict—is my plant going to be closed?’’
"No,’’ says Bill. "Not at all. Do you think we’re such bad managers that we would close a gold mine?’’
I sigh in relief. Only now do I notice I’ve been holding my breath.
"As manager of productivity of the division,’’ Hilton says with a red face, "I feel it’s my duty to protest.’’
Bill ignores him, and turning to
Ethan
and Johnny he asks, "Shall we tell them now, or wait until Monday?’’
They both laugh.
"Hilton, this morning I asked you to sit in for me because we were meeting with Granby. Two months from now the three of us are moving up the ladder, to head the group. Granby left it to us to decide who will be the next manager of the division. I think that the three of us have decided. Congratulations, Alex; you will be the one to replace me.’’

When I return to the plant, Fran hands me a message "It’s from Bill Peach. What’s going on?’’
"Call everybody. I have some good news,’’ I smile.
Bill’s message is: "I recommend you use these two months to prepare yourself. You still have a lot to learn, hotshot.’’
At last I’m able to reach Jonah in New York and fill him in on the latest developments. Although pleased for me, he does not seem surprised.
"And all this time I just worried about saving my one plant,’’ I tell him. "Now it seems that I’m ending up with three.’’
"Good luck,’’ says Jonah. "Keep up the good work.’’
Hurriedly, before he hangs up I ask in a desperate voice, "I’m afraid that luck will not be enough; I’m out of my depth. Can’t you come down and help me?’’ I haven’t spent two hours tracking down Jonah just to hear his congratulations. Frankly, I’m terrified at the prospect of my new job. It’s one thing to handle a production plant, but handling a division of three plants does not mean just three times the work, it also means responsibility for product design and marketing.
"Even if I had the time, I don’t think it’s a good idea,’’ I hear his disappointing answer.
"Why not? It seemed to work fine so far.’’
"Alex,’’ he says in a stern voice, "as you climb up the ladder and your responsibilities grow, you should learn to rely more and more on yourself. Asking me to come now will lead to the opposite; it will increase the dependency.’’
I refuse to see his point. "Can’t you continue to teach me?’’
"Yes, I can,’’ he answers. "But first you should find out exactly what it is that you want to learn. Call me then.’’
I don’t give up easily. "I want to learn how to run an efficient division, isn’t it obvious?’’
"In the past you wanted to learn how to run an efficient plant,’’ Jonah sounds impatient. "Now you want to learn how to run an efficient division. We both know that it will not end here. What
is
it that you want to learn? Can you spell it out?’’
"Actually, I guess that I want to learn how to manage—a plant, a division, a company, any type or size organization.’’ After a second of hesitation I add, "It wouldn’t be bad to learn how to manage my life, but I’m afraid that would be asking for too much.’’
"Why too much?’’ says Jonah to my surprise. "I think that every sensible person should want to learn how to manage his or her life.’’
"Great, when can we start?’’ I ask eagerly.
"Now. Your first assignment is to find out what techniques are needed for effective management.’’
"What?’’ I ask in a choked voice.
"Come on, I didn’t ask you to develop them, just to determine clearly what they should be. Call me when you have the answer. And Alex, congratulations on your promotion.’’

"I’m really proud of you. Three more steps like that and we will have made it. Shall we drink to it?’’
Julie’s forced enthusiasm strikes a responding chord inside me. "No, I don’t think so.’’ I refuse the toast, an event which, as you can imagine, is not very common.
Julie doesn’t say a word. She just slowly lowers her drink, leans slightly forward, and looks directly into my eyes. It’s quite apparent that she is waiting for some explanation.
Under the pressure I start to talk slowly, trying to verbalize my rambling thoughts. "Julie, I really don’t think that we should toast it, at least not in the way you make it sound, like toasting an empty victory. Somehow I feel that you were right all along— what is this promotion if not just winning a point in the rat race?’’
"Hmm,’’ is her only response.
My wife can express herself very clearly without even opening her mouth—which is definitely not the case for me. Here I am, rambling all over the place . . . ‘Rat race’ ... ‘Empty victory.’ What on earth am I talking about? But still, why do I feel it’s inappropriate to toast my promotion?
"The family paid too big a price for this promotion,’’ I finally say.
"Alex you’re being too hard on yourself. This crisis was about to explode one way or the other.’’
She continues, "I gave it a lot of thought and let’s face it, if you had given up, the feeling of failure would have spoiled every good part of our marriage. I think you should be proud of this promotion. You didn’t step on anybody to get it; you won it fair and square.’’
A chill goes down my back as I remember it. I was in deep trouble. My plant was under a real threat of being closed down; over six hundred people were about to join the already long unemployment lines; my career was one inch from being kissed by limbo; and on top of all that, the unbelievable hours I was putting in at work had pushed our marriage to the brink of going down the tube. In short, I was about to change from a bright, rising star into an ordinary bum.
But I didn’t give up. Against all odds I continued to fight. And I was not alone. Jonah introduced me to his common-sense (and thus very controversial) approach to managing a company. It made a lot of sense, so my team enthusiastically backed me up. And it was fun, real fun. Let me tell you, the last few months were quite stormy. I think that we violated almost every rule of corporate America. But we made it. We turned the plant around. So much so that it saved the entire division. Now, Julie and I are sitting in this fancy restaurant celebrating. I’m going to head the division, which means relocation—a fact that probably contributes a lot to Julie’s supportive mood.
Raising my glass I say confidently, "Julie, let’s drink to my promotion. Not as a step toward the tip of the pyramid, but let’s drink to what it
really
means—positive reassurance to our exciting, worthwhile journey.’’
A broad smile is spreading over Julie’s face and our glasses make a clear, gentle sound.
We turn to our menus, in a good mood. "It’s your celebration as much as it is mine,’’ I say generously. After a while, and in a more somber tone I continue, "Actually, it’s much more Jonah’s achievement than mine.’’
"You know Alex, it’s so typical of you,’’ Julie says apparently disturbed. "You worked so hard and now you want to give the credit to somebody else?’’
"Julie, I’m serious. Jonah is the one who gave me all the answers, I was just the instrument. As much as I would like to think otherwise, that’s the plain, bare truth.’’
"No, it’s far from the truth.’’
I turn nervously in my chair, "But . . .’’
"Alex, stop this nonsense,’’ Julie says in a firm voice. "Artificial modesty doesn’t suit you.’’ She raises her hand to prevent me from answering and firmly continues, "Nobody handed you solutions on a silver platter. Tell me, Mr. Rogo, how many nights did you sweat until you succeeded in finding the answers?’’
"Quite a few,’’ I admit with a smile.
"You see!’’ Julie tries to close the subject.
"No, I don’t see,’’ I laugh. "I’m very well aware that Jonah didn’t simply give me the answers. As a matter of fact, during those long nights, (and days), considerable time was spent cursing him for just that. But, come on, Julie, the fact that he elected to present them in the form of very pointed questions doesn’t change a thing.’’
Rather than continuing, Julie calls the waiter and starts to order. She’s right. This line of discussion will just ruin a pleasant evening.