The Goal: A Process of Ongoing Improvement (7 page)

I see it now.
The goal of a manufacturing organization is to make money.
Why else did J. Bartholomew Granby start his company back in 1881 and go to market with his improved coal stove? Was it for the love of appliances? Was it a magnanimous public gesture to bring warmth and comfort to millions? Hell, no. Old J. Bart did it to make a bundle. And he succeeded—because the stove was a gem of a product in its day. And then investors gave him more money so they could make a bundle and J. Bart could make an even bigger one.
But is making money the only goal? What are all these other things I’ve been worrying about?
I reach for my briefcase, take out a yellow legal pad and take a pen from my coat pocket. Then I make a list of all the items people think of as being goals: cost-effective purchasing, employing good people, high technology, producing products, producing quality products, selling quality products, capturing market share. I even add some others like communications and customer satisfaction.
All of those are essential to running the business successfully. What do they all do? They enable the company to make money. But they are not the goals themselves; they’re just the means of achieving the goal.
How do I know for sure?
Well, I don’t. Not absolutely. But adopting "making money’’ as the goal of a manufacturing organization looks like a pretty good assumption. Because, for one thing, there isn’t one item on that list that’s worth a damn if the company isn’t making money.
Because what happens if a company doesn’t make money? If the company doesn’t make money by producing and selling products, or by maintenance contracts, or by selling some of its assets, or by some other means . . . the company is finished. It will cease to function. Money must be the goal. Nothing else works in its place. Anyway, it’s the one assumption I have to make.
If the goal is to make money, then (putting it in terms Jonah might have used), an action that moves us toward making money is productive. And an action that takes away from making money is non-productive. For the past year or more, the plant has been moving away from the goal more than toward it. So to save the plant, I have to make it productive; I have to make the plant make money for UniCo. That’s a simplified statement of what’s happening, but it’s accurate. At least it’s a logical starting point.
Through the windshield, the world is bright and cold. The sunlight seems to have become much more intense. I look around as if I have just come out of a long trance. Everything is familiar, but seems new to me. I take my last swallow of beer. I suddenly feel I have to get going.

By my watch, it’s about 4:30 when I park the
Mazda
in the plant lot. One thing I’ve effectively managed today is to evade the office. I reach for my briefcase and get out of the car. The glass box of the office in front of me is silent as death. Like an ambush. I know they’re all inside waiting for me, waiting to pounce. I decide to disappoint everyone. I decide to take a detour through the plant. I just want to take a fresh look at things.

I walk down to a door into the plant and go inside. From my briefcase, I get the safety glasses I always carry. There is a rack of hard hats by one of the desks over by the wall. I steal one from there, put it on, and walk inside.

As I round a corner and enter one of the work areas, I happen to surprise three guys sitting on a bench in one of the open bays. They’re sharing a newspaper, reading and talking with each other. One of them sees me. He nudges the others. The newspaper is folded away with the grace of a snake disappearing in the grass. All three of them nonchalantly become purposeful and go off in three separate directions.

I might have walked on by another time. But today it makes me mad. Dammit, the hourly people know this plant is in trouble. With the layoffs we’ve had, they have to know. You’d think they’d all try to work harder to save this place. But here we’ve got three guys, all of them making probably ten or twelve bucks an hour, sitting on their asses. I go and find their supervisor.

After I tell him that three of his people are sitting around with nothing to do, he gives me some excuse about how they’re mostly caught up on their quotas and they’re waiting for more parts.

So I tell him, "If you can’t keep them working, I’ll find a department that can. Now find something for them to do. You use your people, or lose ’em—you got it?’’

From down the aisle, I look over my shoulder. The super now has the three guys moving some materials from one side of the aisle to the other. I know it’s probably just something to keep them busy, but what the hell; at least those guys are working. If I hadn’t said something, who knows how long they’d have sat there?

Then it occurs to me: those three guys are doing something now, but is that going to help us make money? They might be working, but are they productive?

For a moment, I consider going back and telling the supervisor to make those guys actually produce. But, well . . . maybe there really isn’t anything for them to work on right now. And even though I could perhaps have those guys shifted to someplace where they could produce, how would I know if that work is helping us make money?

That’s a weird thought.
Can I assume that making people work and making money are the same thing? We’ve tended to do that in the past. The basic rule has been just keep everybody and everything out here working all the time; keep pushing that product out the door. And when there isn’t any work to do, make some. And when we can’t make work, shift people around. And when you still can’t make them work, lay them off.
I look around and most people
are
working. Idle people in here are the exception. Just about everybody is working nearly all the time. And we’re not making money.
Some stairs zig-zag up one of the walls, access to one of the overhead cranes. I climb them until I am halfway to the roof and can look out over the plant from one of the landings.
Every moment, lots and lots of things are happening down there. Practically everything I’m seeing is a variable. The complexity in this plant—in
any
manufacturing plant—is mind-boggling if you contemplate it. Situations on the floor are always changing. How can I possibly control what goes on? How the hell am I supposed to know if any action in the plant is productive or non-productive toward making money?
The answer is supposed to be in my briefcase, which is heavy in my hand. It’s filled with all those reports and printouts and stuff that Lou gave me for the meeting.
We do have lots of measurements that are supposed to tell us if we’re productive. But what they really tell us are things like whether somebody down there "worked’’ for all the hours we paid him or her to work. They tell us whether the output per hour met our standard for the job. They tell us the "cost of products,’’ they tell us "direct labor variances,’’ all that stuff. But how do I really know if what happens here is making money for us, or whether we’re just playing accounting games? There must be a connection, but how do I define it?
I shuffle back down the stairs.
Maybe I should just dash off a blistering memo on the evil of reading newspapers on the job. Think that’ll put us back in the black?

By the time I finally set foot inside my office, it is past five o’clock and most of the people who might have been waiting for me are gone. Fran was probably one of the first ones out the door. But she has left me all their messages. I can barely see the phone under them. Half of the messages seem to be from Bill Peach. I guess he caught my disappearing act.

With reluctance, I pick up the phone and dial his number. But God is merciful. It rings for a straight two minutes; no answer. I breathe quietly and hang up.

Sitting back in my chair, looking out at the reddish-gold of late afternoon, I keep thinking about measurements, about all the ways we use to evaluate performance: meeting schedules and due dates, inventory turns, total sales, total expenses. Is there a simplified way to know if we’re making money?

There is a soft knock at the door.
I turn. It’s Lou.
As I mentioned earlier, Lou is the plant controller. He’s a

paunchy, older man who is about two years away from retirement. In the best accountants’ tradition, he wears horn-rimmed bifocal glasses. Even though he dresses in expensive suits, somehow he always seems to look a little frumpled. He came here from corporate about twenty years ago. His hair is snow white. I think his reason for living is to go to the CPA conventions and bust loose. Most of the time, he’s very mild-mannered—until you try to put something over on him. Then he turns into Godzilla.

"Hi,’’ he says from the door.
I roll my hand, motioning him to come in.
"Just wanted to mention to you that Bill Peach called this afternoon,’’ says Lou. "Weren’t you supposed to be in a meeting with him today?’’
"What did Bill want?’’ I ask, ignoring the question.
"He needed some updates on some figures,’’ he says. "He seemed kind of miffed that you weren’t here.’’
"Did you get him what he needed?’’ I ask.
"Yeah, most of it,’’ Lou says. "I sent it to him; he should get it in the morning. Most of it was like the stuff I gave you.’’
"What about the rest?’’
"Just a few things I have to pull together,’’ he says. "I should have it sometime tomorrow.’’
"Let me see it before it goes, okay?’’ I say. "Just so I know.’’
"Oh, sure,’’ says Lou.
"Hey, you got a minute?’’
"Yeah, what’s up?’’ he asks, probably expecting me to give him the rundown on what’s going on between me and Peach.
"Sit down,’’ I tell him.
Lou pulls up a chair.
I think for a second, trying to phrase this correctly. Lou waits expectantly.
"This is just a simple, fundamental question,’’ I say.
Lou smiles. "Those are the kind I like.’’
"Would you say the goal of this company is to make money?’’
He bursts out laughing.
"Are you kidding?’’ he asks. "Is this a trick question?’’
"No, just tell me.’’
"Of course it’s to make money!’’ he says.
I repeat it to him: "So the goal of the company is to make money, right?’’
"Yeah,’’ he says. "We have to produce products, too.’’
"Okay, now wait a minute,’’ I tell him. "Producing products is just a means to achieve the goal.’’
I run through the basic line of reasoning with him. He listens. He’s a fairly bright guy, Lou. You don’t have to explain every little thing to him. At the end of it all, he agrees with me.
"So what are you driving at?’’
"How do we know if we’re making money?’’
"Well, there are a lot of ways,’’ he says.
For the next few minutes, Lou goes on about total sales, and market share, and profitability, and dividends paid to stockholders, and so on. Finally, I hold up my hand.
"Let me put it this way,’’ I say. "Suppose you’re going to rewrite the textbooks. Suppose you don’t have all those terms and you have to make them up as you go along. What would be the minimum number of measurements you would need in order to know if we are making money?’’
Lou puts a finger alongside his face and squints through his bifocals at his shoe.
"Well, you’d have to have some kind of absolute measurement,’’ he says. "Something to tell you in dollars or yen or whatever just how much money you’ve made.’’
"Something like net profit, right?’’ I ask.
"Yeah, net profit,’’ he says. "But you’d need more than just that. Because an absolute measurement isn’t going to tell you much.’’
"Oh yeah?’’ I say. "If I know how much money I’ve made, why do I need to know anything else? You follow me? If I add up what I’ve made, and I subtract my expenses, and I get my net profit—what else do I need to know? I’ve made, say, $10 million, or $20 million, or whatever.’’
For a fraction of a second, Lou gets a glint in his eye like I’m real dumb.
"All right,’’ he says. "Let’s say you figure it out and you come up with $10 million net profit . . . an absolute measurement. Offhand, that sounds like a lot of money, like you really raked it in. But how much did you start with?’’
He pauses for effect.
"You see? How much did it take to make that $10 million? Was it just a million dollars? Then you made ten times more money than you invested. Ten to one. That’s pretty goddamned good. But let’s say you invested a billion dollars. And you only made a lousy ten million bucks? That’s pretty bad.’’
"Okay, okay,’’ I say. "I was just asking to be sure.’’
"So you need a relative measurement, too,’’ Lou continues. "You need something like return on investment... ROI, some comparison of the money made relative to the money invested.’’
"All right, but with those two, we ought to be able to tell how well the company is doing overall, shouldn’t we?’’ I ask.
Lou nearly nods, then he gets a faraway look.
"Well....’’ he says.
I think about it too.
"You know,’’ he says, "it is possible for a company to show net profit and a good ROI and still go bankrupt.’’
"You mean if it runs out of cash,’’ I say.
"Exactly,’’ he says. "Bad cash flow is what kills most of the businesses that go under.’’
"So you have to count cash flow as a third measurement?’’ He nods.
"Yeah, but suppose you’ve got enough cash coming in every month to meet expenses for a year,’’ I tell him. "If you’ve got enough of it, then cash flow doesn’t matter.’’
"But if you don’t, nothing else matters,’’ says Lou. "It’s a measure of survival: stay above the line and you’re okay; go below and you’re dead.’’
We look each other in the eye.
"It’s happening to us, isn’t it?’’ Lou asks.
I nod.
Lou looks away. He’s quiet.
Then he says, "I knew it was coming. Just a matter of time.’’
He pauses. He looks back to me.
"What about us?’’ he asks. "Did Peach say anything?’’
"They’re thinking about closing us down.’’
"Will there be a consolidation?’’ he asks.
What he’s really asking is whether he’ll have a job.
"I honestly don’t know, Lou,’’ I tell him. "I imagine some people might be transferred to other plants or other divisions, but we didn’t get into those kinds of specifics.’’
Lou takes a cigarette out of the pack in his shirt pocket. I watch him stamp the end of it repeatedly on the arm of his chair.
"Two lousy years to go before retirement,’’ he mutters.
"Hey, Lou,’’ I say, trying to lift him out of despair, "the worst it would probably mean for you would be an early retirement.’’
"Dammit!’’ he says. "I don’t
want
an early retirement!’’
We’re both quiet for some time. Lou lights his cigarette. We sit there.
Finally I say, "Look, I haven’t given up yet.’’
"Al, if Peach says we’re finished—’’
"He didn’t say that. We’ve still got time.’’
"How much?’’ he asks.
"Three months,’’ I say.
He all but laughs. "Forget it, Al. We’ll never make it.’’
"I said I’m not giving up. Okay?’’
For a minute, he doesn’t say anything. I sit there knowing I’m not sure if I’m telling him the truth. All I’ve been able to do so far is figure out that we have to make the plant make money. Fine, Rogo, now
how
do we do it? I hear Lou blow a heavy breath of smoke.
With resignation in his voice, he says, "Okay, Al. I’ll give you all the help I can. But....’’
He leaves the sentence unfinished, waves his hand in the air.
"I’m going to need that help, Lou,’’ I tell him. "And the first thing I need from you is to keep all this to yourself for the time being. If the word gets out, we won’t be able to get anyone to lift a finger around here.’’
"Okay, but you know this won’t stay a secret for long,’’ he says.
I know he’s right.
"So how do you plan on saving this place?’’ Lou asks.
"The first thing I’m trying to do is get a clear picture of what we have to do to stay in business,’’ I say.
"Oh, so that’s what all this stuff with the measurements is about,’’ he says. "Listen, Al, don’t waste your time with all that. The system is the system. You want to know what’s wrong? I’ll tell you what the problem is.’’
And he does. For about an hour. Most of it I’ve heard before, it’s the kind of thing everybody’s heard: It’s all the union’s fault; if everybody would just work harder; nobody gives a damn about
quality; look at foreign labor
—
we can’t compete on costs alone; and so on, and so on. He even tells me what sorts of selfflagellation we should administer in order to chasten ourselves. Mostly Lou is blowing off steam. That’s why I let him talk.
But I sit there wondering. Lou actually is a bright guy. We’re all fairly bright; UniCo has lots of bright, well-educated people on the payroll. And I sit here listening to Lou pronounce his opinions, which all sound good as they roll off his tongue, and I wonder why it is that we’re slipping minute by minute toward oblivion, if we’re really so smart.