Aconversation with a lean friend reminded me of a story that I shared four years ago. It dealt with the consequences of crazy measures and how lack of management oversight will allow these measures to persist indefinitely. Absentee decision makers passing down absurd directives... sound familiar?
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My friend, Al, a retired divisional controller of a large multinational manufacturer, related a story about his former firm’s CEO: “It used to drive me crazy how decisions were made,” Al said. “We ran a profitable operation here in Massachusetts, but I was constantly pressured to identify work that could be shipped to low-wage regions.”
The CEO’s behavior was driven by the corporation’s MBOs (management by objectives). In particular, the CEO’s bonus was tied in part to increasing the percentage of “foreign content” for all divisions.
“Our labor was less than 5 percent of our cost,” Al said. “I tried to show our CEO that relocating production for my division’s products would increase total costs far beyond any perceived part cost savings, but he had blinders on. All he saw was the mindless objective to increase foreign content. Ultimately, we were forced to move production. And when problems with quality and delivery arose as a result, our CEO wasn’t accountable. That was someone else’s MBO!”
Several years ago, I heard a similar story from the factory manager of a well-known, highly automated hosiery producer: “Our entire production line was automated save for one manual step at the end of the process to sew several stitches in the toe of the stockings. Corporate decided that the three stitches should be done in China. So we were forced to load nearly completed products into containers for shipment through the Panama Canal and across the Pacific Ocean for the last stitching operation. Once stitched, the stockings were shipped back to the U.S. for packaging and sale.” The factory manager shook his head in frustration as he told the story. “Where are these folks getting these ideas?” he wondered.
So, how do these two stories relate to my 2010 post? No oversight. No direct observation, in this case, by the persons who are charged with the corporation’s fiduciary responsibility—its board of directors. The CEOs in the examples above are no different than the cashier in my 2010 post. They were following damaging directives from absentee leadership. The difference in these cases, however, is that when CEOs receive nonsensical objectives, the potential for damage to customers and employees is very much greater.
Are your corporate measures working for you, or do they reward you for crazy behavior? Please share a story.
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