A Quick look at a failing business

[Pataha]

From the original posting on the thread Bosses from he!! [Heck...] - Identify and Avoid

This phrase particular bothered me.

"One reason outside executives get brought into troubled companies is that they lack the emotional stake in either the enterprise or its people. It's easier for them to act callously and remorselessly, which is exactly what their backers want."

I pointed out how my brother handles failing businesses and that his approach is more abrupt than mine is. The following comments indicated that either my brother or myself were psychopaths. I maybe a little insane, but show me someone who isn’t.

Reviewing my limited library, I encountered “The Seven Deadly Diseases” by Frank Voehl, as inspired by Mary Walton. It turns out that what we do for failing companies is to bring order to chaos.

If businesses would address these Diseases then, in most cases you would not need someone to come in for a “rescue Operation.” There is nothing callous about the approach to help companies to return to a positive direction. It requires planning and extreme teamwork. When anyone has to terminate an existing employee, it can not be done with an emotional point, but it should meet the overall plan. When the Crew Chief was fired from Bobby LaBonte’s racing team, the owner stated he wanted to go into a “different direction.” For the followers of NASCAR, that direction must be for last place.

Doing a quick look at the Deadly Diseases as written by Mr. Voehl and originally identified Dr. Deming.

1. Inconsistency of purpose – “The crippling disease”.
2. Emphasis on short-term profits. This has been brought into sharp focus because of people like Former WorldCom Chief Financial Officer Scott Sullivan. The reason for his allege approach is because of number 3.
3. Evaluation of performance using Annual Review, Ratings, and Management by Objectives. Mr. Sullivan was after a bonus.
4. Mobility of Top Management. Basically, this is the one where we are brought in because of the business failing. Typically, because mangers have stopped working for the company and start a “competing or sparring fiefdoms.”
5. Counting the money. This is usually the cause of someone being brought in from the outside. The money has stopped increasing or in some cases staying level and has starting to decline. One coming in must address Dr. Demings ‘unknowables and unmeasurables’. That will lead to “improvement of quality and productivity.” However, when one achieves this the people who count the money are happy because the money input level generally improves. I am not sure how one could lessen the impact of this particular disease.
6. Excessive Medical Costs and Obsolescence in Schools.
7. Excessive Costs of Warranty, Fueled by Lawyers Who Work on Contingency Fees.

So when looking at the diseases, what should be done if you get the right person to help with the changing the direction of the failing business, is to address the first four and warn about the fifth. We are to help set a long-range goal. Since, I deal mainly with private companies the main long-term goal is to have a company that is well run and will be here for generations.

Sometimes, this does involve being a little more tyrannical, than is to the people in place liking.

Now for you – the following is a situation that is somewhat fictional. If any of you recognize the company or the situation, remember this is fictional. My only comment is, as was pointed out by the other thread, when a person was waiting at O’Hare airport to layoff people, do not talk about this or other company matters in public. You never know who is listen.
Now, let’s look. At a restaurant in the Gas Lamp District of San Diego across the street from the Spaghetti Factory and the Hilton Hotel, a business owner was having dinner and relating the following to someone in mid-February:
He was running his company remotely, because he lived in La Jolla and the company was located in another State. However, he had noticed that thought it appeared that the in place Management was hitting the strategic and short term economic goals, which earned them year end bonuses, the company had somehow been losing money over the last three years. He knew the quality of the product was good, because the internal audits and his annual ISO audit never pointed to anything other than Opportunities for Improvement. He was wondering if there was anything that he could do. He communicated with his company on a daily basis and would visit every other Wednesday.
What an outside observer may note is that after the owner’s morning telephone call, the Upper Management would go off to lunch and be gone, just before the afternoon telephone call. That these lunches where paid for by the company. That the other mangers in the company followed suit. That neither quotas or deadlines where being meet. If an order were deemed too small it would not be filled. Customer complaints unless directly presented to the absent owner were ignored. That the ISO Auditor, when coming to audit, would go on these long lunches with the upper management.
On the plus side, it was a very good product. Some supervisors and assembly workers where without direction, doing there best to meet the incoming demands from customers. All suppliers were paid on time and the company had a good DNB rating.

So it there enough to determine the root causes and what actions would you take?

 

[Jen Kirley]

IMHO:

Call me pragmatic (is that a naughty word? Depends on which definition one chooses to use) but this is not enough information to make a root cause analysis.

Among the input factors (man, material and machine, and I add environment because it can affect each of the M factors) I see lots of "man" inputs but have little data regarding material, machine and environment factors.

That said,

1st: It seems the management personnel are not on task--I am saying that nicely. Seems to me they are acting like they are on holiday.

2nd, being ISO registered does not ensure product quality. ISO takes care to disavow responsibility for product quality because ISO is about systems, not product outcomes. An organization can be ISO registered and still fail.

3rd, internal audit OFIs or NCRs or any of the other audit function outcomes --or their lack-- do not reflect product quality unless they are specifically auditing that factor or there is a process involving "Product quality evaluation" (like inspection and quality assurance, ahem). If the procedures and processes are established with loose or no controls, none will be found in an audit.

The saying "When the cat's away, the mice will play" seems relevant in this hypothetical example. Rather than hire a consultant to cure his company, this owner needs to be closer (how about present, or bringing in a trusted plant manager unless he wants to change out the management structure en masse?) because his management team seems to believe there is plenty of room for ad hoc behavior.

If the owner can't understand what processes and/or data he should look at to judge his product's quality and find problems such as "don't bother to ship unless there is a large enough order" then he needs a consultant because he has somehow built a business without understanding how to tell if things are going well or not.

Now if you press me to name a single, root "cause" of this problem I'd say start with the owner because he is not apparently looking at the right indicators, and he is too easily hoodwinked.

I stand by my post, where I expressed dissatisfaction with the tactic of firing personnel simply because they were late for a meeting--the purpose of which I understood was to make a point clear--in my view it did not address any of the Seven Deadly Diseases. It would be too easy to sabotage a good employee with this technique.

 

[Randy Stewart]

I stand by my post, where I expressed dissatisfaction with the tactic of firing personnel simply because they were late for a meeting

I agree. Using the last example lets say you are one of the few supervisors or managers that are giving 125% to try and make customers happy. You were on the phone with one of the order makers that mattered (orders aren't too small to fill) and you end up 2 minutes late for the meeting. Oops, you are one of the people the tyrant should have kept but, due to not knowing anyone or their performance records, you get the boot. Bye-Bye Now.
If it is to the point where management can't even fire slackers, the weight challenged female is singing! Don't worry about giving me a pink slip, I'm already out the door. Any manager without a spine is nothing but a suck up.
What was that saying in another thread? A nambie bambie suit?

 

[Pataha]

As to not getting inot more detail. I was attempting to highlight certain human factors, since that is what we are dealing with. If more detail is given and though I am assuring that the company/situation is fiction, it will closely parallel an actual company. Since, I may have done work for one or more companies in an informal basis, that may look like this one, which certain documents fo not allow for a deeper view.

People who are held accountable for arriving at the inital meeting are at a certain layer of managment and above. Several of these poeple need to go anyway.

Believe it or not, when handled correctly for those employees it does create a level of security. It may seem strange, but when the employees know the direction and see that those who were not accountable , suddenly and without question accountable it does start creating security.
You also "Put everybody in the company to work to accomplish the transfromation. The transformation is everybody's job."
It does work.

 

[Wes Bucey]

My great aunt always said, "if you can't say anything nice . . ."

 

[Jen Kirley]

As to not getting inot more detail. I was attempting to highlight certain human factors, since that is what we are dealing with. If more detail is given and though I am assuring that the company/situation is fiction, it will closely parallel an actual company. Since, I may have done work for one or more companies in an informal basis, that may look like this one, which certain documents fo not allow for a deeper view.

People who are held accountable for arriving at the inital meeting are at a certain layer of managment and above. Several of these poeple need to go anyway.

Believe it or not, when handled correctly for those employees it does create a level of security. It may seem strange, but when the employees know the direction and see that those who were not accountable , suddenly and without question accountable it does start creating security.
You also "Put everybody in the company to work to accomplish the transfromation. The transformation is everybody's job."
It does work.

Your human factors were clearly enough described, however ancedotally, to place the blame on human factor in the absence of other factors. While pointing out that absence, I did acknowledge that the human factors did seem to point to a human cause.

I stand by the "cause" I stated. The owner should start with his own transformation into leadership, not just ownership. IMHO it is no good to open the trap door, albeit on those who many may have wished to stand on one, except to score points for those who long to say, "Looks like you got yours." To me, this is not healing a sick environment.

I won't deny the need to cut out rot. And the remaining people's relief must have been profound. Third, it seems chances fell into place wherein the right person was caught. Indeed, nonperformers at any level poison the organizational waters, and you did describe production people trying to get a product out in spite of the operations-level playground atmosphere. You also left out what these managers did while they were there... they weren't at lunch all the time. How did it sink so far?

I remain in my position that firing someone for failure to perform duties (was being on time for meetings, or else, part of their job descriptions?) is a better path to organizational healing than a flourish of power.

What about after the consultant is gone? How does this show of power teach the remaining people how to ensure such abuses won't reoccur? Will they hire your brother again when more people need to be fired?

I'm afraid that without more information I just can't support this method.

 

[Pataha]

I must apologize for this thread. As pointed out by another brother sometimes in life one can explain a situation well enough that you can experience the ah ha of Ludwig Wittgenstein’s Duck-Rabbit. Other times you are forced to recognize the argument of R. M. Hare’s Blik argument. The problem is that not everyone would approach a situation the same way for the same problem and since businesses are very organic. Different approaches can have the same positive goal. The thing is that for me I have to rely on books and impressions from others for the spirit of Dr. Deming which expressed a certain passion that I can agree with. Plus, you take a discussion between T. Boone Pickens and Sir James Goldsmith about the corporate responsibilities of all persons in a company, you will have a view that a company that is failing is due to a problem with the management team. If anyone still has the video of the T. Boone Pickens and Sir James Goldsmith discussion, I would love to get a copy of it.

To this fictional company as a follow-up, the management team that was terminated moved to San Diego and took positions with several companies over there. As I understand it they play golf and have long lunches with their former employer.

The owner’s daughter spent the summer working for my brother and went back to college where she majored in Finance. She is the President of the company which is doing well as acquiring other companies. This is sort an illustration of the statement in W. Edwards Deming Out of the Crisis.; “The best way for a student to learn a skill is to go to work in some goo company (or hospital), under masters, and get paid while he learns.”