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Point of View: A Cautionary Tale

Editor's Note: This article originally appeared in the February 2012 issue of The PCB Magazine.

Once Upon A Time…

A very large American manufacturer and its equally large Japanese competitor decided to hold an annual canoe race between the two companies, with the winner securing bragging rights for the following year. Both teams were given 30 days to develop their strategy and prepare their teams to reach peak performance before the race.

On the big day, Team Japan won by a mile.

Team America, very discouraged and disappointed, decided to investigate the reason for the crushing defeat. A canoe steering committee of senior managers was formed to investigate the root cause and recommend appropriate action. After months of meetings, action items and strategic analysis, their conclusion was that Team Japan had eight people rowing and one person steering, while Team America had eight people steering and one person rowing.

Unsatisfied with the internal conclusions and feeling that a deeper study was in order, Team America’s management hired the prestigious Williams Consulting firm and paid them a large amount of money for a second opinion. After considerable time and great expense, Williams Consulting advised, of course, that too many people were steering the canoe, while not enough people were rowing. Not sure how to utilize that information, but wanting to prevent another loss to Team Japan, the rowing team organizational structure was realigned into:

• Four steering supervisors;
• Two area steering managers;
• Two steering directors; and
• One rower.

They also implemented a new pay-for-performance program that would give the one person rowing the canoe greater incentive to work harder. The program was launched with much fanfare and named “Team High Incentive Canoe Kickoff” (THICK), with meetings, dinners and free pens for the rower. There was discussion of getting new-technology paddles, canoes and other equipment, extra vacation days for practices, and bonuses.

The next year, Team Japan won by two miles.

Humiliated, Team America’s management laid off the rower for poor performance, halted development of a new canoe, sold the equipment and canceled all capital expenditures for new technology. The money saved was distributed to the senior executives as bonuses. The following year the racing team was outsourced to India.

Steve’s moral of the story: If Team America doesn’t start working smarter in the manufacturing sector, we will be destined to remain a service nation.

Art Imitates Life

Is this story so far-fetched? I would suggest that a quick look through recent headlines of any major newspaper would provide ample examples that it is not. While the excesses of high-profile companies such as Tyco, WorldCom, Enron, and Solyndra have been well publicized, corporate irresponsibility can be found at every level in the business world. Examples abound of senior executives that have been incentivized for short-term performance at the expense of long-term corporate health. The award of multi-million dollar golden parachutes to CEOs that are fired for underperformance is commonplace. Personal agendas trump stakeholder value. Has the whole world gone crazy?

Decades ago it began in the automotive industry; everyone remembers the big push to “buy American” when Asia’s automotive companies began to penetrate the U.S. market in a big way. This finally fizzled out when people began to notice (at that time) that these automobiles were not only less expensive, but were also built better. There is a reason some of these companies began offering 10-year, 100,000 mile warranties when most U.S. automakers were still offering 3-year, 36,000 mile warranties. They know that, statistically, the risk of having to pay-out on this warranty is within an acceptable number because of the product’s quality.  

Author’s note: As 3/36 warranties are still common, I would like to know what these people are smoking who are telling us the average person drives only 12,000 miles per year. The average 36,000 mile warranty is realistically only about 1½ to 2 years of coverage. Considering that an automobile is generally the second most expensive purchase for the average consumer, this warranty is not only embarrassing, but totally unacceptable.

Take a Lesson

I have to give credit where credit is due; the U.S. automotive industry has made great strides recently in the areas of product quality, reliability and warranty. However, to fully appreciate this we must examine the motivation behind this improvement. Did the folks in Detroit determine that the American consumer deserved a better quality automobile out of the goodness of their hearts? Hell no, they did it because their foreign competition was kicking their collective butts, stealing market share and seriously threatening to put them out of business.

As we look to retrench our operations during 2012, be sure to remain focused on the right things for the long-term sustainability of not only our organizations, but our industry. Heed the caution of this tale and don’t get caught being one of the companies with eight people steering and only one person rowing.

Steven Williams is a 35-year veteran in the electronics industry and an authority on manufacturing and management. He is currently the commodity manager for a large global EMS provider, a distinguished faculty member at several universities and author of the book Survival Is Not Mandatory: 10 Things Every CEO Should Know About Lean (www.survivalisnotmandatory.com).