My daily routine begins with scouring an ever growing list of business sources from around the world, both for blog fodder and to keep on top of things. My only product is my knowledge and the older I get, the harder I have to work to assure that I am learning as fast as I am forgetting. Two stories, neither having to do with manufacturing, gave me reason to take a long pause.
In Europe, Exxon Mobil and some of the other big oil companies are being hauled back into court for the damage done by 13 years of collusion to fix the price of paraffin, and thereby gouging the candle manufacturers. How pathetic is that? The oil companies have made a staggering amount of money over the last few decades. I don't begrudge them that. They invest a lot, risk a lot, and earn a lot. The point is not that there is anything wrong with profits – even enormous profits. I am a capitalist through and through. What I scratch my head at is, what kind of a corporate culture allows managers to spend company expense account money to stay in the 5 star hotels, meeting with competitors plotting to what amounts to stealing money from their customers? It is not as though the companies were desperate.
In a similar vein, the New York Times wrote of the frustration on the part of bank customers with the lack of a sense of responsibility on the part of the big banks and brokerage firms. Bank customers – taxpayers whose money went to bail out many of these firms – are outraged at still rising foreclosures and rising credit card interest rates in the face of rapidly escalating financial sector profits. In a related story, Morgan Stanley set aside 72% of its revenue – some $3.9 billion – for executive bonuses, despite losing money, and losing money for many of the people whose money they invested. It is a corporate culture of pure, unabashed greed and utter disregard for any stakeholder other than management.
In his Encyclical Letter, Pope Benedict XVI wrote, "business management cannot concern itself only with the interests of the proprietors, but must also assume responsibility for all the other stakeholders who contribute to the life of the business: the workers, the clients, the suppliers of various elements of production, the community of reference." Exxon Mobil and Morgan Stanley are pretty blatant examples of the problem the Pope is worrying about. The pages of Evolving Excellence have been riddles with scathing indictments Kevin and I have written over the years blasting big, publicly traded manufacturers who have decimated communities, both in the United States and around the world as they have jettisoned employees and suppliers without warning in a never-ending search to save a nickel.
Jim Huntzinger, the driving force behind the Lean Accounting Summit and the TWI Summit– is also a very good man, a very good Christian, and a deep interest in American business history. In conversations with Jim, he and I have been struck by the parallels between the Pope's message and the principles of lean manufacturing. As lean proponents, we are all striving to convince the business community that making a lifetime commitment to employees; forming long term true partnerships with suppliers; being driven by an intense focus on quality and customer service; and managing with a long term outlook is not only in the best interests of those stakeholders, it generates the best long term results for the stockholders.
We find a receptive ear to that message more often in privately held companies; and rarely, if ever, in publicly held ones. The difference, I believe, is that the privately held company has a real flesh and blood human being in charge. There is someone with a reasonable mind, along with a heart and soul, and someone who is just as concerned about tomorrow as he is about today. That human owner/manager takes a very much more balanced approach, considering today and tomorrow, and is more apt to consider the interests of everyone involved.
Exxon Mobil, Morgan Stanley, and everyone else listed on the New York Stock Exchange really have no one in charge – at least no one with a permanent interest in the companies. They are owned by money, which has no ability to reason and for which there is no yesterday or tomorrow. It just is and it wants to grow and it does not care where or how it does so. It has "shareholders, who are not tied to a specific geographical area and who therefore enjoy extraordinary mobility," writes the Pope, and "a new cosmopolitan class of managers has emerged, who are often answerable only to the shareholders generally consisting of anonymous funds which de facto determine their remuneration". In other words, anything goes if it makes more money now.
When I write like this, bipolar economic thinking immediately emerges. If I am critical of our version of capitalism as embodied by our financial institutions and publicly owned manufacturers, then I must be for socialism. Nothing could be further from the truth. Socialism has hardly existed in true form, and failed when it did. The American version – the golden age of the labor unions – was a disaster for everyone involved and the sooner the last vestiges of organized labor hit the scrap heap the better. Communism, which is nothing more than oppressive dictatorship couched in socialist propaganda, brought misery to more millions of people than any economic idea in history.
The notion that all economics boils down to capital versus labor is increasingly proven to be wrong. A lean enterprise subscribes to neither camp – at least as we define them in the United States. Our view of capitalism, the Wall Street form, is based on the principle that the owner is the one taking all of the risk, and is therefore entitled to the rewards – and to call all of the shots in his own best interests. That is nonsense. Employees have risked their livelihoods and their families' security in taking jobs with big manufacturers – and lost. And not just American employees – literally millions of Mexican and Chinese young people have left homes and family to go hundreds of miles, risking it all for jobs with these companies, and have been left high and dry without even the price of a bus ticket home. Communities have risked taxpayers' money and lost. Retailers risk their reputations, customer good will and their very survival on the quality of the products they get from these companies. Suppliers risk enormous sums in the resources needed to support these companies. One has only to read the proceeds of a bankruptcy filing when 'restructuring' time comes to see the level of risk suppliers took on.
The news today is filled with stories of small, privately owned manufacturers who do have a sense of broader responsibilities – and now are in the gut wrenching position of having to renege on promises made in good faith to employees and their suppliers, all because they were left in the lurch by some Fortune 500 outfit that found cheaper labor on some other continent, or filed for Chapter 11 in order to restructure. The investors take risk, to be sure, but so does every stakeholder in a business.
Several years ago, Norman Bodek pursued having Shigeo Shingo nominated for a Nobel Prize for economics. He was roundly rejected by that august body – factory tricks like lean manufacturing, no matter what their affect – do not rise to the level of importance of "laying the foundation for mechanism design theory". Whether it was Shingo who deserved recognition, or more likely someone else from Toyota's early days, the Nobel Prize people were wrong. However they did it, perhaps by some unintended hybrid of Eastern philosophy and Western capitalism, Toyota and the Japanese companies that mimic them actually created a new economic model – one that occupies the middle ground in Marx' grand struggle between capital and labor – one that was perfectly described by a German-born Catholic Pope – one that serves all stakeholders with incredible success. At the very least, it is an economic model that makes a lot of money for the owners, without resorting to the systematic swindling of mom and pop candle makers or from kicking people out of their homes.