The largest privately owned manufacturing company in the U.S. came together yesterday when Koch announced that it was buying Georgia-Pacific. The folks at Koch said it would be good for G-P to become a private company because Wall Street would probably not understand the strategic moves the company was going to make. I guess they think it would be a waste of time trying to explain it to the analysts. The Koch people also said that G-P would be much better off not having to deal with "the distraction of quarterly reports" and they would be able to "execute strategic decisions much faster" if they did not have to drag Wall Street along with them.
Also in the news recently is that GHSP – Grand Haven (Michigan) Stamped Products has landed a global supply contract with Honda. They previously had been a Honda North America supplier, but have done so well they are going to sell automatic transmission shifters to Honda world wide, including in Japan. They have been described by one lean expert as "the poster boy for the Toyota Production System". Imagine that! A U.S. company – in Michigan, no less – supplying Honda in Japan. So much for lean not being enough and U.S. companies having to be lean and in China in order to turn a buck.
Did I mention that GHSP is also a private company that does not have to deal with the "distraction of quarterly reports"?
There is a great story out of Ford in the early days when lean was coming to life. It seems that Assistant Production Superintendent Charles Sorenson rolled into work at the Highland Park plant at about 7:00 AM one day and ran into Henry Ford, who was coming out of the plant. Ford warned him to watch out for James Couzens, the man in charge of Ford accounting. Couzens was in the plant and had seen a new conveyor system Sorenson had installed in the radiator line and was not happy. He was miffed that he was continually out of the loop with big purchases like the radiator line and was on the warpath.
Think about that story, and those of you who work for a publicly owned manufacturer ask yourselves: Can you even conceive of the CEO being in a plant alone before the production manager shows up in the morning? Or the CFO being in a plant at all? Or the CEO or the CFO knowing the plant well enough to even notice a new conveyor? Or the CEO giving production a ‘heads up’ instead of firing them for spending a big chunk of money without finance approval?
Of course not. Lean came to life at Ford under the same environment it blossomed into an art form at Toyota. Decisions and authority in those companies rested with people steeped in product and manufacturing knowledge. Finance was an advisory function.
With all of the Delphi flap lately, one Delphi production person sent me an email in which he disparaged the former Delphi CEO by asserting that the guy only took off his designer suit when he took a shower. For those who don’t get it, it means the CEO lived in a corporate world of executive suites, company jets and hobnobbing with Wall Street types. Rolling up his sleeves and actually touching something in the factories was not part of the CEO’s mix. That is typical.
In privately owned companies – particularly family owned ones, the people calling the shots tend to be like Henry Ford and the Toyoda boys. They know the product and the manufacturing operation inside and out and they expect finance and accounting to keep up with them and find ways to support their efforts to improve. Such companies tend to readily embrace lean manufacturing.
In the publicly traded companies, it could not be more opposite. The people at the top are finance and accounting wizards, who do not feel much need to know very much about the core technologies around which the business exists. Instead, the the onus is on production to learn the accounting rules. To quote one lean expert who has knocked himself out trying to help such companies become lean, working with them is like trying to push a boulder up a never ending hill.
I understood exactly what the Koch people were saying when they explained why they wanted to take Georgia-Pacific private. Being pulled out of the Wall Street orbit was the best thing that could have happened for the G-P employees, customers and suppliers. Look for them to become a very capable manufacturer very quickly now that they no longer have to worry about being good at quarterly number games.