Abuse of Entrusted Power for Private Gain

by BILL WADDELL

Thanks to Joel Lown from the U of Tennessee for this article from Knoxvillebiz.com about a local company called Bailey Hydropower that outsourced manufacturing to India, found that it was not quite the Nirvana it was billed to be, and came back. In many respects it is just the same as the flood of similar re-shoring tales.  "But at the same time we were correcting the defects, there were two or three more containers on the water headed here with the exact same problem," Bailey said"  Yep – could have told him it is logically, mathematically, statistically impossible to have world class quality with long lead times.  Bailey learned this the hard way, it seems. "Bailey said. 'I think so often we are quoted cheap prices overseas and we don't realize there are hidden costs.'"  Could have told him that too. 

I was struck, however, by another aspect of the story.  Bailey said, "There is a totally different set of laws, different culture, a different work ethic and even a moral culture that is different."  He's got that right, and I am less and less sure excellent manufacturing can ever take place within such a culture.

Now I am fully aware of the fact that Peter Minuit introduced European business thinking to North America when he scammed the natives out of Manhattan for a few guilders worth of junk not more than a few blocks from where Bernie Madoff would set up shop 300 years later.  With used car peddlers, congressmen and the rest of the bottom feeding class of petty scam artists at the low end, and serious thieves on Wall Street who don't stoop to steal less than a million, we are in no position to lecture anyone on ethics.  And our Canadian, Australian and British friends are more than political allies – they are quite often accomplices in our criminal doings.

In between the extremes, however, we are generally an ethical bunch, and we try to deal fairly. While we fail often we want to be honest, 'my word is my bond' kind of folks.  So when I see the United States ranked 19th out of 180 countries in the 2009 Corruption Perceptions Index put out by Transparency International I wish we were #1 but I can't really complain.  It seems about right.  The bulk of Evolving Excellence readership and the heart of lean thinking – the USA, Canada, Germany, the UK, Australia and New Zealand - have an average ranking of 11.

On the other hand, the three big outsource destinations – for the USA anyway – of China, Mexico and India have an average ranking of 84.  The people running transparency International define corruption as "the abuse of entrusted power for private gain."  From my experince, that is pretty much cut and pasted from the job descriptions of every government official and senior business manager in those countries.  To me, that phrase encapsulates the polar opposite of lean thinking.  Obviously supplier partnerships and culture of optimum value to customers are not possible when people entrusted with power; are out for 'private gain'.  Respect for people is out of the question.  In fact, abusing power for personal gain is the definition of disrespect for the people over whom one has power.

It isn't a religious thing.  Buddhist India, Catholic Mexico and China with its Gospel According to Mao cover the theological waterfront. Nor is it an east-west thing.  The local Chinese inspector who recently hit up an American company I know for a couple thousand yuan to OK their electrical system took that page right out of the Mexican playbook.

It has to do with the political , social and economic systems in the 'emerging economies'.  There is a reason why countries chock full of people willing to work and troves of natural resources are third world, while other countries often with fewer workers and less resources have solid economies.  The economists and those infatuated with globalization wax about BRIC – Brazil, Russia, India, China – as the economies of the 21st century – the up and coming global powerhouses.  Let's hope they are wrong.  With an average rating of 96 on the corruption scale it would mean the coming of one very sleazy world.

I don't think there is much risk of BRIC ruling the economic globe, however.  More likely they are having their chance and, if they don't clean up their act, that chance will pass them by.  Serious, mainstream companies like Bailey Hydropower don't suffer liars and cheats lightly.  They try to play it straight and if the host country can't or won't step up and do business honorably, they pack up and go home.  And God help the third world folks when the decent western companies leave and they are left to do business only with the boys and girls from Wall Street. Those amateurs will get skinned alive when they find out how the 'Art of the Deal' is played out in the Major Leagues of Corruption.