"What's the use you learning to do right when its troublesome to do right and ain't no trouble to do wrong, and the wages is just the same? Huck Finn
When a guy like Rob Sweetnam says, "the head count needs to stay aligned with production output" in explaining layoffs at TMD Friction, just 18 months after hiring people and putting everyone on 6 day work weeks, praising the workforce as a "dynamic team" and a part of a "world-class production culture" he knows how dumb that is. He has to – the guy did not get to be the Managing Director without being a pretty smart guy.
Figuring out how to keep the company prospering without laying off the workforce is not easy, though. It's doable all right, but complicated, and Rob would have to butt heads with lots of people to really create a "world class production culture". Far easier to lie to himself and the rest of the world - just follow the crowd of mediocre managers and lay 'em all off.
Funny thing, however, the Rob Sweetnams of the manufacturing world are perfectly capable of analyzing the acquisition of tools and machines to death, buying only very flexible ones, and devising shrewd financing schemes for them because he knows he can't just toss them in the dumpster when business drops and buy a bunch of new ones when it picks back up. He knows it is costly and wrong on so many levels to jerk the workers up and down, but no one can prove the direct cause and effect between designating hourly workers as a variable cost (and treating them precisely that way) and lousy quality and poor productivity, so he gets away with taking the easy path to fixing his company's problems.
Perhaps the report from the internal investigation at J&J will shake up a few people. We have beaten the J&J incompetence to death in Evolving Excellence, describing them as bumbling and fumbling, unable to see their factories as the source of brand value, and how the the people on the shop floor gave no chance of getting the sort of leadership necessary for excellence. The report comes as close as you will see to establishing that direct cause and effect. According to the Wall Street Journal:
"J&J has laid off thousands of employees since 2007 in response to drug-patent expirations and economic pressures. The job cuts have been aimed at reducing J&J's annual expenses by hundreds of millions of dollars.
The directors' report doesn't explicitly cite the broad scope of the layoffs, but it does show that under-staffing in certain areas played a role in the McNeil quality problems"
"Johnson & Johnson's recent efforts to cut costs by laying off employees and avoiding new hires may have contributed to the manufacturing-quality problems behind a damaging series of medicine recalls over the past two years."
In J&J's case the intellectual laziness – laying of thousands of people to balance the impact of patent expiratiions and a slow economy instead of figuring out a creative strategy to use their workforce to create value in other ways, or getting beyond the overly simplistic assumptions in cost accounting that work for the accountants but no one else – may well have been compounded by enormous egos. There is an ugly tendency among many high level folks to believe their career success demonstrates the supremacy of their knowledge – I didn't have to know anything about manufacturing to get to this multi-million dollar a year C-whatever-O job so my success demonstrates that it is not important.
Be it laziness or narcissism, there is little excuse for well paid, well educated, obviously intelligent people to deceive themselves and those around them that wholesale abuse of the company's workforce is good management.
Alfred Sloan has been on the management pedestal for far too long. He wrote that workers "accept the hazards of poor times – the business cycle" and decried the efforts of "attempts to improve the economic status of our people" as "wishful thinking". He said that General Motors is not the "220,000 workers on our payrolls". "For me," he wrote, "it is a group on not more than 10,000 workers whose skill is in management". And his sidekick, Donaldson Brown – the 'Father of Modern Cost Accounting' codified people in variable cost status based on that thinking. While GM's lack of competition due to the destruction of Europe and Asia in World War II allowed him to believe he was right, the wreckage of GM lies at the feet of those absurd beliefs.
The UAW and GM's workers did all they could and played a large part in destroying Sloan's company in an all effort to prove they did not "accept the hazards of poor times – the business cycle". High time the leadership of J&J, Mr Rob Sweetnam, and far too many others start earning their pay – quit taking the easy way out of difficulties – before their companies end up on the same scrap heap as Sloan's.