Time for Another Roundup

by BILL WADDELL

Before I head out for another week on the road I need to share a few of the more interesting tidbits that have popped into the news lately …

The Arabs are Starting to Figure it Out

All of the hubbub in recent years about alternative energy sources is not good at all for the Middle East.  Their economy was basically non-existent for ten thousand years – then oil came along and made them filthy rich – and if oil goes away, they are pretty much back to the stone ages.  It will take the world a long time to be over its oil addiction, and it will take the folks in the Middle East a long time to spend all of their money, but the handwriting is pretty much on the wall.

But don't count them out just yet.  Hasan Malek, a big mover and shaker in the Muslim Brotherhood (an outfit whose methods and motives are a bit shaky to say the least) says, "We want to turn Egypt from a consumer market into a manufacturing market."  he is not talking about peddling cheap labor either.  He talks about the need to raise manufacturing standards, and says, "We are thinking of developmental investments that include proper professional training of the labor force to create manufacturing industries and reduce the reliance on imports."

He is not the only one who sees manufacturing as critical to the Middle East economy.  A Saudi guy by the name of Khalaf Al-Harbi pointed out the Israel was not about to dry up and blow away – calling it an "inescapable fact" – because Israel "went on [to develop] manufacturing, industry, and invention. The [average] income there is double [the average income] in the neighboring Arab countries."

In a conversation with Jim Womack at the Lean Accounting Summit, he described a mutual acquaintance of ours as a "philosophical genius but a practical idiot".  He could have been talking about John Stossel, who repeats the failed blathering that has all but destroyed western economies.  Wouldn't that be a historical irony to have the Middle east dominate the west not through oil or terrorism, but by having the common sense to appreciate the critical nature of manufacturing?

The Lean Train Keeps Rolling

Thank goodness guys like John Stossel are largely ignored in Holstein, Iowa.  I can imagine how far down their pointy noses the academic and economic elite have to look to see an outfit like VT Industries based in an Iowa town named after a sort of cow, but VT is rolling along making doors in an economy that is not doing much construction.  How is VT succeeding?  "Not only do we have a manufacturing complex in Holstein, we also have eight other facilities spread strategically across the United States and Canada. Regardless of our growth, though, our philosophy remains the same: treat every customer as if they were your only customer. That means delivering the finest products possible, supported by the ultimate in customer service."  Says VT VP Jason Farver, "Using Kaizen events is one tool we utilize in every plant, but driving the improvement process at all levels of the organization makes for the most sustained improvements.  Standard Work has been a key focus at VT for the past two to three years, which is enhancing our training and consistency across shifts and operations."

Stories like VT's are actually becoming pretty common in manufacturing, and almost as common in health care.  Tucson's Northwest Medical Center – a very big hospital – pledges 30 minute max wait to see a doctor. Kimberly Chimene says the multi-million dollar expansion of their ER facility isn't the driver of getting wait times down to 21 minutes. "We redid a lot of our processes," she says, "It is very much a collaberative effort to enhance our service and working with ER staff, physicians and out nursing group."

Theeeeey're Mediocre!

 Seems Kellogg canned 1,500 folks in 2009 under the auspices of a simple minded program called K-Lean, which has nothing to do with lean and everything to do with the sort of 'management by headcount reduction' that people with no idea how their company actually creates value are wont to do these days.  Two years later, costs are up, profits are down and, worst of all, quality is so bad even Girl Scout cookies are at risk.  It is in no way the fault of the people at the Augusta plant – I have met some folks there and they know exactly how to run a world class, high quality factory.  The problem is 100% at the top.

CEO John Bryant said he has to hire people back and make some big investments in manufacturing and the supply chain. In an overwhelming burst of the obvious he said, "We were chasing aggressive productivity goals.  We thought we were making sustainable cost reductions but they were not."

 Some investment guy named David Kolpak said, "I thought this was a company that consistently managed its business for the long term, but apparently they have made decisions for the short term that are coming back to haunt them.  Boy, who has a handle on the operations of this company?"

Well, David, perhaps you ought to actually read the annual reports and apply a bit of common sense. Isn't that what you get paid to do? In the 2009 report.  It says right there on page 43, "In 2009, 2008 and 2007, the company made performance share awards to a limited number of senior executive-level employees, which entitles these employees to receive a specified number of shares of the Company's common stock on the vesting date, provided cumulative three-year targets are achieved.  The cumulative three-year targets involved cost savings for the 2009 grant, operating profit for the 2008 grant and cash flow for the 2007 grant."

Think, now David.  Kellogg stock was at about $40 bucks when they announced the big layoff.   Your pals on Wall Street loved it and the stock ended the year at better than $50.  The guys you assumed were in it for the long haul had stock options based on "cost savings in 2009" – nothing in the equation about making good Girl Scout cookies in 2011.  They did quite well by the scheme.  The "cost savings for the 2009 grant" were achieved and Mr Bryant raked in better than $2 million as a result.  Where exactly in that arrangement did you see anything to lead you to be surprised that Kellogg did stuff that made the numbers look great in 2009, but trashed the long term?

This is why privately held companies with an inherently longer term view find true lean easier to pursue than the big guys.

Why Policy Manuals are Dumb Ideas

It is a fundamental truth that dumb people will work for less money than smart people.  Big companies love to hire people who will work for less money, so they tend to get more than their fair share of dumb people.  Government also gets a lot of small thinkers just because big thinkers tend to not want to work for the government. The solution?  Policies.  By creating rules for everything the big companies and government think they can prevent dumb people from makng dumb decisions.  It is a strategy that rarely works.  Case in point:  Safeway in Honolulu.

The Leszczynski's (whose only crime in my book is a seriously inadequate vowel count) went shopping in the Safeway store a few weeks back with their 2 year old daughter.  30 week pregnant Mrs. L was hungry, so they grabbed a couple of sandwiches from the Safeway deli and ate them while they shopped.  They kept the wrappers so they could scan the bar codes when they paid for the rest of their groceries, but forgot to do so.

For this high crime, they were detained in the Safeway office for shoplifting, then ultimately handed over to the Honolulu police, who decide to haul the L's down to the pokie and book 'em.  With mom and dad on their way to the stir, two year old Zofia is parentless, so off to Child Services she goes.  Despite the fact that mom and dad are released after a few hours, Child Services is so bureaucratic and buried in useless processes it takes them 18 hours to process Zofia in and out of the system, all the while Mr and Mrs L are beside themselves with worry.

Safeway's Susan Houghton said "management followed routine shoplifting procedure".  "A Honolulu police spokeswoman said it was routine procedure to call Child Welfare Services if a child is present when both parents are arrested." I assume it is also a matter of Honolulu policy to arrest people for a $10 "mommy-brain moment", as Mrs L described it, if the Safeway manager tells them to.

Mrs L says she has not given suing Safeway any thought.  Do it Mrs L.  PT Barnum made it clear that you have a moral obligation to take money from fools before they do something with it to hurt themselves. The moral of the story for the rest of us is to hire people with intelligence, pay them what they are worth, then tear up the policy manuals and let the employees make intelligent decisions with a modicum of common sense.