Wednesday, December 21, 2016

A Self-Fulfilling Prophecy by Allen Laudenslager

I keep hearing that American business can’t find qualified workers and they must look overseas for those workers. In large part the blame rests with American business itself.

When you want to make a train engine, you must have steel mills to make quality steel which is affordable and in the quantity needed to make the parts. You must have people who can design the individual parts, and you must have workers to assemble the parts. What no one not familiar with the process of making things will notice it the missing elements from my description: you must also have people who can design and manufacture the machines to make the parts such as lathes, drill presses, or welding machines. At each step in the process of making a complex product there are many other parts that must be made to make the machines that make the parts of the final product.

For many years, American business managers came from the ranks of people who actually made the products: the designers, the production managers, not finance, accounting, marketing, or purchasing. Why was that system so successful? Huge corporations like Ford and General Motors had management career paths that put their people first into manufacturing to learn the business. Only after they understood the process of making cars were they transferred for a few years (not for a few weeks or months) into financing, accounting, marketing, purchasing, and all the other departments in order to give them a solid grounding in the business.

As the cost of doing business rose, major projects needed more outside financing and the lenders demanded more participation in the decision making process and they got seats at the table. The problem of course is that financiers were trying to make decisions about processes they didn’t fully understand. They fell into the trap of thinking that everything could be reduced to numbers. One of those traps was not understanding just how much they didn’t know.

The old cliché, “If all you own is a hammer, everything looks like a nail.” means that human nature will filter what it sees to fit what they already know; that we will trim a problem into the elements we recognize. This is particularly true if you have to make a decision very quickly, without time to put your feet up on the desk, ponder the problem, and consider all the solutions.

Those finance wizards thought they could save a lot of money if they didn’t have to make some of the parts. So they said, "Let’s get someone else to invest in the machinery and employees to make fuel pumps. We can buy them cheaper than we can make them." But they didn't understand that making fuel pumps was a training ground for the people who would one day design complete automobiles. 

The same is true for senior management. We won’t have career paths for entry-level people in order to groom them for upper management. We can just hire that expertise from somewhere else and save a lot of money!

How does this apply to those assembly line workers? In the rush to save money the people who didn’t understand how assembly workers learned how to do the work tried to shift the responsibility for training to someone else (like trade schools subsidized by the local government). They say, workers should be experienced when we hire them, the schools aren’t training enough people to work with their hands. But the schools can’t provide the kind of familiarity with your product that actually working in your plant could. Yes, this method is going to cost a company in the short-run, but in the long-run you'll end up with a first class workforce.

Companies will retort, “if we train those workers, then they'll run down the street to my competitor the first time they get offered ten cents more an hour and I’ll lose my investment in training them!” Well, duh!
IF THEY’RE WORTH 10 CENTS MORE AN HOUR TO YOUR COMPETITOR, THEN THEY'RE WORTH 11 CENTS MORE TO YOU! That extra penny is what you don’t have to spend to train a new worker. In the same way, some of the people making fuel pump parts will be able to advance their skills and make even more precision parts. If you are outsourcing those parts, you'll never develop the workers to make those parts. That will cost you money, but it is an investment in the long-term health of your business and your industry. You are trading short-term profits for the long-term health of your company. And the one key question you, as a senior manager, must ask is, “do we want to still be in business next year, in 5 years, and in 25 years?"

The self-fulfilling prophecy is that by shifting the responsibility and cost of training workers to someone else you lose the very benefit you need, trained workers, to operate your business.

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