by E M Goldratt
I refuse to see his point. "Can't you continue to teach me?"
"Yes, I can," he answers. "But first you should find out ex- actly what it is that you want to learn. Call me then."
I don't give up easily. "I want to learn how to run an efficient division, isn't it obvious?"
"In the past you wanted to learn how to run an efficient plant," Jonah sounds impatient. "Now you want to learn how to run an efficient division. We both know that it will not end here. What is it that you want to learn? Can you spell it out?"
"Actually, I guess that I want to learn how to manage-a plant, a division, a company, any type or size organization." After a second of hesitation I add, "It wouldn't be bad to learn how to manage my life, but I'm afraid that would be asking for too much."
"Why too much?" says Jonah to my surprise. "I think that every sensible person should want to learn how to manage his or her life."
"Great, when can we start?" I ask eagerly.
"Now. Your first assignment is to find out what techniques are needed for effective management."
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"What?" I ask in a choked voice.
"Come on, I didn't ask you to develop them, just to deter- mine clearly what they should be. Call me when you have the answer. And Alex, congratulations on your promotion."
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"I'm really proud of you. Three more steps like that and we will have made it. Shall we drink to it?"
Julie's forced enthusiasm strikes a responding chord inside me. "No, I don't think so." I refuse the toast, an event which, as you can imagine, is not very common.
Julie doesn't say a word. She just slowly lowers her drink, leans slightly forward, and looks directly into my eyes. It's quite apparent that she is waiting for some explanation.
Under the pressure I start to talk slowly, trying to verbalize my rambling thoughts. "Julie, I really don't think that we should toast it, at least not in the way you make it sound, like toasting an empty victory. Somehow I feel that you were right all along- what is this promotion if not just winning a point in the rat race?"
"Hmm," is her only response.
My wife can express herself very clearly without even open- ing her mouth-which is definitely not the case for me. Here I am, rambling all over the place... 'Rat race'... 'Empty vic- tory.' What on earth am I talking about? But still, why do I feel it's inappropriate to toast my promotion?
"The family paid too big a price for this promotion," I finally say.
"Alex you're being too hard on yourself. This crisis was about to explode one way or the other."
She continues, "I gave it a lot of thought and let's face it, if you had given up, the feeling of failure would have spoiled every good part of our marriage. I think you should be proud of this promotion. You didn't step on anybody to get it; you won it fair and square."
A chill goes down my back as I remember it. I was in deep trouble. My plant was under a real threat of being closed down; over six hundred people were about to join the already long un- employment lines; my career was one inch from being kissed by limbo; and on top of all that, the unbelievable hours I was putting in at work had pushed our marriage to the brink of going down the tube. In short, I was about to change from a bright, rising star into an ordinary bum.
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But I didn't give up. Against all odds I continued to fight. And I was not alone. Jonah introduced me to his common-sense (and thus very controversial) approach to managing a company. It made a lot of sense, so my team enthusiastically backed me up. And it was fun, real fun. Let me tell you, the last few months were quite stormy. I think that we violated almost every rule of corpo- rate America. But we made it. We turned the plant around. So much so that it saved the entire division. Now, Julie and I are sitting in this fancy restaurant celebrating. I'm going to head the division, which means relocation-a fact that probably contrib- utes a lot to Julie's supportive mood.
Raising my glass I say confidently, "Julie, let's drink to my promotion. Not as a step toward the tip of the pyramid, but let's drink to what it really means-positive reassurance to our excit- ing, worthwhile journey."
A broad smile is spreading over Julie's face and our glasses make a clear, gentle sound.
We turn to our menus, in a good mood. "It's your celebra- tion as much as it is mine," I say generously. After a while, and in a more somber tone I continue, "Actually, it's much more Jonah's achievement than mine."
"You know Alex, it's so typical of you," Julie says apparently disturbed. "You worked so hard and now you want to give the credit to somebody else?"
"Julie, I'm serious. Jonah is the one who gave me all the answers, I was just the instrument. As much as I would like to think otherwise, that's the plain, bare truth."
"No, it's far from the truth."
I turn nervously in my chair, "But..."
"Alex, stop this nonsense," Julie says in a firm voice. "Artifi- cial modesty doesn't suit you." She raises her hand to prevent me from answering and firmly continues, "Nobody handed you solu- tions on a silver platter. Tell me, Mr. Rogo, how many nights did you sweat until you succeeded in finding the answers?"
"Quite a few," I admit with a smile.
"You see!" Julie tries to close the subject.
"No, I don't see," I laugh. "I'm very well aware that Jonah didn't simply give me the answers. As a matter of fact, during those long nights, (and days), considerable time was spent cursing him for just that. But, come on, Julie, the fact that he elected to
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present them in the form of very pointed questions doesn't change a thing."
Rather than continuing, Julie calls the waiter and starts to order. She's right. This line of discussion will just ruin a pleasant evening.
It's not until I'm busy with my delicious veal parmesan that my thoughts start to crystallize. What was the nature of the an- swers, the solutions, that Jonah caused us to develop? They all had one thing in common. They all made common sense, and at the same time, they flew directly in the face of everything I'd ever learned. Would we have had the courage to try to implement them if it weren't for the fact that we'd had to sweat to construct them? Most probably not. If it weren't for the conviction that we gained in the struggle-for the ownership that we developed in the process-I don't think we'd actually have had the guts to put our solutions into practice.
Still deep in thought, I raise my eyes from the plate and examine Julie's face. It's as if she was waiting for me all this time.
"How come you didn't think of it yourselves?" I hear her asking. "To me your answers look like plain, common sense. Why couldn't you do it without Jonah's guiding questions?"
"Good question, very good question. Frankly, I doubt I know the answer."
"Alex, don't tell me you haven't thought about it."
"Yes, I have," I admit. "All of us, back in the plant, had the same question. The solutions look trivial, but the fact is that for years we've done the exact opposite. Moreover, the other plants still insist on sticking to the old, devastating ways. Probably Mark Twain was right saying that 'common sense is not common at all' or something similar."
"That's not an answer to my question." She doesn't let me off the hook.
"Just bear with me," I plead. "I really don't know. I'm not sure that I even know the meaning of'common sense'. What do you think we mean when we refer to something as 'common sense'?"
"It's unfair to answer a question with a question." She re- fuses my apparent attempt to turn the table.
"Why not?" I try again.
She doesn't allow her lips to move.
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"Okay," I give up. "The best that I have come up with so far is to recognize that we refer to something as common sense only if it is in line with our own intuition."
She nods her head in approval.
"Which only helps to intensify your question," I continue. "It only means that when we recognize something as common sense, it must be that, at least intuitively, we kn
ew it all along. Why is there so often the need for an external trigger to help us realize something that we already knew intuitively?"
"That was my question!"
"Yes, darling, I know. Probably these intuitive conclusions are masked by something else, something that's not common sense."
"What could that be?"
"Probably common practice."
"Makes sense," she smiles and turns to finish her dinner.
"I must admit," I say after a while, "that Jonah's way of lead- ing to the answers through asking questions, his 'Socratic ap- proach,' is very effective at peeling away the layers-the thick layers-of common practice. I tried to explain the answers to others, who needed them as badly as we did, but got nowhere. As a matter of fact, if it hadn't been for Ethan Frost's appreciation of our improvements to the bottom line, my approach might have led to some very undesirable results.
"You know," I continue, "it's amazing how deeply ingrained those things are that we've been told and practiced, but never spent the time to think about on our own. 'Don't give the an- swers, just ask the questions!' I'll have to practice that ." Julie doesn't look too enthused.
"What's the matter?" I ask.
"Nothing," she says.
' 'Don't give the answers,' definitely makes sense," I try to convince her. "Spelling out the answers when you are trying to convince someone who blindly follows the common practice is totally ineffective. Actually there are only two possibilities, either you are not understood, or you are understood."
"You don't say?"
"In the first case, no real harm has been done, people are just going to ignore you. The second case might be much worse, people might understand you. They'll take your message as something worse than criticism."
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"What is worse than criticism?" she asks innocently .
"Constructive criticism." I smile gloomily, remembering the harsh responses of Hilton Smyth and that Cravitz fellow. "You have a point, but it's below the belt. People will never forgive you for that."
"Alex, you don't have to convince me that when I want to persuade somebody-especially my husband-that giving an- swers is not the way. I'm simply not convinced that only asking questions is much better."
I think about it. She is right. Whenever I tried just to ask questions it was interpreted as patronizing, or even worse, that I was simply negative.
"It looks like one should think twice before charging the tall windmills of common practice." I conclude gloomily.
Julie busies herself with the delicious cheesecake our waiter is placing in front of us. I do the same.
When the coffee's served I gather enough stamina to con- tinue the conversation. "Julie, is it really so bad? I don't recall giving you a lot of grief."
"Are you kidding? Not only are you stubborn like a Southern mule, you had to go and pass on these genes to your kids. I bet you gave Jonah a hard time as well."
I think about it for a short while. "No Julie, with Jonah somehow it was different. You see, whenever I'm talking with Jonah, I have the distinct feeling that not only is he ready with his questions, he's also ready with my questions. It must be that the Socratic method is much more than just asking questions. One thing I can tell you, improvising with this method is hazardous, believe me, I've tried. It's like throwing a sharpened boomer- ang."
Then it dawns on me. Here's the answer. This is the tech- nique that I should ask Jonah to teach me: how to persuade other people, how to peel away the layers of common practice, how to overcome the resistance to change.
I tell Julie about my last telephone conversation with Jonah.
"That's very interesting," she says at last. "You definitely need to learn how to manage your life better. But sweetheart," she laughs, "be careful, remember what happened to Socrates. He was forced to drink poison."
"I don't intend to give Jonah any poison," I say, still very excited. "Julie, let me tell you, whenever Jonah and I talked
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about my troubles at the plant, I always felt he anticipated my response. It actually bothered me for quite some time."
"Why?"
"When did he have the time to learn so much? I'm not talk- ing about theories, I'm talking about his intimate understanding of how the wheels are really turning in a plant. As far as I know, he never worked one day of his life in industry. He's a physicist. I can't believe that a scientist, sitting in his ivory tower, can know so much about the detailed realities of the shop floor. Something doesn't match.
"Alex, if that's the case, it seems that you should ask Jonah to teach you something more than just the Socratic method."
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Lou is my first and most important target. If I'm unable to persuade him to join me, I'm basically lost. It's not going to be easy. He's very close to retirement and I know to what extent he's involved in his community. I take a deep breath and walk into his office. "Hey Lou, is it a good time?"
"Good as any. How can I help you?"
Perfect opening, but somehow I don't have the guts to go straight to the point. "I was just wondering about your forecast for the next two months," I say. "Do you see any problem in us reaching and maintaining the fifteen percent net profit? Not that it's crucial any more," I hurriedly add, "but I'd hate giving Hilton Smyth even the slightest opening to hiss, 'I told you so.' '
"You can sleep tight. According to my calculations we'll easily cross the twenty percent net profit for the next two months."
"What!" I can hardly believe my ears. "Lou, what's the mat- ter with you? Since when do you believe marketing's chronically optimistic outlook?"
"Alex, a lot has happened to me recently, but believing mar- keting is not one of them. Actually, my forecast is based on a slight decline in incoming orders."
"So how did you pull this rabbit out of your hat?"
"Have a seat, it'll take me some time to explain. I have some- thing important to tell you," he says.
It's clear that I'm going to hear about another devious ac- counting trick. "All right, let's hear it."
I make myself comfortable while Lou shuffles papers. After two minutes I lose my patience, "Well, Lou?"
"Alex, we blamed the distorted way in which product costs are calculated for giving the appearance that our net profit was only twelve point eight percent, rather than over seventeen per- cent as we believed was the case. I know that you were furious about it, but what I've found out is that there's an even bigger accounting distortion. It's tied to the way that we evaluate inven- tory, but it's hard for me to explain. Maybe I'll try to do it through the balance sheet."
He pauses again. This time I wait patiently.
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"Maybe I should start with a question," he says . "Do you agree that inventory is a liability?"
"Of course, everybody knows that . And even if we didn't know it, the last few months have shown to what extent inventory is a liability. Do you think we could have pulled off this fast re- sponse to orders if the floor had been as jammed up as before? And haven't you noticed that quality has improved, and overtime has gone down-not to mention that we hardly ever have to ex- pedite today!"
"Yeah," he says, still looking at his papers. "Inventory is defi- nitely a liability, but under what heading are we forced to report it on the balance sheet?"
"Holy cow, Lou!" I jump to my feet. "I knew that the finan- cial measurements were remote from reality, but to that extent- to report liabilities under the heading of assets? I never realized the full implications... Tell me, what are the bottom line ramifications?"
"Bigger than you think, Alex. I've checked and rechecked it, but the numbers do talk. You see, we're evaluating inventory ac- cording to the cost to produce the goods. These costs include not only the money we pay for the raw materials, but also the value added in production.
"You know what we have done in the last few months. Dono- van has worked only on things that we have orders for. Stacey has released material accordingly. We've d
rained about fifty percent of the work in process from the plant, and about twenty-five per- cent from finished goods. We've saved a lot by not purchasing new materials to replace this excess inventory, and the cash fig- ures show it clearly. But on our books, the assets represented by inventory went down, since they were only partially compensated for by the cash we didn't have to pay out. In this period, when we were reducing inventory, all the difference between the product cost and the material cost of the reduced inventory showed up as a net loss."
I swallow hard. "Lou, you're telling me that we were penal- ized for doing the right thing? That reducing the excess inven- tory was interpreted by our books as a loss?"
"Yes," he replies, still looking at his papers.
"Well tell me, what was the impact-in numbers?"
"Our actual net profit was well over twenty percent in each of the last three months," he says flatly.
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I stare at him. I can't believe my ears.
"But look at the good side," he says sheepishly, "now that the inventory has stabilized at a new, low level, this effect won't dis- turb us any longer."
"Thank you very much," I say sarcastically and turn to leave.
When I reach the door I turn around and ask him, "When did you discover this phenomena? When did you find out that we were turning much more profit than the targeted fifteen per- cent?"
"A week ago."
"So why didn't you tell me? I could have used these facts very effectively in the plant review."
"No Alex, you couldn't have used them at all, it just would have confused your story. You see, everyone evaluates inventory this way, it's even required by the tax authorities. You didn't stand a chance. But I did discuss it at length with Ethan Frost; he understood it perfectly."