had kept making them, they could turn them out today a lot
more efficiently than DC-10's.
It's not enough to turn out a quality product on an efficient
basis. The goal has to be something else.
But what?
As I drink my beer, I find myself contemplating the smooth
finish of the aluminum beer can I hold in my hand. Mass produc-
tion technology really is something. To think that this can until
recently was a rock in the ground. Then we come along with
some know-how and some tools and turn the rock into a light-
weight, workable metal that you can use over and over again. It's
pretty amazing—
Wait a minute, I'm thinking. That's it!
Technology: that's really what it's all about. We have to stay
on the leading edge of technology. It's essential to the company.
If we don't keep pace with technology, we're finished. So that's
the goal.
Well, on second thought . . . that isn't right. If technology
is the real goal of a manufacturing organization, then how come
the most responsible positions aren't in research and develop-
ment? How come R&D is always off to the side in every organiza-
tion chart I've ever seen? And suppose we did have the latest of
every kind of machine we could use—would it save us? No, it
wouldn't. So technology is important, but it isn't the goal.
Maybe the goal is some combination of efficiency, quality and
technology. But then I'm back to saying we have a lot of impor-
tant goals. And that really isn't saying anything, aside from the
fact that it doesn't square with what Jonah told me.
I'm stumped.
I gaze down the hillside. In front of the big steel box of the
plant there is a smaller box of glass and concrete which houses
the offices. Mine is the office on the front left corner. Squinting at
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it, I can almost see the stack of phone messages my secretary is
bringing in my wheelbarrow.
Oh well. I lift my beer for a good long slug. And as I tilt my
head back, I see them.
Out beyond the plant are two other long, narrow buildings.
They're our warehouses. They're filled to the roof with spare
parts and unsold merchandise we haven't been able to unload
yet. Twenty million dollars in finished-goods inventory: quality
products of the most current technology, all produced efficiently,
all sitting in their boxes, all sealed in plastic with the warranty
cards and a whiff of the original factory air—and all waiting for
someone to buy them.
So that's it. UniCo obviously doesn't run this plant just to fill
a warehouse. The goal is sales.
But if the goal is sales, why didn't Jonah accept market share
as the goal? Market share is even more important as a goal than
sales. If you have the highest market share, you've got the best
sales in your industry. Capture the market and you've got it
made. Don't you?
Maybe not. I remember the old line, "We're losing money,
but we're going to make it up with volume." A company will sometimes sell at a loss or at a small amount over cost—as UniCo
has been known to do—just to unload inventories. You can have a
big share of the market, but if you're not making money, who
cares?
Money. Well, of course . . . money is the big thing. Peach is
going to shut us down because the plant is costing the company
too much money. So I have to find ways to reduce the money that
the company is losing. . . .
Wait a minute. Suppose I did some incredibly brilliant thing
and stemmed the losses so we broke even. Would that save us?
Not in the long run, it wouldn't. The plant wasn't built just so it
could break even. UniCo is not in business just so it can break
even. The company exists to make money.
I see it now.
The goal of a manufacturing organization is to make money.
Why else did J. Bartholomew Granby start his company back
in 1881 and go to market with his improved coal stove? Was it for the love of appliances? Was it a magnanimous public gesture to
bring warmth and comfort to millions? Hell, no. Old J. Bart did it
to make a bundle. And he succeeded—because the stove was a
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gem of a product in its day. And then investors gave him more
money so they could make a bundle and J. Bart could make an
even bigger one.
But is making money the only goal? What are all these other
things I've been worrying about?
I reach for my briefcase, take out a yellow legal pad and take
a pen from my coat pocket. Then I make a list of all the items
people think of as being goals: cost-effective purchasing, employ-
ing good people, high technology, producing products, produc-
ing quality products, selling quality products, capturing market
share. I even add some others like communications and customer
satisfaction.
All of those are essential to running the business successfully.
What do they all do? They enable the company to make money.
But they are not the goals themselves; they're just the means of
achieving the goal.
How do I know for sure?
Well, I don't. Not absolutely. But adopting "making money"
as the goal of a manufacturing organization looks like a pretty
good assumption. Because, for one thing, there isn't one item on
that list that's worth a damn if the company isn't making money.
Because what happens if a company doesn't make money? If
the company doesn't make money by producing and selling
products, or by maintenance contracts, or by selling some of its
assets, or by some other means . . . the company is finished. It
will cease to function. Money must be the goal. Nothing else
works in its place. Anyway, it's the one assumption I have to
make.
If the goal is to make money, then (putting it in terms Jonah
might have used), an action that moves us toward making money
is productive. And an action that takes away from making money
is non-productive. For the past year or more, the plant has been
moving away from the goal more than toward it. So to save the
plant, I have to make it productive; I have to make the plant
make money for UniCo. That's a simplified statement of what's
happening, but it's accurate. At least it's a logical starting point.
Through the windshield, the world is bright and cold. The
sunlight seems to have become much more intense. I look
around as if I have just come out of a long trance. Everything is
familiar, but seems new to me. I take my last swallow of beer. I
suddenly feel I have to get going.
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6
By my watch, it's about 4:30 when I park the Mazda in the
plant lot. One thing I've effectively managed today
is to evade the
office. I reach for my briefcase and get out of the car. The glass
box of the office in front of me is silent as death. Like an ambush.
I know they're all inside waiting for me, waiting to pounce. I
decide to disappoint everyone. I decide to take a detour through
the plant. I just want to take a fresh look at things.
I walk down to a door into the plant and go inside. From my
briefcase, I get the safety glasses I always carry. There is a rack of
hard hats by one of the desks over by the wall. I steal one from
there, put it on, and walk inside.
As I round a corner and enter one of the work areas, I hap-
pen to surprise three guys sitting on a bench in one of the open
bays. They're sharing a newspaper, reading and talking with each
other. One of them sees me. He nudges the others. The newspa-
per is folded away with the grace of a snake disappearing in the
grass. All three of them nonchalantly become purposeful and go
off in three separate directions.
I might have walked on by another time. But today it makes
me mad. Dammit, the hourly people know this plant is in trouble.
With the layoffs we've had, they have to know. You'd think they'd
all try to work harder to save this place. But here we've got three
guys, all of them making probably ten or twelve bucks an hour,
sitting on their asses. I go and find their supervisor.
After I tell him that three of his people are sitting around
with nothing to do, he gives me some excuse about how they're
mostly caught up on their quotas and they're waiting for more
parts.
So I tell him, "If you can't keep them working, I'll find a
department that can. Now find something for them to do. You
use your people, or lose 'em—you got it?"
From down the aisle, I look over my shoulder. The super
now has the three guys moving some materials from one side of
the aisle to the other. I know it's probably just something to keep
them busy, but what the hell; at least those guys are working. If I
hadn't said something, who knows how long they'd have sat
there?
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Then it occurs to me: those three guys are doing something
now, but is that going to help us make money? They might be
working, but are they productive?
For a moment, I consider going back and telling the supervi-
sor to make those guys actually produce. But, well . . . maybe
there really isn't anything for them to work on right now. And
even though I could perhaps have those guys shifted to some-
place where they could produce, how would I know if that work
is helping us make money?
That's a weird thought.
Can I assume that making people work and making money
are the same thing? We've tended to do that in the past. The basic
rule has been just keep everybody and everything out here work-
ing all the time; keep pushing that product out the door. And
when there isn't any work to do, make some. And when we can't
make work, shift people around. And when you still can't make
them work, lay them off.
I look around and most people are working. Idle people in
here are the exception. Just about everybody is working nearly all
the time. And we're not making money.
Some stairs zig-zag up one of the walls, access to one of the
overhead cranes. I climb them until I am halfway to the roof and
can look out over the plant from one of the landings.
Every moment, lots and lots of things are happening down
there. Practically everything I'm seeing is a variable. The com-
plexity in this plant—in any manufacturing plant—is mind-bog-
gling if you contemplate it. Situations on the floor are always
changing. How can I possibly control what goes on? How the hell
am I supposed to know if any action in the plant is productive or
non-productive toward making money?
The answer is supposed to be in my briefcase, which is heavy
in my hand. It's filled with all those reports and printouts and
stuff that Lou gave me for the meeting.
We do have lots of measurements that are supposed to tell us
if we're productive. But what they really tell us are things like
whether somebody down there "worked" for all the hours we
paid him or her to work. They tell us whether the output per
hour met our standard for the job. They tell us the "cost of prod-
ucts," they tell us "direct labor variances," all that stuff. But how do I really know if what happens here is making money for us, or
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whether we're just playing accounting games? There must be a
connection, but how do I define it?
I shuffle back down the stairs.
Maybe I should just dash off a blistering memo on the evil of
reading newspapers on the job. Think that'll put us back in the
black?
By the time I finally set foot inside my office, it is past five
o'clock and most of the people who might have been waiting for
me are gone. Fran was probably one of the first ones out the
door. But she has left me all their messages. I can barely see the
phone under them. Half of the messages seem to be from Bill
Peach. I guess he caught my disappearing act.
With reluctance, I pick up the phone and dial his number.
But God is merciful. It rings for a straight two minutes; no an-
swer. I breathe quietly and hang up.
Sitting back in my chair, looking out at the reddish-gold of
late afternoon, I keep thinking about measurements, about all the
ways we use to evaluate performance: meeting schedules and due
dates, inventory turns, total sales, total expenses. Is there a sim-
plified way to know if we're making money?
There is a soft knock at the door.
I turn. It's Lou.
As I mentioned earlier, Lou is the plant controller. He's a
paunchy, older man who is about two years away from retire-
ment. In the best accountants' tradition, he wears horn-rimmed
bifocal glasses. Even though he dresses in expensive suits, some-
how he always seems to look a little frumpled. He came here from
corporate about twenty years ago. His hair is snow white. I think
his reason for living is to go to the CPA conventions and bust
loose. Most of the time, he's very mild-mannered—until you try
to put something over on him. Then he turns into Godzilla.
"Hi," he says from the door.
I roll my hand, motioning him to come in.
"Just wanted to mention to you that Bill Peach called this
afternoon," says Lou. "Weren't you supposed to be in a meeting
with him today?"
"What did Bill want?" I ask, ignoring the question.
"He needed some updates on some figures," he says. "He
seemed kind of miffed that you weren't here."
"Did you get him what he needed?" I ask.
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"Yeah, most of it," Lou says. "I sent it to him; he should get it in the morning. Most of it was like the stuff I gave you."
"What about the rest?"
"Just a few things I have to pull together," he says. "I should have it sometime tomorrow."
"Let me see it before it goes, okay?" I say. "Just so I know."
"Oh, sure," says Lou.
"Hey, you got a minute?"
"Yeah, what's up?" he asks, probably expecting me to give
him the rundown on what's going on between me and Peach.
"Sit down," I tell him.
Lou pulls up a chair.
I think for a second, trying to phrase this correctly. Lou waits
rxpectantly.
"This is just a simple, fundamental question," I say.
Lou smiles. "Those are the kind I like."
"Would you say the goal of this company is to make money?"
He bursts out laughing.
"Are you kidding?" he asks. "Is this a trick question?"
"No, just tell me."
"Of course it's to make money!" he says.
I repeat it to him: "So the goal of the company is to make
money, right?"
"Yeah," he says. "We have to produce products, too."
"Okay, now wait a minute," I tell him. "Producing products
a just a means to achieve the goal."
I run through the basic line of reasoning with him. He lis-
tens. He's a fairly bright guy, Lou. You don't have to explain
ery little thing to him. At the end of it all, he agrees with me.
"So what are you driving at?"
"How do we know if we're making money?"
"Well, there are a lot of ways," he says.
For the next few minutes, Lou goes on about total sales, and
market share, and profitability, and dividends paid to stockhold-
ers, and so on. Finally, I hold up my hand.
"Let me put it this way," I say. "Suppose you're going to re-
.-. rite the textbooks. Suppose you don't have all those terms and
vou have to make them up as you go along. What would be the
minimum number of measurements you would need in order to
know if we are making money?"
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Lou puts a finger alongside his face and squints through his
bifocals at his shoe .
"Well, you'd have to have some kind of absolute measure-
ment," he says. "Something to tell you in dollars or yen or whatever just how much money you've made."
"Something like net profit, right?" I ask.
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