Tuesday, December 22, 2009

Managers

Noam Scheiber blames the decline in manufacturing on . . . business schools.

A lot of people talk about reviving the domestic manufacturing sector, which has shed almost one-third of its manpower over the last eight years. But some of the people I spoke to asked a slightly different question: Even if you could reclaim a chunk of those blue-collar jobs, would you have the managers you need to supervise them?

It’s not obvious that you would. Since 1965, the percentage of graduates of highly-ranked business schools who go into consulting and financial services has doubled, from about one-third to about two-thirds. And while some of these consultants and financiers end up in the manufacturing sector, in some respects that’s the problem. Harvard business professor Rakesh Khurana, with whom I discussed these questions at length, observes that most of GM’s top executives in recent decades hailed from a finance rather than an operations background. (Outgoing GM CEO Fritz Henderson and his failed predecessor, Rick Wagoner, both worked their way up from the company’s vaunted Treasurer’s office.) But these executives were frequently numb to the sorts of innovations that enable high-quality production at low cost. As Khurana quips, “That’s how you end up with GM rather than Toyota.”

Instead of just moving money around, put people in charge who know how to make stuff. Maybe then the money will just take care of itself.

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8 Comments:

Blogger EvMick said...

There seems to be a "conflict of facts" with

http://mjperry.blogspot.com/2009/12/us-remains-largest-manufacturer-in.html

which states that the US remains the worlds largest manufacturer.

I'm not taking sides here....just wondering how to reconcile.

8:53 PM  
Blogger dubjay said...

EvMick, what that chart might show is that our manufacturing is simply more expensive than that of other countries.

And it doesn't contradict the notion that one-third of US manufacturing went away. If it hadn't, that US column might tower over everything in sight.

10:39 PM  
Blogger Oz said...

As someone who has worked in manufacturing and been a CPA doing audits and tax returns of manufacturers, a lot of this rings true. Middle managers know how to do things and know how product is made. You go to them for answers. There's some deadwood in there, but for the most part, these are the guys who get the job done.

I think this downplays the importance of sales and marketing, though. I hate both, but you have to move product, too.

But the overall statement that these grads are going into consulting and finance jobs is true. And it's difficult to see what value they add to the economy when they do. As opposed to being private investment blood-sucking vampires.

Oz

4:05 AM  
Blogger Dave Bishop said...

My Dad was a sheet metal worker who spent his entire working life in a UK factory which made biscuit/bread ovens and stuff like that. In the late 60s he celebrated 40 years with the firm - who presented him with a clock. The presentation was made by the Managing Director who had joined the company a couple of decades or so after my Dad. As part of his training the MD had had to work in every department in the company and, at one stage, had been my Dad's labourer (not for very long I would imagine!).At the presentation I remember the MD fondly recalling the time that he had spent with my Dad.
When Dad retired, around 10 years later, the company was already being taken over by managerial 'whizz kids'. They obviously 'failed' because the company no longer exists (the site once occupied by the factory is now a prison - would you believe?).
I bet the whizz kids never had to work in every department and the story of the company that my Dad gave the best years of his life to seems to have been repeated right across the Western world (apart from the prison bit, of course!).

10:01 AM  
Blogger john_appel said...

This is endemic not just in manufacturing, but in virtually every industry. I attribute it to the "I'm a manager, thus I can manage anything" attitude that seems to be inculcated into MBAs during their programs. In vertical after vertical, you'll find people running companies who have absolutely zero experience in the field of their firms' "core competencies".

This doesn't change the math on labor costs, legacy health care and pension burdens, etc.; and unions which have refused to allow their companies to adapt to changing technologies and markets have a share of the blame as well. But the factors this article talks about certainly play a role.

Of course, you don't hear the free market fanatics acknowledge that the bulk of these folks who go into finance aren't "rational actors" - hey, given the choice between slogging through Rust Belt winters working in some decaying factory town and living the good life in Manhattan (and being paid handsomely to do so), isn't this the logical outcome? /snerk off

12:01 PM  
Blogger john_appel said...

Erm, make that "are rational actors".

12:06 PM  
Blogger Lance Larka said...

I've worked in the biotech manufacturing business for the last 15 years and can definitely attest to the Harvard MBA effect. For what was once billed as the 'new' industry that defied the rules I can definitely say it does not and can weigh in here.

I'm now an executive and partial owner of a biotech manufacturing company making synthetic genes, enzymes, and oligos. I've worked my way up the responsibility ladder from bench tech to my current job when starting this new company. I know what it takes to physically move samples around on the bench, label tubes, and how much they cost. That is a skill I learned over years of actual hands-on activity. Fly-by-night managers will never take the time to do this level of learning.

In the past I've worked with CFO's that cannot grasp the concept of 'unit of measure.' As in we buy a case of 2000x2.2mL tubes for $100 and when I explain that the product we ship has a material cost of $0.05 I get a blank stare.

Or the guy who couldn't understand that if one of my technicians could concurrently process between 1-96 samples depending on what was in the production queue at the time they started the run there was no way I could tell him how much the per sample labor cost was and that it had to be charged to general overhead instead.

The best one was the guy who was sent to Harvard for his MBA at the companies expense so that the company could be sold under his control and came back after 3 years and proceeded to put his skills to use in such a way that when we did find a buyer they needed to put up a million bucks to cover outstanding expenses or we would have failed 2 weeks before the deal closed.

I don't care what people say, but if you do not understand the business that you are in you will not succeed on the fundamentals...like making a profit.

2:03 PM  
Blogger EvMick said...

Dubjay said:

what that chart might show is that our manufacturing is simply more expensive than that of other countries.

I've been trying for some time now to come up with an appropriate response to that remark.

I've failed.

So let me just say Merry Christmas and let it go at that.

9:29 AM  

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