THE ENTERPRISE--CRAZY, CRAZIER & CRAZIEST AWARDS
AWARDS TIME
It seems like every time I turn on a TV there is some kind of awards show on it. Music of all genres, athletes, actors, humanitarians, and beauties all get their own awards. Therefore, I am creating mine. The CRAZY AWARDS, which, unlike the others will come in tiers of craziness. There are also lessons to be learned so we don't recreate INSANITY: "Doing the same things over and over and expecting a different outcome."
CRAZY
American households at the end of 2008 were in debt $13.8 trillion, almost equal to the $14.3 trillion of the whole US economy. Is that insane or what? They owed about 130% of their disposable income. Consumers may be cutting back now, but they have proven their willingness to spend beyond their means. With this kind of a population, is it any wonder that many people still don't comprehend what their government is doing? It is also spending immense sums, way beyond its means. Does a $1.8 trillion dollar deficit for this year sound a bit excessive?
Lesson: In business when you spend beyond your means, you deplete your cash, and this leads to very bad consequences, ranging from not having the money to make important investments all the way to not having the money to pay your bills--which eventually leads to bankruptcy. Since the government has the printing presses, it can print all the money it needs, but in doing so the value of each successive dollar is lessened--since there is nothing tangible to back those newly printed dollars. That's called inflation, in which everything costs more, but is not really worth more.
CRAZIER
If you read any of my past editions of THE ENTERPRISE, you know about the insane levels of Federal spending. It was bad during Bush's administration, but Obama has proven he can outdo Bush at anything--including running up deficits of epic proportions--and telling Americans with a straight face that it is the right thing to to. Using the CBO's estimates for likely economic growth, these gargantuan deficits will go on ad infinitum into the future. The Democrats (and too many of the Republicans) in Congress have seldom seen a spending bill they didn't like--IF at least part of it that benefited them and their constituents.
Lesson: Prioritization is the toughest job for any executive. There are always more needs for money and more demands on time than can be accommodated. Choosing which ones to ignore or turn down is critical. If the government tries to fund everything--from the big important needs to the smaller special interest needs--invariably there will be massive spending and waste. That's why budgets exist, and in theory at least, they are intended to be balanced. The expenditures should not exceed the income. Too bad no one in government believes in that old-fashioned theory any more.
CRAZIEST--PART 1
You probably think I am going to call the "jobs saved or created" lies the "craziest" but I'm not. That is downright sneaky. Create an unmeasurable measurement, and then tell the lie over and over until it is repeated so many times in so many places and so many ways, that it becomes accepted as the truth. Shades of Al Gore's Global Warming consensus, which NO ONE in the "mainstream" (meaning liberal, stupid or illicit) media will bother to tell you is being questioned almost daily by more and more scientists. Gore won his Oscar and his Nobel prize and his histrionics will drive America to spend billions more, making it less and less competitive to cure something that no one can prove we caused.
Lesson: If you repeat a lie or reinforce something of dubious accuracy often enough and widely enough, it becomes accepted as common knowledge or consensus knowledge--even if its NOT true. In business gossip, rumors and "the grapevine" do this all the time. Only when wise leaders correct the misinformation that circulates around an organization, can the organization be rooted in facts and truth. The same applies for Governments.
CRAZIEST--PART 2
You might think I am going to attack the new "pay as you go" misdirection tactic next. I'm not. It is another crafty, cleverly concealed way to lie to the American people under the guise of being fiscally responsible. The loopholes in the "pay as you go" program are so large that an aircraft carrier could pass through them, with room left over for the rest of the Navy. The rule, for example doesn't apply to "discretionary spending," which is projected to be about $1.4 trillion this year. Neither would it apply to costs of extending the Bush tax cuts (which the Dems don't want to do), or the cost of keeping the AMT from expanding (which they do want to do) AND it doesn't apply to legislation that is passed each and every year. Those latter three just created another $2.5 trillion loophole.
Lesson: One of the basic laws of physics is that "matter can neither be created nor destroyed"--it can only change its form: Solid, liquid or gaseous. The same goes for spending and taxes. "There really are no free lunches." Everything needs to be paid for, one way or another, eventually. Run a deficit in expenses over income long enough and you will run out of money--unless you can print your own.
CRAZIEST--A LIFETIME ACHIEVEMENT AWARD--GOES TO GENERAL MOTORS, PAST, PRESENT (AND PROBABLY FUTURE)
General Motors has been run by myopic and insular management for decades. It has been plagued (and I use that word advisedly) by a Union that claims to represent GM workers, but in fact has betrayed them. In concert with the inept management, it has essentially killed what was once the world's greatest car company. The union was totally unconcerned about the longer term ramifications of the great "victories" it gained in negotiations that resulted in GM's workers making more money than "the market would bear," and burdening the company with benefits that were unrealistic, excessive and horribly costly. GM has wasted $150+ billion over the past 3 decades; an amount that would have let them buy both Toyota and Honda and have money leftover. The current debacle will cost another $100 billion, and government intervention only assures that GM will not be focused properly--on building great cars, that people are willing to pay for. It will be on political agendas, micro-management and "fire-sales" of brands, plants, inventory, etc.
This is the height of craziness. Just how crazy is pointed out by Alan Mulally and the FORD management, who are changing priorities, pruning deadwood, making good cars, etc. In doing so, it appears FORD has a good chance of survival unless the government's biased position toward GM & Chrysler injures FORD. That would be truly criminal.
GM MANAGEMENT, ITS BOARD & THE UAW ARE ALL GUILTY
Worst of all, the management was complicit in these "crimes" It neither was willing nor able to stand up and say NO to the Union's non-competitive demands. (In fact the Detroit Three--once known as the Big Three--were all complicit in these failures of will, of courage and of sound business foresight.) The short sighted union used strikes as a "gun to the head" of the company, then claimed "hard earned negotiations" led to their non-competitive contracts. Meanwhile, the world got more and more competitive while GM and its Detroit brethren (and many suppliers) became less and less so.
Did this need to happen this way? NO! However, GM was so wrapped up in its own, old, outdated, and misguided culture that it could not accept new ways. The GM board was so filled with highly paid, "stuffed shirts" that it didn't recognize a disaster even when it was all around them. These were (at one time anyway) smart successful people. What happened when they stepped into that board room. Did their brains quit functioning? Or was it their fear of consequences that paralyzed them? Even the auto design brilliance of Bob Lutz could not overcome the poor prioritization of where to spend and on what models, badges, etc. I have written many times, for years, that GM had 3-4 too many "brands" and it should dump them. Ditto the massive dealer network built to repair defective cars "in the old days, " and the outmoded method of producing cars that no one wants, to let them sit on dealer lots, and then be sold at discounts--or alternatively to be sold at cost to rental car fleets.
Lesson: It takes more than one party to really mess something up. The more bureaucracies involved, the worse it gets: count them--Corporate management; Board of Directors, Union leadership; Government. That's four--plenty to oversee and real mess. And when everyone is responsible, no one is really responsible--and the finger pointing begins. Except for one small detail--competitors can choose not to participate. Enter Honda, Toyota, Nissan, BMW, Mercedes, Hyundai/Kia, VW, etc. When competitors don't play by the same twisted rules, the game changes--a lot--and the finger pointers LOSE.
IT DOESN'T HAVE TO BE THAT WAY
I once ran a 2000 employee United Steelworkers Plant, in which (after a decade of disharmony before I arrived there) the Union leadership and the employees became partners with the management. Our goal was simple: success in the marketplace by being competitive, and thus assuring the company's profitability, survival and their job security. I was blessed with a great management team aND a hard working, sincere Union work force (and that included the Union leadership). We went to great lengths to explain competitive circumstances and educate everyone about their role in their own future--and that of the Union. We involved the Union officers (appropriately) in management matters and important decision/deliberations. Unions can be inconvenient. If they have poor or greedy leadership, they can be damaging or downright fatal. But if they have intelligent and open minded leadership, they can become an effective ally, and truly work on behalf of their members future success--which is what they are all supposed to do.
THAT'S ALL THE CRAZY AWARDS FOR THIS TIME--BUT A PREVIEW:
A CANDIDATE FOR A FUTURE CRAZY AWARD--THE U. S. HEALTH CARE SYSTEM
One topic about which we are all hearing a lot is that we must provide HEALTH CARE INSURANCE for the 46 million uninsured. Consider some truths: 1) about 1/5 of that 46 million are illegals--people who are in the country illegally. Does it make sense to "give them" government health care insurance? 2) Another large portion of the 46 million--estimates vary--but probably another 1/4 can afford health care insurance--but choose not to buy it. Any new government plan that wishes for them to be "insured" will have to force them to do so.
That's about HALF of the problem population that are "exceptions." There are still many people who want & need health insurance but cannot afford it. Those present the real problem, but SCHIP has already covered many of their children. According to Census Bureau research, only about 19 million people go without health insurance in the USA for an entire year. The real number of "problem uninsured" is more like 15 to 20 million--still a lot--but a long way from 46 million. Let's use the facts to treat the real problem, not the campaign sound-bites that sensationalize it.
Lesson: Does the country need an overhaul of the health care system, and how it is offered and used? Absolutely. But is the solution a single broad one-size-fits-all (wasteful) government plan, using taxpayer dollars to provide insurance for everyone (including illegals) and to mandate that people be forced to buy health insurance (even if they don't want it). Remember the earlier lesson on prioritization? It's critical in problem solving too: 1) Understand and define the problem first; then 2) solve the problem--taking the big pieces in order.
First, fix the Health Care System's glaring flaws: Transparency of costs; pricing inconsistencies; (sensible) malpractice lawsuit limits; widespread use of digital data techniques to reduce errors & administrative costs; cost effective clinics for simple treatments; and stop the "arms race" to see how many redundant hyper-expensive pieces of test equipment can exist in a given city or area--and on, and on. It is likely that the costs for health care can be dramatically reduced before any "government plan" is imposed.
Lesson: This is a "business-process problem" first and foremost. Tools and techniques to fix it are known--if only someone would choose to use them. Simplification. Lean concepts, Cost management, and many more are directly applicable. Sure there will always be "outliers." Medical treatments can go wrong; people develop complications, etc. But the basic plan should be to do routine things routinely--in the best and most cost effective way.
I HOPE THE CRAZY AWARDS AND Lessons prove interesting and useful. There will be lots more of them. I get emails every day with new ones. Stay tuned for future CRAZY AWARDS--but one of these days, it would be nice to focus on positive awards--success stories that "paid off."
Anyone who finds some, please send them along. Perhaps we can all learn from them. And come up with a catchy name for them too!
Best, JOHN
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