Every story is influenced by personal issues. These stories add another dimension to the characters. Besides, the stories are a good break from the serious issues associated with the revolution.

#60 Being Fair. Part of POTUS’ Project on Manufacturing

18 Wednesday Jun 2014

Posted by Jordan Abel in Causes of the Revolution, Innovative Thinking: Ideas and Products, Personal Stories, Possible Solutions, Societal Issues

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(Readers: Please note the blog about the 5th revolution in the US is constructed as a story. While not all chapters are linked, after a few recent entries, you might want to start at the beginning. More about the blog and about the author. )

Scene: Jordan and Matt, Jordan’s Office

Jordan: “Matt, thanks for taking time to talk again.”
Matt: “Jordan, the least I could do. You spent a lot of time preparing for the POTUS project. My guess is these comments will be a good add.”
Jordan: “Hope so. Some of the ideas stem from actions by GM. Others are based on recent experience.”
Matt: “OK, let’s get started. What’s the theme? What idea…or ideas do we want to add?”
Jordan: “The idea might seem obvious or naïve or both. And it might be. I want to talk about fairness.”
Matt: “Mmmm, that is interesting. And talking about ‘fairness’ does seem appropriate. We never talked specifically about it. Implied, yes but not fairness as a specific topic.”
Jordan: “Reason I bring it up is some recent experience and a conversation with a long-time friend. I was going to say old friend but she would not like that.”
Matt: “What happened?”
Jordan: “Incidents with the cell-phone company and airlines and TSA. The conversation with my friend led to a discussion of an earlier incident with GM – not product but culture.”
Matt: “I need some details to help understand the issue.”
Jordan: “I figured you might. Rather than take your time now, I wrote several papers describing what happened.”
Matt: “Good. I’ll read those later. What was your conclusion?”
Jordan: “Simple. Fairness is a critical component for long-term success of an organization.”
Matt: “Keep going.”
Jordan: “Do you deal with people or companies that have a ‘heads I win, tails you lose’ approach?
Matt: “Not if I can help it.”
Jordan: “Everyone feels the same way. Why get the shaft in every situation?”
Matt: “So how does fairness affect POTUS’ policy on rebuilding US manufacturing?”
Jordan: “Fairness needs to be a key component. We talked a lot about how GM became a money machine and then started to focus on earnings and slid into bankruptcy. And then the turmoil over ignoring obvious safety issues.”
Matt: “You’re saying…if I hear you correctly…the overarching issue for GM’s downfall was fairness, or really lack of fairness.”
Jordan: “Fairness for customers. Fairness for employees. Fairness for suppliers. And fairness for people who sell the product.”
Matt: “What about fairness for the community?”
Jordan: “Great point. You’ll see in one of the write-ups that I think GM’s chairman in the 1980’s, Roger Smith, took revenge on Flint, Michigan.”
Matt: “Really? I’ll read the paper. Now, how do we translate fairness into some policy recommendations?”
Jordan: “Take your question about fairness to the community. Tell me why as a country do we encourage states to recruit businesses from other states?”
Matt: “Economic development, I suppose.”
Jordan: “Economic development for whom? The policy forces a winner and a loser. The state where the business moved considers itself the winner. The state where the business moved from is the loser. In fact, there is probably a net loss when add the incentives are added up. The US as a country gains nothing by the move. ”
Matt: “What about competitiveness of the company moving? Lower wages will make the company more competitive.”
Jordan: “That’s often the argument but it’s not necessarily true. In fact, I’d claim it is not true far more often than true. Why not increase worker productivity enough to offset any wage differential?”
Matt: “You think companies can really increase productivity to offset wage increases?”
Jordan: “Did we talk about the company I ran in California?”
Matt: “Not sure. What’s relevant?”
Jordan: “Short story is with some changes to the manufacturing process we reduced labor cost dramatically.”
Matt: “How much?
Jordan: “We could have doubled the wages of workers in California and paid workers in China zero and still come out ahead.”
Matt: “What? You could pay workers in California twice what they were making. Then pay workers in China nothing and still have lower costs?”
Jordan: “You got it. And the reason is twofold. First reason is increased productivity. By the way, we did not lay off any workers. We actually added workers.”
Matt: “You added workers and increased output? That’s un-American.”
Jordan: “I know. Counter intuitive, huh? The second reason is all the other costs associated with producing in a remote location.”
Matt: “You had a term for that. I remember now…a holistic approach to cost.”
Jordan: “Taking all costs into account.”
Matt: “Is that example a one-of-a-kind or are there more examples?”
Jordan: “An example few people know about is the coal industry.”
Matt: “Not a very popular topic, especially among environmentalists.”
Jordan: “Not a very popular topic among former coal miners either.”
Matt: “What do you mean, former coal miners? Still lots of coal being produced in the US.”
Jordan: “Actually, production is higher than during the 1970’s.”
Matt: “What about employment. You said former miners.”
Jordan: “Productivity is way up. We need to confirm these numbers but I think employment is down from about 250,000 miners to only about 50,000 today.”
Matt: “That’s all that work in coal mining? That’s a blip on the employment radar screen. That’s it?”
Jordan: “All because of productivity.”
Matt: “Makes you wonder why some politicians claim environmental laws will destroy coal mining jobs.”
Jordan: “The coal industry destroyed the jobs through productivity.”
Matt: “That’s a good and bad example for POTUS. Good because technology can increase output. Bad because of reduced employment.”
Jordan: “We need a balanced policy in manufacturing policy. Companies should adopt technology but not just dump workers on society. They have an obligation to their employees.”
Matt: “How can that policy work? Sounds like socialism. Won’t such a policy just encourage companies to produce outside the US?”
Jordan: “Not if the policy is structured properly. We’re talking about being fair. If some people view being fair as socialistic, then so be it. But being fair does not mean being equal.”
Matt: “You’re really hammering on being fair. Few people ever talk about companies being fair.”
Jordan: “Lack of fairness is why we had a revolution. In fact, lack of fairness has been the cause of each revolution in this country…”
Matt: “…and, if you think about it, elsewhere as well.”
Jordan: “So why not make being fair part of the manufacturing policy recommendations for POTUS? Maybe fair should be part of every policy in Washington.”
Matt: “Jordan, you might be on to something. Get people to move away from hard-core ideology…”
Jordan: “…which most ideologues do not really understand…”
Matt: “…and focus on fairness. Sounds so simple.”
Jordan: “It is simple. Start addressing problems with the premise, ‘What’s fair?’ Then work out the details.”
Matt: “Listen, I gotta run. And I need to start drafting a formal paper for POTUS. But I want to make sure we include your thoughts about fairness.”
Jordan: “I’ve written a couple of papers on fairness. I should write a couple more.”
Matt: “If you want. But I’m a reporter. I’m used to working from interviews with people. If it’s OK with people you talk to, just record the interview and send me the audio or the transcript.”
Jordan: “Alright. We each have our assignments.”
Matt: “Let’s keep in touch and meet periodically.”
Jordan: “Deal. And just to be fair, I’ll buy coffee next time.
Matt: “No, just to be fair, I’ll buy.”
Jordan: “Get out of here.”

(Want a PDF version for Entries #1-10, #11-20, #21-30 formatted as an e-book? Entries #31-40 available soon. Click links for download. America’s 5th Revolution Volume I (Entries 1-10), America’s 5th Revolution Volume II (Entries 11-20), America’s 5th Revolution Volume III (Entries 21-30)

#59 Customers Unite. Out with the Bean Counters.

14 Saturday Jun 2014

Posted by Jordan Abel in Back Asswards Thinking, Personal Stories, Societal Issues, Stupid Is as Stupid Does

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Scene: Jordan and JC continuing earlier conversation.

JC: “OK, tell me the airline story. Given all the miles you’ve travelled, this must be a good one.”
Jordan: “It’s more about an organization’s culture and being fair.”
JC: “What happened?”
Jordan: “Friday afternoon, I’m in Houston, headed back to Charlotte on USAir. Everyone boards. Then the captain announces the maintenance crew is working on the plane and it will be another 30 minutes or so. Emphasis on ‘or so.’”
JC: “Not a good start.”
Jordan: “2 to 2½ hours pass and everyone is ordered off the plane.”
JC: “No doubt you were toward the back of the plane.”
Jordan: “Yep. Huge line at the gate and only one ticket agent. So, being the genius that I am I decide to go to the ticket counter in the terminal to get help.”
JC: “So now you are back where you were three hours ago — in the terminal needing to get past security again.”
Jordan: “While in line, I call USAir 800 number and the agent arranges a flight on United. Flight leaves in about 45 minutes from the same terminal.”
JC: “And you have a new reservation number.”
Jordan: “All I have to do is go to the United kiosk, punch in the number, get a ticket and off I go. I’m a happy camper.”
JC: “So what became the problem Mister Happy Camper?”
Jordan: “The kiosk accepts the reservation number and then spits out a message, ‘See ticket agent.’”
JC: “Big line to see the agent?”
Jordan: “No. the agent is in a different terminal.”
JC: “So United has ticket kiosks and gates in this terminal…and I assume counter space…but no agents.”
Jordan: “You got it.”
JC: “So did you head out to the next terminal?”
Jordan: “No. I once again applied logic…mistakenly. I go to security and show them my boarding pass for the USAir flight and the reservation number for the United flight.”
JC: “Given this story, they must not have let you through. Why not?’
Jordan: “Because, according to TSA, the USAir flight had departed…
JC: “…even though the plane was at the gate right outside the security checkpoint.”
Jordan: “They refused to accept any type of reasoning. Nor would they even look to see if the plane was at the gate and 100 people waiting in line for help. Only comment from TSA agent, ‘You need a new ticket. Go to the other terminal.’”
JC: “Not sure if TSA has back asswards thinking or just stupid is as stupid does. You hardly fit the profile of a terrorist. Next?”
Jordan: “Off to Terminal B.”
JC: “How far is it?”
Jordan: “Half mile at least.”
JC: “Was there a shuttle close by?”
Jordan: “Train downstairs. Of course, I got to the bottom of the escalator as the train pulled out. So I walked briskly to Terminal B, found the United desk and presented my information.”
JC: “Let me guess. ‘Sorry sir, you are too late.”
Jordan: “Yes and followed by an unfriendly ‘We can’t help you. You need to go back to USAir.’”
JC: “So back down the escalator and if Murphy’s Law holds true the train was there this time.”
Jordan: “Murphy was right. ‘Whatever can go wrong, will go wrong at the worst possible time.’ Since I am now to the point where I will leave Saturday at the earliest, I don’t need to rush and then train is there.”
JC: “So back to USAir and what happens.”
Jordan: “After about 30 minutes in line I get to an agent and tell my story. She starts to write-up some information and I ask if she wants an ID?”
JC: “And…another issue?”
Jordan: “No. The only humor in the whole fiasco. She says to me, ‘No ID. No one would make up a story like that.’ She then proceeds to book a hotel.”
JC: “Decent digs?”
Jordan: “Yes, a 3-star, maybe 3½. And met a couple of other people on the shuttle who were on the flight.”
JC: “Got out OK the next day?”
Jordan: “Yes. And the night before had dinner with one of the other people on the flight. Turns out he had the same problem with United. Had a flight but the time required to get to a ticket in the other terminal caused him to miss it. He was worse off since luggage was on the canceled flight.”
JC: “USAir never unloaded the luggage?”
Jordan: “Apparently not.”
JC: “What I take away from this story is yet another example of bean counters looking at cost and not the customer.”
Jordan: “How so?”
JC: “USAir knew there was a serious problem with the plane at least an hour before departure. They spent that hour and another two hours trying the same fix over and over and expecting a different outcome. And Houston is not a hub so they mechanics are not as sophisticated as say in Charlotte, which is a hub.””
Jordan: “What the pilot said was the problem occurred on landing and he told the maintenance crew what the problem was. Most people in maintenance have a sense of how hard a problem is to fix…and if they are qualified to fix it. A lot of times the fix requires special equipment.”
JC: “So if the pilot identified the problem at landing, the maintenance crew should have been able to determine whether they could fix it or needed more expertise.”
Jordan: “USAir had more than enough time to call Charlotte or Phoenix or even contract another mechanic in Houston – some airline must have a hub there – and at the worst fly in a mechanic or fly in another airplane.”
JC: “USAir is bad but who really qualifies as ‘stupid is as stupid does’ is United Airlines. Having gates in one terminal and no one to help. No doubt some bean counter figured United could save a few thousand dollars per year by not having a ticket agent.”
Jordan: “The same bean counter assigns no value to customer’s time going back and forth between terminals, no cost to possible missed flights and certainly no value to customer satisfaction.”
JC: “You going to fly United any time soon?”
Jordan: “Not if I can help it. As frustrated as I was dealing with USAir, dealing with United was even more frustrating.”
JC: “The TSA agent is right up there with United in terms of not being fair. Through no fault of your own, the flight was cancelled. Through no fault of your own, United does not have a ticket agent in the terminal with the gate. In addition, you already passed security for your flight at that same TSA checkpoint. Yet they refuse to let you through security that you went through earlier.”
Jordan: “If asked, TSA would probably claim they could not let me through for reasons of national security.”
JC: “They let you through once but would not let you through again. I think that is stupid and unfair.”
Jordan: “But TSA suffers no consequence for not being fair.”
JC: “But you do and so do a lot of other people.”
Jordan: “Not to bring up General Motors again…”
JC: “…but you will.”
Jordan: “The report of why GM did not fix the ignition switch for more than 10 years indicated employees were encouraged not to bring up problems.”
JC: “Don’t rock the boat. The pressure to conform must have been intense. Knowing there was a clear safety problem and yet virtually no one openly talked about it and no one led an effort to fix it. In fact, the report said some employees hid info about the problem, even lawyers.”
Jordan: “GM was not fair to customers and not fair to employees. USAir and United…and remember ATT…were not fair to customers.”
JC: “Let’s not forget our friends as TSA.”
Jordan: “Right. Each organization fostered a culture that encouraged employees to ignore the customer, no matter how illogical or unfair the behavior.”
JC: “You have got to work with Matt and make sure a section on consequences of these type behaviors gets into the report for POTUS on rebuilding US manufacturing. I know ATT, United, USAir and TSA are services organizations, not manufacturing. But I think attitudes and cultures that evolve in manufacturing companies eventually migrate to service companies as well.”
Jordan: “JC, I will meet Matt again. Your observations about culture in manufacturing migrating to service organizations is a good one.”
JC: “OK. So what Engine Charlie Wilson said years ago still holds true today. What’s good for General Motors is good for the country and vice versa. Say goodbye Jordan.”
Jordan: “Goodbye JC. And thanks.”

#58 More about Being Fair. Do Companies Really Understand?

11 Wednesday Jun 2014

Posted by Jordan Abel in Back Asswards Thinking, Personal Stories, Stupid Is as Stupid Does

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(Readers: Please note the blog about the 5th revolution in the US is constructed as a story. While not all chapters are linked, after a few recent entries, you might want to start at the beginning. More about the blog and about the author. )

Scene: Jordan and JC continuing earlier conversation.

JC: “Jordan, I need to leave pretty soon. But, if you ask me, which you haven’t, I think the POTUS project needs to be expanded beyond General Motors.”
Jordan: “I agree. GM is what POTUS asked me to focus on.”
JC: “And you have. But your experience extends well beyond GM. You need to at least include some other ideas, especially about the importance of being fair. Besides not being fair has been a big problem for many companies, not just GM.”
Jordan: “Funny you mention other companies. Two incidents that happened to me recently point that out in spades. I’m not sure either company remembers why they are in business.”
JC: “Let me guess. One is a cell phone provider and the other a cable company.”
Jordan: “You got one right – the cell-phone provider. The other is an airline.”
JC: “Alright, what happened? Start with the airline. No, changed my mind…
Jordan: “…a prerogative of women.”
JC: “Jordan, now, now. Be careful. Like I said, I changed my mind. Start with the cell-phone provider.”
Jordan: “I get a new smart phone.”
JC: “iPhone?”
Jordan: “No LG. I have the phone a little over two weeks…16 days actually…and then have a problem. Take it back to the ATT store where I bought it. But, like the good service-minded company that ATT is, they refuse to switch it out.”
JC: “Why?”
Jordan: “Because I’ve had the phone for more than two weeks.”
JC: “What do they do, if anything?”
Jordan: “Sent me to an ATT service center, about 20 minutes away.”
JC: “Service center fix it?”
Jordan: “No. The tech…let me rephrase that…the alleged technician said nothing was wrong. Before reaching that conclusion, the tech erased all the information on the phone.”
JC: “What happened next?”
Jordan: “I get the phone back and sent on my way with the claim that nothing is wrong. After 30 minutes or so, I figured out a solution that sorta, kinda solved the problem. At least enough that I could continue to use the phone. My fix worked for about six months then no more.”
JC: “Did ATT finally fix it?”
Jordan: “Tried to fix it then said the phone was defective. They agreed to replace it, except…”
JC: “…except what?”
Jordan: “There was no replacement phone in stock at the Service Center. Seems odd but I don’t work at ATT. Anyway, the plan is to ship a phone from somewhere.”
JC: “When?”
Jordan: “Next business day for sure and maybe next calendar day. But now it’s mid-afternoon Friday and ATT is unwilling to guarantee delivery to the house on Saturday. I tell them I will be in Houston Monday and ship to that office. But do not ship to the office Saturday because no one is there on weekends.”
JC: “Let me guess. ATT ships to Houston for delivery Saturday.”
Jordan: “Exactly. And then it gets delivered again Monday.”
JC: “So now you have a new phone. What’s the problem?”
Jordan: “ATT only sent the back half of the phone, not the front half. So I had to take the old phone apart and put the new phone together.”
JC: “For an MIT guy that must have been a no brainer.”
Jordan: “It was easy but the phone still does not work. I have to find an ATT store to activate the phone.”
JC: “OK, what about the old back half.”
Jordan: “The store that activates the phone will not take the broken half. I am supposed to send it back.”
JC: “So now what?”
Jordan: “I get busy all week and take off for Charlotte with the back of the old phone but not the box.”
JC: “Just get another box.”
Jordan: “I would have except the shipping label is in the box in Houston. I called ATT, told them the situation and they said to take the broken phone to the service center in Charlotte where all this started. The Service Center would then mail the phone back to wherever broken phones go.”
JC: “Seems simple enough. End of story?”
Jordan: “No. Get to the Service Center and they refuse to take the phone…but did give me a new box…”
JC: “…but no shipping label.”
Jordan: “In the meantime I am getting texts and robo calls from ATT asking me where the phone is.”
JC: “What’s next? By the way, you making up this story? Seems too bizarre.”
Jordan: “I’m not creative enough to make up a story like this. So back to Houston, find the box, put the old phone in it, use their label and mail it.”
JC: “Let me guess, again. ATT claims you still have the phone.”
Jordan: “You got it. I call ATT to explain I mailed the box and the guy at ATT asks me for the tracking number off the return label.”
JC: “Didn’t ATT send you the label?”
Jordan: “Yes. ATT does not have a record of its own tracking number. And then the guy at ATT has the audacity to tell me if I can’t find the tracking number and the phone is lost, I get to pay $300-$400.”
JC: “Gee, that seems fair to me. ATT sells you a defective phone. Finally replaces the phone. Then insists it’s your responsibility to tell ATT its own tracking number. If the phone…broken phone…is lost somewhere along the line, even though not your fault, they will charge you $400.”
Jordan: “Good way to build customer relations, right?”
JC: “By the way, did it ever get resolved?”
Jordan: “I don’t know if the broken phone ever got back to ATT. But 7-8 days after the ATT guy told me it was my job to find the tracking number, I get a text saying to the effect ‘All is well and we love you as a customer.’”
JC: “Whew! ATT has a new definition of ‘fair.’ You are responsible to overcome our incompetence. If you can’t, then you pay us even more money.”
Jordan: “Have you got time for another story about fairness – this time the airlines?”
JC: “Yes, but I need to get rid of this coffee first.”
Jordan: “Me, too.”

#57 Being Fair Is Good for GM and Good for the Country

07 Saturday Jun 2014

Posted by Jordan Abel in Back Asswards Thinking, Causes of the Revolution, General Motors, Personal Stories, Societal Issues, Stupid Is as Stupid Does

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(Readers: Please note the blog about the 5th revolution in the US is constructed as a story. While not all chapters are linked, the story might be more meaningful by starting at the beginning.)

Scene: Coffee shop with Jordan and JC. Catching up on recent events. They’ve finished their first cup.

JC: “Thanks for buying my coffee refill. You’re so generous.”
Jordan: “You’re welcome. Next time, you buy…dinner.”
JC: “So when you look back at what went wrong at GM, is there one overriding issue that comes to mind?”
Jordan: “Yes. And I am not sure I actually said this to Matt. GM’s downfall started when it stopped being fair.”
JC: “Stopped being fair? Jordan, that seems odd and naïve, especially from you. You want companies to be fair? What planet are you living on?”
Jordan: “Think about it? Do you deal with people or companies you don’t think are fair? They must win and you must lose.”
JC: “Occasionally, we all end up with the short end of the stick. But I try to avoid situations where I am always the loser and getting screwed.”
Jordan: “That’s what I mean. Everyone makes mistakes and not every situation is fair. But people try to stay away from situations where ‘heads I win, tails you lose.'”
JC: “Now give me an example. And not just the car stuff.”
Jordan: “OK. Do you know what COLA means?”
JC: “Cost of living allowance.”
Jordan: “Hey, you’re good.”
JC: “Jordan, most everyone knows what COLA means. So tell me the story, already.”
Jordan: “I don’t remember the exact year…sometime in the early 1980’s…and the economy was in a mild recession. Car sales were down and GM was under pressure to maintain profits. More self-induced pressure but that was the claim.”
JC: “And who was captain of the GM ship at the time?”
Jordan: “Roger Smith.”
JC: “Oh, Mister ‘focus-on-cost’ himself. This story should be good.”
Jordan: “So Squeaky decides all salaried people should sacrifice some compensation in order to help earnings.”
JC: “Everyone was to sacrifice? Across the board?”
Jordan: “All salaried employees. And Smith decides the most equitable way is to stop paying COLA. That way no one has to take a salary cut.”
JC: “How is…or was COLA calculated at GM. I know for Social Security, COLA is a percentage of benefits. Everyone gets an increase, say 2-3%. The higher the benefit payment, the higher the amount of the COLA increase. A benefit of $1,000 per month would receive $30 more per month. A base benefit of $2,000 per month would get $60 more per month.”
Jordan: “COLA was different at GM. COLA was not tied to salary amount. COLA was a specific dollar amount. And COLA was paid each quarter, not every month. The amount was linked to the UAW contract.”
JC: “You in the UAW? I mean really. ‘Look for the union label…’ That’s really funny.”
Jordan: “C’mon. By linking COLA for salaried employees to the UAW, GM thought it would deter people from joining the union.”
JC: “So Squeaky…I mean Mr. Smith…decides fair means every salaried person should give up COLA. But COLA for salaried is the same dollar amount, whether the person is chairman of the board or a mail clerk. That seems like a new definition of fair.”
Jordan: “That was Smith’s definition of fair. For Smith, COLA was barely pocket change. For lower-paid staff, eliminating COLA meant a noticeable pay cut.”
JC: “What really troubles me about the story is Smith not understanding what’s fair. If everyone had to give up say 5.0% of salary, then people would not like it…but they might understand…and think its fair. But pocket change to one person and 5.0% to another is not fair. For the lower-paid employees, that might have been grocery money.”
Jordan: “I hear you. Before announcing the plan, I wonder if Smith discussed it with anyone or if he did, if anyone tried to talk him into making it more fair?”
JC: “This story is maddening…and probably all too typical. How do we make sure CEO’s and Boards of Directors of companies become more fair? I’m convinced if POTUS wants to rebuild US manufacturing, there needs to be strong emphasis on companies being as fair as possible.”
Jordan: “Telling stories like the one about taking away COLA is a good start. Everyone…well, most everyone…will understand that was not fair.”
JC: “Here’s another fairness issue. Fast forward to GM post bankruptcy, which is a whole lot more recent. GM starts recalling millions of cars. What was it for… something to do with starting the car?”
Jordan: “The ignition switch.”
JC: “That’s it. What really happened?”
Jordan: “Short answer is GM was still run by bean counters. GM saved about $1 per car by not fixing a design flaw in the switch. Then GM spent hundreds of millions, maybe a billion dollars or more, to recall the cars and fix the problem.”
JC: “What about all those people who died?”
Jordan: “When the switch failed, the power to the rest of the car, including the airbags was cut off.”
JC: “How many people died?”
Jordan: “We’ll never know exactly. Initial reports indicated 13 or so…but likely more.”
JC: “That’s awful. Why didn’t they fix the problem?”
Jordan: “I’m not trying to defend any actions by GM. But most people have no idea how complicated an automobile is…and how driver’s abuse it.”
JC: “Stuff happens. I understand that. But what’s not fair is the way GM knew about the problem for 10 years and never fixed it.”
Jordan: “I agree. But the report said the problem was confined to a group, not all of GM.”
JC: “Not fixing a problem is a reflection of corporate culture. And culture starts with the CEO. Worse yet, from what I read, the lawyers were some of the main culprits. Jordan, when you were at GM, was there a culture of burying problems…I don’t mean for 10 years…or even five years. And did a bunch of bean counters and even worse a bunch of lawyers effectively run the company?”
Jordan: “The problem would have been fixed…and quickly.”
JC: “That’s my point. GM ran amok. Why? And, you know why.”
Jordan: “GM management go so focused on trying to generate earnings by controlling cost, it lost sight of why it was in business.”
JC: “And, oh great GM historian, when did that culture begin to change?”
Jordan: “You know when. With the reign of Roger Smith.”
JC: “You know something, Jordan, as much as I agree with your assessment of GM changing starting under Roger Smith, GM was not alone. The United States when thru a similar transition starting at the same time.”
Jordan: “You mean under Ronald Reagan?”
JC: “Yes. Just take a look at some basic economic statistics, especially median household income. We talked about this before. Upper incomes started to gain and lower incomes remained flat. The disparity got worse, and worse and worse. Then the disparity became so great…and so unfair…that people revolted. The unfairness resulted in US having its 5th revolution.”
Jordan: “Point well taken. And lesson for the project for POTUS.”
JC: “And the lesson is ‘Why being fair is good for General Motors and good for the country.’ I know, a variation on what Engine Charlie Wilson said but still true.”

#56 Catching Up with JC. Can’t Shake GM.

04 Wednesday Jun 2014

Posted by Jordan Abel in Causes of the Revolution, General Motors, Personal Stories, Societal Issues

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(Readers: Please note the blog about the 5th revolution in the US is constructed as a story. While not all chapters are linked, the story might be more meaningful by starting at the beginning.)

Scene: Coffee shop with Jordan and JC. Catching up on recent events.
JC: “Jordan, old boy, where have you been? Besides, you look awful.”
Jordan: “Thanks for the compliment JC. Nice to see you, too.”
JC: “Seriously, where have you been? You OK?”
Jordan: “I’m fine, I think. And I appreciate your concern.”
JC: “So, where have you been?”
Jordan: “Holed up in my office on an assignment for POTUS.”
JC: “Some project where you’ll be put on double-secret probation if you tell me?”
Jordan: “Nothing secret…at least no one told me not to discuss it.”
JC: “So what is it?”
Jordan: “POTUS is developing a plan to rebuild US manufacturing. He asked me to use my knowledge of and experience at GM for any lessons that might be helpful.”
JC: “You’ve been away from there for a while. Besides GM seems to be in a lot of trouble.”
Jordan: “That’s one of the lessons. How did GM go from the world’s leading company to basically a so-so player…at least in the car business?”
JC: “You have to write all the stuff yourself?”
Jordan: “No, fortunately. POTUS’ office assigned a reporter.”
JC: “I came by your office the other day and saw Matt…”
Jordan: “Pardon me for interrupting but his involvement you have to keep quiet. We don’t need a bunch of people claiming liberal bias before the report is written. Forget you saw him. But, he has been a great help.”
JC: “But why the haggard look?”
Jordan: “Talking about GM…or at least what I know about GM…during the early years was great fun. And frankly, truly inspiring. They did a great job.”
JC: “A lot of those years Sloan was in charge, right?”
Jordan: “How did you know that?”
JC: “Remember, I’m an American history major. Plus I read a lot. Plus I’ve known you since you could barely see over a split-rail fence.”
Jordan: “A very long time.”
JC: “When you said you were going to the Sloan School at MIT…I knew about MIT but not Sloan…I did some research on who Sloan was.”
Jordan: “So you read up on Alfred P. Sloan.”
JC: “And his middle name was Pritchard. So there.”
Jordan: “You are good. Anyway, telling the story about GM quit being fun when we started to discuss the 1980’s under Roger Smith.”
JC: “You were at Buick, then, right? From all you’ve said that was a great assignment.”
Jordan: “Buick was loads of fun. And I’d like to think I helped.”
JC: “So what’s the conflict, already?”
Jordan: “Until Matt starting probing, I’d never put the Smith regime in proper context. I’d thought about a lot of what went on but never put all the pieces together or really assessed the impact.”
JC: “And what was your conclusion?”
Jordan: “Smith…aka Squeaky in certain circles…put GM on the path to bankruptcy.”
JC: “You think intentionally?”
Jordan: “No but he intentionally caused harm to parts of GM.”
JC: “Such as?”
Jordan: “Such as the UAW and such as Flint, MI.”
JC: “Why?”
Jordan: “I don’t know exactly why. But I think Squeaky believed the UAW members made too much money.”
JC: “And therefore were effectively stealing money from GM…or at least taking it unfairly.”
Jordan: “More like taking part of Squeaky’s bonus.”
JC: “But why Flint?”
Jordan: “Because GM was forced to recognize the UAW after a sit-down strike at Fisher Body #1 in Flint.”
JC: “When was that strike? Late 1930’s?”
Jordan: “1936-37. And I don’t think Smith ever forgave the workers in Flint for the strike…or the people who supported the workers.”
JC: “I don’t want to dredge up old stories but I can tell by your voice talking about the decline of GM has been painful.”
Jordan: “The pain only gets worse the more we talk about GM post 1980. Let’s get a refill.”

#55 Wrap-Up of the GM Story…for Now

31 Saturday May 2014

Posted by Jordan Abel in Back Asswards Thinking, General Motors, Personal Stories, Stupid Is as Stupid Does

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(Readers: Please note the blog about the 5th revolution in the US is constructed as a story. While not all chapters are linked, the story might be more meaningful by starting at the beginning.)

Scene: Jordan’s office with Matt, reporter for major publication. Matt has been asked by POTUS’ office to help write the story of GM. POTUS wants to use the information as part of a plan to help rebuild US manufacturing. Entries about GM begin #41.

Jordan: “Matt, we’ve covered a lot of ground about GM. Any thoughts on what else about GM we should cover for POTUS’ project? There’s 10+ years left before GM files bankruptcy.”
Matt: “From what I’ve heard from you, the GM ship really started to take on water during Roger Smith’s tenure. The EV1 (electric vehicle) could have helped plug the leak but EV1 was thrown overboard.”
Jordan: “And the situation continued to get worse.”
Matt: “From what I know, seems like GM continued to wander around under Jack Smith and who followed him…Rick Wagoner?”
Jordan: “You are spot on. Believe it or not, instead of GM trying to fix the car divisions, GM bought other car companies, probably in worse shape than GM.”
Matt: “What did they buy?”
Jordan: “SAAB and Hummer. And then made an alliance with Fiat. And that was Fiat pre-Sergio Marchionne. At the time Fiat was anything but a top-line European car manufacturer.”
Matt: “So more cash out the door. What on earth did anyone see in SAAB?”
Jordan: “SAAB is…or was…an interesting car with a group of buyers who would not normally consider GM products. But the SAAB buyers were quirky and more attracted to the quirkiness of SAAB.”
Matt: “So if GM tries to integrate SAAB into the rest of the company, the quirks go away and SAAB becomes…something other than SAAB. If they do not integrate it, then what’s the benefit of buying SAAB? I’m confused.”
Jordan: “You’re not the only one. Another GM boondoggle was buying Hummer. As you know, Hummer was really a military vehicle…more like an old-style Jeep on steroids.”
Matt: “Who bought Hummers? How many Arnold Schwarzenegger’s are there?”
Jordan: “Matt, quit being so perceptive. There weren’t many Schwarzenegger’s out there. GM eventually came out with a smaller version – still large but not gigantic. But GM also had SUV’s from Chevrolet, GMC and even Buick.”
Matt: “Seems as if GM kept adding new mouths to feed for product updates. And that is expensive. Putting more people at the dinner table with less money in the bank to buy food is not a good formula.”
Jordan: “Now think about GM’s alliance with Fiat. Talk about mouths to feed. Fiat was a very large family…that was very hungry.”
Matt: “How did the Fiat alliance work out?”
Jordan: “It didn’t. I think GM had to pay about $2 billion…yes one billion plus one billion…to get out of it.”
Matt: “What the heck were they thinking?”
Jordan: “I don’t know exactly but I do know this. A lot of financial guys measure transactions at the margin.”
Matt: “Not sure what you mean.”
Jordan: “The question becomes, ‘What is the incremental cost in terms of cash?’ Using that approach there is little, if any recognition to the long-term cost…and impact on such factors as manpower needs, corporate image, time available for decisions, distribution, and a bunch of other stuff.”
Matt: “Interesting that all the deals beginning with Roger Smith and thereafter – EDS, Hughes, Saturn, EV1, SAAB, Hummer, Fiat…and who knows what else – are all dead. And all died relatively quick deaths.”
Jordan: “Some were spun off but you’re right, most died relatively quickly.”
Matt: “How much cash did GM burn in these deals?”
Jordan: “We will never know but fair to say these deals were a major contributor to putting GM into bankruptcy.”
Matt: “Rather than plowing earnings back into the car divisions and making them stronger, GM kept bleeding the car divisions and making them weaker. GM spent money like a drunken sailor.”
Jordan: (laughing) “Matt, now you know all sailors aren’t drunks.”
Matt: “You know what I mean.”
Jordan: “GM’s wild spending spree and Squeaky’s reorganization plan also killed some very good suppliers divisions, which were big money makers for GM.”
Matt: “I forgot how vertically integrated GM. Why did GM get rid of the supplier divisions?”
Jordan: “Vertical integration was part of the formula for the GM money machine. Squeaky then spun off the supplier divisions. From a pure financial perspective, it appears cheaper to buy products from outside suppliers rather than buying from GM divisions…because you can shop around for the best price.”
Matt: “But, if there is anything I’ve learned from this study, the purchase price is only part of the equation. There are many more things to consider.”
Jordan: “Bean counters don’t look at the whole picture, only tangible cost. A lesson for POTUS is executives should be focused on understanding how different part of the business affect the whole. Bean counters…and all executives…should be taught to take a holistic approach to cost and many other issues.”
Matt: “You’re starting to sound like some granola junkie. Holistic approach?”
Jordan: “Look at the companies that are most successful long term. The companies are more balanced…much like GM was for many years.”
Matt: “Other thoughts?”
Jordan: “I know I’m repeating myself, but until we started this assignment for POTUS, I did not appreciate the extent to which Roger Smith, then Jack Smith and finally Rick Wagoner, screwed up the GM money machine.”
Matt: “Think it was intentional?”
Jordan: “That’s like saying there was a conspiracy to kill the electric car.”
Matt: “Then what happened?”
Jordan: “The singular focus on financial – earnings per share — rather than growing the business was the problem. Squeaky’s ‘my way or the highway’ decree that earnings were more important than market share changed the culture and turned out to be the death knell of GM.”
Matt: “What about post bankruptcy?”
Jordan: “The group that replaced GM management didn’t get it either. The CEO was from a telephone company. C’mon.”
Matt: “You know, Jordan, this might be a good place to wrap up lessons learned from GM. How do we apply those lessons to help POTUS formulate a policy to rebuild US manufacturing.”
Jordan: “As simple as this sounds, and for fear of repeating myself yet again…
Matt: “Say it again.”
Jordan: “Companies need to be balanced. Take a holistic approach. And companies need to be fair. Fair to customers, fair to suppliers, fair to employees. And by employees I don’t mean just executives, or even salaried workers. Fair to everyone, including the lowest paid workers. And by being fair, the company will be consistently profitable over the long term.”
Matt: “That seems so simple.”
Jordan: “The company must have incredible discipline to continue to be fair to all parties, and not get hung up in short-term earnings. It is very difficult to create and maintain that discipline. GM maintained it for many years.”
Matt: “And during those years made tons of money, even in the Depression. Then GM lost its balance, as it were, and slid into bankruptcy.”
Jordan: “A simple and powerful lesson.”
Matt: “Jordan, thanks for the insight. This has been a great education for me. Are you available if POTUS wants some additional information?
Jordan: “Of course. Matt, I really enjoyed working with you. And thanks for your time and patience.”

#50 GM Saturn: Where Was the Proctologist?

14 Wednesday May 2014

Posted by Jordan Abel in Back Asswards Thinking, General Motors, Personal Stories, Stupid Is as Stupid Does

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(Readers: Please note the blog about the 5th revolution in the US is constructed as a story. While not all chapters are linked, the story might be more meaningful by starting at the beginning.)

Matt: “We need to talk more about Saturn. I know the program upsets you but I want your perspective.”
Jordan: “Of all the programs and changes Roger Smith implemented, I think starting Saturn division was the worst.”
Matt: “Why do you say that? Saturn seems like a good idea.”
Jordan: “The concept of Saturn was OK. But concept and execution are entirely different.”
Matt: “What do you think went wrong?”
Jordan: “Squeaky was adamant that Saturn become, in the words of the Hal Riney ad agency, ‘A Different Kind of Car Company.’”
Matt: “Good idea. You think bad execution. Why?”
Jordan: “Because the Saturn team was given carte blanch to build a new assembly plant, new foundry, new whatever they thought…emphasize what they thought…would separate Saturn from the rest of GM.”
Matt: “Do I detect a bit of jealousy? How was Saturn funded?”
Jordan: “Now we are getting at the heart of the problem — funding. GM profits were down because Squeaky and the gang ignored market share and kept thinking GM could save its way into prosperity.”
Matt: “So profits are flat to down and in the meantime GM spent tons of cash to buy Hughes, EDS and then pay Ross Perot another $700 million to get off the Board of Directors.”
Jordan: “With the buying spree and payoff to Perot…plus keep in mind GM is still paying a dividend even though it needs cash…there is no money left in the piggy bank. Pardon me, no money except for Saturn.”
Matt: “Then where did the money come from?”
Jordan: “Cutting product programs at the life blood of GM – the car divisions.”
Matt: “You’re kidding. Squeaky funds Saturn by not spending money to update product at Chevrolet, Olds, etc. From what you said GM makes money at the car divisions. What am I missing in Squeaky’s logic?”
Jordan: “You are not missing anything other than a classic case of stupid is as stupid does. These kind of decisions show how little Squeaky and the gang knew about the car business. They were just moving numbers around on a worksheet with no real understanding of the implication.”
Matt: “Where was there head during these decisions?”
Jordan: “In a place where only a proctologist could find it.”
Matt: “Despite all this wasn’t Saturn successful?”
Jordan: “Depends on how one defines success. Once Saturn finally got on the market, it did capture some buyers new to GM.”
Matt: “What about profits?”
Jordan: “Oh, profits? You mean a division is supposed to make profits? Saturn costs were so high that it would probably never make money. If you took away all the development costs, Saturn might have made a little money in its best years. But not enough to pay for development and not enough to fund new product. It was a cash drain…a sinkhole.”
Matt: “I’m stunned. In a way, GM starting Saturn is like cutting off your nose to spite your face.”
Jordan: “If you had to pick a single event that put GM on a clear path to bankruptcy, it was the creation of Saturn. The drain on the rest of the organization was so great that it effectively killed the company.”
Matt: “Do you think other people feel that way?”
Jordan: “If they spent time thinking about what really happened and the effect on the divisions that were generating the profits, I think many people would reach the same conclusion.”
Matt: “I can tell by the tone of your voice how frustrated you are.”
Jordan: “When one guy and his henchmen basically kill an economic engine then I have a right to be angry. And so should everyone who was committed to making GM a success. It is truly maddening.”
Matt: “Whew. The scope of what you’re talking about is hard to comprehend.”
Jordan: “I’ll give you one more Squeaky proctology story and then we will move on.”
Matt: “…and that is?”
Jordan: “About one of my favorite cars, the Buick Reatta.”
Matt: “Wasn’t Reatta a two-passenger sorta luxury car? And it wasn’t around very long. What’s Squeaky have to do with the Reatta?”
Jordan: “Yes, it was a two-passenger car in what was labeled the ‘near-luxury’ segment. Why wasn’t it around very long?”
Matt: “Squeaky? But what did he do?”
Jordan: “Squeaky doomed Reatta from the start, even before it was formally introduced. During development Buick conducted some very sophisticated market research about the price point. The research, some of which was conducted through MIT, indicated MSRP should be less than $20,000. Remember this was the mid-1980’s.”
Matt: “Price sounds reasonable.”
Jordan: “That’s what we thought. At the time prices for all GM cars and trucks were reviewed by what I think was called the Price Review Group, or PRG.”
Matt: “Part of Squeaky’s reorganization plan?”
Jordan: “Yes. And guess who was chairman of the PRG?”
Matt: “Let me guess. Mmmm…Squeaky.”
Jordan: “During our presentation about Reatta, Squeaky interrupts and states, ‘Reatta price is $25,000.’ Next item.”
Matt: “Any discussion?”
Jordan: “Squeaky the king had spoken and no one on the PRG was going to challenge him. They had seen what happened to others who challenged the king.”
Matt: “How did the price affect sales?”
Jordan: “Reatta is a new entry into the two-passenger market with an MSRP 25% higher than all the research suggested. Many people who were interested in Reatta balked at the sticker price. As a result, sales never met expectations.”
Matt: “Squeaky’s pricing strategy seems just the opposite of how the other auto companies price cars.”
Jordan: “I told you it was a Squeaky proctology decision. When Toyota introduced Lexus, they low-balled the price to generate interest and sales. Same strategy on Prius.”
Matt: “But not GM…with Reatta and more recently with the Chevrolet Volt. Squeaky seems to have thought the model for pricing cars should parallel the model for pricing new electronics – like computers and phones. Price high initially and then decrease prices over time.”
Jordan: “One key difference between cars and say computers. Cars have a residual value…used car value…that electronic items do not. That residual value…trade-in value…is very important to personal use buyers and fleet buyers. Very few customers own a car for its entire life.”
Matt: “Your Miata being an exception.”
Jordan: “Yes but I knew that when I bought the Miata. For virtually all buyers, personal and fleet, there is an expected depreciation schedule. What happened with Reatta was the expected depreciation plus another 25% depreciation for the first owner. Fleets in particular were upset because costs for owning Reatta were higher than forecast.”
Matt: “So the expected depreciation schedule is why auto companies maintain prices over time for older models rather than dropping prices like computers.”
Jordan: “Matt, you now understand more about the car business than Squeaky and his gang ever did. I’m going to say it one more time, then let’s break. After the break we will move into the post-Squeaky era at GM.”
Matt: “Let me guess what you were going to say. Decisions by Squeaky and his gang were the primary cause of GM going bankrupt. And diverting funds to start Saturn were the single biggest cause.”
Jordan: “You took the words out of my mouth.”

#43 Beginning My Years with General Motors

19 Saturday Apr 2014

Posted by Jordan Abel in General Motors, Innovative Thinking: Ideas and Products, Personal Stories, Possible Solutions

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(Readers: Please note the blog about the 5th revolution in the US is constructed as a story. While not all chapters are linked, the story might be more meaningful by starting at the beginning.)

(Want a PDF version for Entries #1-10, #11-20, #21-30 formatted for tablets and e-books? Entries #31-40 available soon. Click links for download. America’s 5th Revolution Volume I (Entries 1-10), America’s 5th Revolution Volume II (Entries 11-20), America’s 5th Revolution Volume III (Entries 21-30)

Scene: Jordan’s office with Matt, reporter asked by POTUS to help Jordan write story why GM was so successful and why it failed. Report will be used as part of effort to rebuild US-based manufacturing.

Jordan: “First bit of trivia. Matt, how many times has GM gone bankrupt?

Matt: “One that I know of – 2009. That’s when the Feds put in a lot of cash and got a lot of stock in return. People started calling it Government Motors.”

Jordan: “A lot of people thought the Feds should have let GM die. Doing so would have been a huge mistake. We can discuss why in another session…but not today.”

Matt: “OK, I give. How many times has GM gone BK, or bankrupt?”

Jordan: “Three. 2009, then twice before 1920. The first was about 1909 and the second about 1919. We need to get exact dates but close enough for now.”

Matt: “Three times. That’s a surprise.”

Jordan: “And they might survive all three.”

Matt: “What happened in 1909 and 1919?”

Jordan: “The short version is this. Rapid expansion of production and rapid sales growth without proper financial controls. The result was the deadly sin – running out of cash.”

Matt: “So unlike 2009 when demand was weak, the other two times demand was strong. But GM expanded too quickly…really beyond their ability to raise enough cash to finance the growth.”

Jordan: “Yes. And that reminds me of my first day in finance at MIT.”

Matt: “Alright. First day of finance class. What happened?”

Jordan: “The professor begins the class by saying, ‘Ladies and gentlemen, if you learn nothing else the entire time you are at this esteemed institution, I want you to remember one thing. It does not matter whether your income statement indicates you made money or lost money. The only thing that matters is…never run out of cash.’”

Matt: “Well, GM management apparently didn’t go to that class.”

Jordan: “A lot of people seemed to have skipped that class…a hundred years ago and now.”

Matt: “OK, GM goes BK. But in 1919 there is no government bailout. Who bailed them out?”

Jordan: “My view is the second BK and the bailout is the beginning of the GM juggernaut. The bailout is from the DuPont family. DuPont’s, already an investor, put in a boatload of cash and end up with a boatload more shares – 30-35% ownership.”

Matt: “Anything else happen?”

Jordan: “The cornerstone for GM’s future success. Pierre DuPont, chairman of the Board, installs Alfred P. Sloan as president.”

Matt: “Is that the same Sloan as Sloan-Kettering Hospital in NY…and the Sloan School at MIT?”

Jordan: “The same Alfred Pritchard Sloan. Sloan was an MIT grad. And I think he implemented three major ideas that separated GM from the pack.”

Matt: “Under Sloan, GM operated differently than other car companies?”

Jordan: “Very much so. GM set a new standard. The ideas applied to car companies and most other manufacturing companies. And the ideas are still relevant today.”

Matt: “I’m anxious to hear more but is the story going to get too complicated for people to understand? We have to keep the story out of the weeds and make sure it is understandable.”

Jordan: “The topics might seem a bit deep at times. But this is not a story told in sound bites. Success does not come with slogans and talking heads…despite what some people think.”

Matt: “Alright but really try to KISS – keep it simple, stupid.”

Jordan: “In my estimation, Sloan’s three major contributions were: (i) implementing understandable financial controls (ii) clearly separating GM’s different products (iii) separating strategic and operational decisions.”

Matt: “I sort of understand financial controls and separating products. Separating strategic and operational decisions is a bit more abstract.”

Jordan: “OK, let take these one at a time, starting with financial controls.”

Matt: “Are you talking about say authority to write checks and keep accurate books?”

Jordan: “Yes, but there is much more. What is hard to understand now with computers, electronic databases and scanning equipment is companies were run using information written on index cards and hand-written ledgers.”

Matt: “That is hard to imagine.”

Jordan: “Imagine this – and I think the date is about right – until the mid-1920’s Ford Motor Company operated without any real accounting system.”

Matt: “Ford had become a huge company by then…and no real accounting system?”

Jordan: “GM before Sloan was similar. But Sloan brings systems thinking. Systems for accounting, systems for cash management and systems for forecasting production.”

Matt: “What you’re saying is GM went from shoe-box accounting to at least reconciling bank statements and creating a budget.”

Jordan: “In very simple terms, yes. However, it is hard to overstate the importance of the discipline Sloan began instilling in the company.”

Matt: “Wasn’t it just an accounting system?”

Jordan: “No, it was creating a culture of being accountable. Having a system in place allowed performance to be measured.”

Matt: “You’re saying the measurement system – production, cost, etc. – allowed measurement of the performance of individuals and groups. And the measurement made them more accountable.”

Jordan: “Exactly. Individuals and groups began to understand what needed to be accomplished and how well they performed.”

Matt: “Have a specific example?”

Jordan: “Yes, and I hope it is not too abstract. But I think critically important to GM’s success.”

Matt: “What is it?”

Jordan: “Budgeting is critical in the auto industry…and any industry with high fixed costs. The company must generate enough sales to pay for all the fixed cost before it begins earning a profit.”

Matt: “Like the sales person on full commission. He or she needs to sell a certain amount just to cover expenses – mortgage, utilities, groceries, car payment, fuel. Then sell some more just to have some spending money.”

Jordan: “Good example. And the higher the mortgage payment and car payment, the more the person has to sell.”

Matt: “But the sales person never knows how much will be sold, and therefore never knows what the commission check will be.”

Jordan: “Car companies face the same problem. When the economy is good, people have more money and buy more cars. When the economy is not so good, people put off buying a new car and sales fall.”

Matt: “What was so innovative about what Sloan did?”

Jordan: “Sloan created a budgeting procedure such that GM broke even profit wise at 70% of its capacity.”

Matt: “So if the company had capacity to sell 1,000,000 cars for a certain year and sales were only 700,000 cars for that year, GM would break even…really, not lose money? That idea seems so simple.”

Jordan: “The idea is incredibly simple but very hard to execute. Forcing the execution helped create a culture of the importance of managing costs.”

Matt: “So budgets were built around 70% of capacity. Still not sure if I understand the significance. And does the process have a name?”

Jordan: “The budget was called a ‘standard-volume budget.’ Focusing on ‘standard volume” helped people form a discipline of controlling costs. Early in my career I was assigned to coordinate the budget process for Cadillac. The budgeting process was not easy and not very pretty. A lot of negotiating, arm twisting and cajoling. By the end everyone involved understood the importance of controlling costs.”

Matt: “Obviously left quite an impact on you. What’s the second point?”

Jordan: “All sales above 70% of capacity were very profitable…and I mean very profitable.”

Matt: “How often did sales fall below 70% of capacity?”

Jordan: “Not very often, even in the Depression. In fact, GM made money every year from the early 1920’s and throughout the Depression.”

Matt: “You’re kidding?”

Jordan: “GM made money while many car companies went out of business. Duesenberg, Cord, Auburn just to name a few.”

Matt: “So how many years in a row was GM profitable?”

Jordan: “70+ years. From the early 1920’s to the early 1990’s.”

Matt: “What a run. What happened?”

Jordan: “This is a good time to take a break. Sloan implemented a couple more key ideas that made the 70-year string possible…and the string should still be going on. We can talk about what went wrong after we talk about what went right. Let’s take a break.”

#19 Rock Man Frames the Issue

25 Saturday Jan 2014

Posted by Jordan Abel in Personal Stories, Possible Solutions, Societal Issues

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(Readers: Please note the blog about the 5^th revolution in the US is constructed as a story. While not all chapters are linked, I think the story will be more meaningful by starting at the beginning.)

Scene: Jordan’s Office

Jordan: “Rock Man, you’re back. Productive week, I assume. What do you have to present?”

Rock Man: “First, I guess I want to thank you for giving me this challenge.”

Jordan: “Guess. What do you mean guess?”

Rock Man: “Well, I’ve often thought about what is required to make the black community more vibrant but no one ever pushed me for details. Like many people, I’ve been focused on the family. What we needed to do to get better. Addressing problems of the community is different and a more complicated.”

Jordan: “For certain difficult and there no easy solutions. Plus, solutions are likely to take several generations.”

Rock Man: “I’m glad you understand it won’t be easy. The first question I asked myself was ‘How could so many other ethnic groups enter this country at the bottom and within several generations be assimilated? Why haven’t blacks done the same thing?'”

Jordan: “I have my own ideas but what did you come up with?”

Rock Man: “I made a list of possible causes and then went through the list. First on the list is skin color. Being black makes one stand out, especially if you are dark like me. Second is how we arrived in this country – slaves. Third, and this might sound strange, but programs to help blacks have actually created two black communities – one better off and one worse off.”

Jordan: “Interesting observation about programs having unintended consequences. I agree. You have some examples?”

Rock Man: “Probably the most prominent example is the effort to assimilate blacks with better housing and better schools. The unintended consequence has been those efforts ended up destroying the black business community. The black neighborhood merchant was put out of business as black families moved to different locations.”

Jordan: “While the end result of efforts to improve housing and improve schools might seem to have worked, we also have to ask whether the programs destroyed the vibrancy of the black community.”

Rock Man: “Here’s what I know. There are very few, if any, black grocery stores. Few, if any, black dry cleaners. Few, if any, black bars and night clubs. You know there were little Harlem’s throughout the country. Virtually all of those are gone.”

Jordan: “What about farmers? How many black farmers today versus say 50-60 years ago? You grew up on a farm.”

Rock Man: “The entire black farm community in eastern NC is virtually gone. I realize lots of small white farmers are gone too but there are almost no black farms left.”

Jordan: “And what has happened to the black community?”

Rock Man: “For guys like me, who got out, got an education, we’ve moved up the income ladder. For others…and I hate to say this…many have become slaves to either minimum-wage jobs or government programs.”

Jordan: “How are the better-off blacks helping those stuck toward the bottom?”

Rock Man: “Want the truth? Not much as we could. Let me tell you a story — and this is not unusual among higher-income blacks. A few years ago my daughter says to me, ‘Dad, I don’t want to be black anymore.'”

Jordan: “Say that again.”

Rock Man: “You heard it right. Here we are in a really nice neighborhood, private school and my kid’s complaining because she is black.”

Jordan: “What did you tell her?

Rock Man: “She’s heard all the stories about being dirt poor but the stories mean nothing to her, especially about not having a pot to piss in. That is too far removed from reality for her. All she knows is her classmates are white and she is black — and didn’t like it.”

Jordan: “She over it now?”

Rock Man: “Better but not over it. I don’t think she will ever get over it no matter where she lives, no matter how much money she has, no matter how much education she has. She’s still going to be black.”

Jordan: “Is being black a problem for blacks or a problem for whites?”

Rock Man: “That is a very perceptive question. Could I get some coffee and then we will discuss?”

Jordan: “You’re stalling.”

Rock Man: “You’re right. Now where is the coffee?”

Jordan: “OK Rock Man, you have stalled long enough.”

Rock Man: “Never quite thought of the issue whether blacks have a problem being black. My answer is ‘yes’ but I am not quite sure why.”

Jordan: “What about being a minority? Is that the cause?”

Rock Man: “You know it shouldn’t be because all immigrant groups were minorities initially. And most all were discriminated against. Nothing new there.”

Jordan: “Let me phrase the question differently. Has the effort to assimilate blacks increased the desire not to be black?”

Rock Man: “Let me ask you. Do Jews want to be Jews?”

Jordan: “Good question, and maybe a lesson for blacks. For many years Jews tried to assimilate. The Reform movement reduced significantly the amount of services spoken in Hebrew. What happened is the services became more like a church service. Over the years, many Reform Jews felt something was lost. Now services include more Hebrew and more traditional prayers.

Rock Man: “And what’s the reaction among congregants?”

Jordan: “Some members are upset. But nationwide, there seems to be two groups forming — Jews who live in the modern world but want to keep links to the past and those who want to live in the past.”

Rock Man: “Are you suggesting that blacks return to the past?”

Jordan: “Yes, in some ways. Quit trying to be white and start being more black.”

Rock Man: “Huey Newton and the Panthers here we come! Or are you talking about something more moderate.”

Jordan: “Forget the Black Power stuff. The only Panthers you should think about play football in Charlotte. The Black Power movement alienated a lot of whites…and probably a lot of blacks as well. My suggestion is focus on education. Focus on rebuilding black businesses.”

Rock Man: “What about all the inequality that exists? How does that get addressed? More government programs?”

Jordan: “Rock Man, you know the answer. You…the black community…needs to solve its own problems. Government can help but mandates don’t generate respect.”

Rock Man: “This is going to be a long road.”

Jordan: “Yes, but guys like you need to start leading the change.”

Rock Man: “Do you really think it is possible after all these years?”

Jordan: “Rock Man, from my perspective the black community seems to have no choice — either begin solving its own problems with some help or watch conditions get worse and worse.”

Rock Man: “OK Jordan. By the way, I agree. Now I need to get started. Will you help if I need you?”

Jordan: “Of course. And say hello to you lovely wife.”

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Thank you for your response. ✨

#18 Rock Man Cometh

22 Wednesday Jan 2014

Posted by Jordan Abel in Innovative Thinking: Ideas and Products, Personal Stories, Societal Issues

≈ 1 Comment

Scene: Jordan’s Office

Jordan: “Rock Man, nice to see you. How’s the world traveler?”

Rock Man: “Back in the States for a while. I thought it would be calmer here. What’s with the revolution?”

Jordan: “How long have you been back?”

Rock Man: “About a week. Heard you had another important job and wanted to stop by and say hello.”

Jordan: “How did you get past security?”

Rock Man: “I have all these clearances for traveling and one of your colleagues asked me to brief you on a couple of countries. Actually, he arranged the clearance.”

Jordan: “One more thing, and then I want to ask you to do me a favor. How’s the corporate wife of yours? President of the company, yet?”

Rock Man: “Not far from it. Head of international operations, which means lots of traveling but headquarters are in the States.”

Jordan: “And the kids?”

Rock Man: “One at Harvard. Sorry, I tried together to consider your alma mater but she’s liberal arts and not a techie. The other is at a trade school. He’s great at making things and not great at English literature.”

Jordan: “That’s wonderful. And a great lead in to what we need help with.”

Rock Man: “And that is?”

Jordan: “This country needs high-energy, non-religious, successful, black man to lead the effort to get more kids to stay in school and get an education.”

Rock Man: “What did I do wrong to get this request?”

Jordan: “C’mon, you know you are the perfect candidate. One of eight children of a dirt-poor family from Eastern North Carolina. Yet, all the kids got a college education.”

Rock Man: “It even amazes me sometimes how my parents pulled it off. I do not know how they did it. We had nothing.”

Jordan: “The great appeal is your success is not tied to entertainment or athletics.”

Rock Man: “I’m sure I told you this but I started out in one college and then moved to another because it was not academically challenging enough.”

Jordan: “There you go. Great story. And yes you told me before and I often repeat the story for other people.”

Rock Man: “Least we forget my spouse, she is the big dollar earner.”

Jordan: “To me that makes the story even better. You, the macho black man, who becomes a stay-at-home dad to help raise the kids. The whole story is 180 degrees from what many people perceive as the role for the macho black man.”

Rock Man: “Might be too far outside the norm.”

Jordan: “No. What we want is for parents and kids to look at you and the family and commit to try to accomplish the same thing.”

Rock Man: “Do you have some program laid out? What am I supposed to do?”

Jordan: “You decide the best approach. Look, no matter how hard I try it’s impossible for me to walk in your shoes or to get the attention of black kids.”

Rock Man: “I agree there is a big problem…but it is more than just black kids. Its kids of color…even a lot of white kids. I know you understand that so we need to be careful not to make this just a black issue.”

Jordan: “I hear you. At the same time, my belief is we have become too politically correct when addressing social issues. Black families have issues that other families do not. But to me blacks are best a t addressing those issues. You think anyone at the synagogue will believe a Buddhist’s interpretation of the Torah?”

Rock Man: “Understood. Blacks do have specific issues. We are not going to make progress until we address them.”

Jordan: “Rock Man, you have a blank sheet of paper for this project. You decide the best approach. Don’t over analyze it. You know the issues and probably the solutions.”

Rock Man: “So how long do I have?”

Jordan: “Let’s review a draft proposal in a week. Sooner if you are ready.”

Rock Man: “Why did I stop to see you? OK, Jordan, I’ll get back. And, by the way, thanks for asking.”

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Thank you for your response. ✨

#18 Rock Man Cometh

Thank you for your response. ✨