Tag: leadership

Taming Turnover

Employees are truly a valuable resource. Regardless of the type of business you operate, or the country in which you operate, every business depends on having qualified and experienced people to reliably perform all of the tasks required by the business.

It is undoubtedly true that some employment positions are more important, more vital, and contribute more directly to the overall success of the business than others. A highly competent Production Manager in many cases is more vital to the business than a General Manager or Finance Manager, because his / her company – specific technical and operational skills and leadership are key to the successful daily operation of the business. In many cases these skills cannot be replicated by an outside hire or an internal promotion without many months or years of intensive training.

However, if your business has any employees or positions that are truly non-important, than as a Manager you are being irresponsible for maintaining such positions or employees. Is the cleaning lady (or cleaning person to be politically correct) a vital position? Probably not, because an outside hire (direct employment or contract) can successfully mobilize in the position and be effective with not more than a few hours of orientation. But don’t make the mistake of thinking of a cleaning lady as being a non-important position. Try running your office or business for a few days without anyone to clean the toilets, canteen, and general office area, and you will quickly discover just how important this function is to a happy and healthy office environment.

I fondly recall one cleaning lady who worked at a factory that I managed nearly 20 years ago. She was a contractor, supplied by a maid service company, and was one of the longest serving members of the office staff. I was very proud to attend the wedding reception for her daughter, and all of us were very sad when she retired. Many tears fell in the office and around the factory site on her last day of service.

The cleaning lady wasn’t the only member of the factory “team” that had served devotedly and loyally for many years. We were very proud to have quite low turnover on our team. Thailand, where this factory was located, and where I have lived and worked for many years, has an entrenched culture of job hopping across all levels and positions. I have probably interviewed well over 1,000 employment candidates, and I have undoubtedly reviewed several times that number of employment applications. In the vast majority of cases, I observed that candidates changed jobs every 2 to 3 years. I rarely received an application from a person who had been employed by the same company for more than 5 years, let alone 20 or 30 years. 

Long service employees do exist, but once an employee has stayed with a company for 4 or 5 years, he / she is quite unlikely to resign except in the case of a significant change in company environment. Such change could include financial distress, a change in technology or operation that significantly alters or eliminates the incumbent employee’s position or job responsibilities, or a change in leadership or ownership that significantly changes the culture and social environment of the workplace. 

Can your company survive and achieve its full potential, if you must replace every employee, including staff, supervisory, and management positions, every 2 to 3 years? Can you provide best service to your customers and shareholders when key positions are vacant, and experienced incumbent personnel are long gone before qualified candidates can be recruited to fill the vacancies? How do you train new employees to fill positions when the experienced former employee is long gone?

Managing an industrial business, serving customers, and defending your market share against competitive challenges is difficult enough when every position on your organizational chart is filled with qualified personnel. You don’t need the additional headache of staff turnover, recruiting and training replacements, and dealing with team morale issues associated with a revolving door work environment. If these issues are all too familiar to you and your team, you must urgently find a way to promote long term loyalty and employment retention.

Reasons for Leaving

Staff retention is a complex and diverse subject. However, it can be boiled down to some simple concepts that can be applied across countries, cultures, and industries to minimize turnover and maximize staff satisfaction and loyalty.

I hear many managers complain that their staff will quit their position for a few percentage point increase in salary at a new company. I don’t doubt that this is in many cases true. However, I think many managers interpret this phenomenon in the wrong way. Most employees are not so focused on compensation that they will quit a secure position to face unknown challenges at a new company for a 2% increase in basic salary. More accurately, such employees are so dissatisfied or feel so disconnected from their current employment that it only takes the most minor incremental incentive for them to risk the unknown. In these cases, if employment conditions were to degrade further, these employees would even accept a cut in basic salary to escape from the drudgery of their current employment experience.

Look in the mirror, evaluate the employment environment that you are providing to your employees, and understand that the problem isn’t your employee’s attitude, but rather the environment that you are providing.

In other cases, employees report resigning from their current position to seek “advancement” or promotion elsewhere.

If you are managing a trade school, college, or university, you should be proud to train your “students” to best serve their future employers. However, if you are running an industrial enterprise, you must train employees to excel in their current roles, then carefully provide a career path, mentoring support, and encouragement to enable your valuable employees to grow into more responsible and challenging roles.

When an employee truly excels in his or her role, organizations often think of such employees as “invaluable”. However, they then proceed to treat these invaluable employees as hardware, plugged into a position with the expectation that they will stay plugged in until they become obsolete or burn out and require replacement. Unsurprisingly, these high performers quickly discover that other organizations also value their skills, experience, and motivation, and are willing to provide incentives including compensation and a positive work environment, to liberate them from their current indentured servitude.

Reasons for Staying

I personally believe that high performing individuals have earned the privilege of being promoted in recognition of their performance. In many cases, a linear promotion opportunity may not be available. A lab technician at your facility might excel and eventually achieve the position of lab manager. They appear to have reached the pinnacle of their career ladder, at least within the confines of your organization. However, if you ignore the career aspirations of such a high performing individual, you can be sure that eventually your lab manager will resign “seeking advancement”.

A few years ago I ran into a former colleague who was the lab supervisor in one of my factories. Shortly after I left this company, she also moved on. When I met her in a popular restaurant, she was surrounded by colleagues, all wearing the same business uniforms. I was very proud to learn that she was the Plant Manager of a well-respected petrochemical complex, and she was enjoying lunch with her loyal subordinates.

Do not place artificial limits on your valuable employees. Allow them to grow, including providing them with opportunities to branch out onto parallel career paths. Or resign yourself to being a charity training institute serving the interests of your competitors and regional peer organizations.

Retention is not just about compensation and advancement. These are certainly very important aspects of retention, but by themselves they are not sufficient to create long-term employee loyalty.

Most people, especially in collectivist cultures, greatly value connection and engagement with fellow team members. Creating a happy workplace, with an inclusive and supporting culture, is perhaps the most effective way to promote employee retention.

Does your company have a culture? Can you describe it? Do you manage and promote your company culture? Do you even give any consideration to the cultural environment of your company?

If your culture is “just another company”, a bunch of people punching the clock, doing their jobs, following procedures (or perhaps shortcutting procedures when not being closely supervised), then going home or to the pub to complain about the drudgery of their positions, then don’t expect to have any success retaining staff.

Creating a company culture takes time and effort, but it certainly doesn’t require a significant budgetary commitment. Evaluate what type of workplace environment your team would most appreciate. Treat your employees as valuable members of a team working towards a common goal.  Define the goal(s), and provide objective metrics so the team can understand and evaluate their performance. Involve your team with your operating strategy, at least to the extent that is safe and prudent with respect to corporate intellectual property and financial reporting regulations. Find ways to treat your employees as fellow shareholders and stakeholders. Solicit suggestions from your team, give them serious consideration, implement worthwhile suggestions, and publicly recognize all valuable contributions.

I have been in factories where employees had no idea how their product was used by customers, or how important their product was to their customer’s success. How does your product contribute to society? If your factory makes rubber blades for windshield wipers, your product might seem to be low tech, simple, and nearly insignificant in the broad scheme of human endeavors. However, that simple blade of rubber represents an important component in each car produced by your customer. If your team doesn’t deliver the windshield wiper blades on time and fully compliant with quality parameters, the car manufacturer can’t deliver completed cars to their customers. The car owner and drivers also depend greatly on the quality and performance of the windshield wiper. A defective wiper can easily become a major factor in an accident, and innocent people might be injured, crippled, or killed. Frankly, there are no unimportant products … if your product has no significance to society, you will very soon be out of business. Be sure your team understands and appreciates the important contributions their work makes to a well-functioning society.

You undoubtedly have a sales team. I typically observe that the sales team is completely isolated from the operations team. They might as well be working for a completely different organization, serving markets and customers on a different planet. This is terribly unfortunate, because in order for the sales team to proudly and effectively represent your product or service to customers, they must understand and appreciate the hard work, dedication, and attention to detail that goes into producing these products. 

Likewise, the operations team needs to understand and appreciate the importance and unique value of the products that they are producing, and how important each team member’s contributions are to the overall success of the product and company. I strongly recommend that you routinely send your sales team into the factory to “sell” your products to your operations team. Teach the team about your customers, how they use your products, what they value in your products and how your products compare with competing products. And insist that your sales team frequently visits the factory floor to gain first hand experience about the product and production process. These modest activities will significantly boost the loyalty, pride, enthusiasm, and effectiveness of all members of your team.

Regardless of industry, country, or market, I do not believe that any company has to accept high turnover as an insurmountable fact of corporate life. As a responsible, enlightened manager you must seek to clearly understand the factors contributing to employee turnover, and you must create an environment and culture in which your employees feel safe, secure, comfortable, and confident. You and your company will never realize its full potential without a loyal, stable, motivated, and happy workforce.

Avoiding Misaligned Incentives

Managers are faced with a great number and diversity of issues each day. Many of these issues require prompt resolution typically in the form of a decision or direction to be issued by the Manager to subordinates.

Good managers recognize that they must base their decisions on an objective, non-biased consideration of relevant facts and circumstances, always seeking to act in the overall best interests of the organization. Unfortunately, most managers don’t have the luxury of time and tranquility required to give each issue ample and careful consideration. Major and minor issues constantly arise in a seemingly relentless manner, and our intrepid manager must consider each issue as quickly and efficiently as possible, render a judgment or decision, and hope for the best.

Modern managers are (still) human. Artificial intelligence is not yet wielding significant influence over the decision-making process. Even the most well-intentioned and highly experienced managers are influenced by personal and organizational biases, historical precedents that may have been based on faulty premises, and pressures from subordinates or other influencers that may have motivations far removed from the best interests of the organization.

One can wish to forgive managers for not giving each issue ample and careful consideration before passing judgment. Clearly, not all issues are of vital, longterm interest to the organization. However, one must be very mindful that even seemingly minor decisions can serve as precedents upon which future issues will be considered and based. This can be especially true when a decision is related to, or can be consciously or unconsciously perverted, to serve the self-interests of the manager or other stakeholders at the expense of the Company’s best interests. 

These decisions that support misaligned interests often appear to be of only minor significance and importance, and self-interested parties may actively seek to  emphasize the limited significance and impact of the issue in hopes of receiving the desired decision. The less time and effort a manager invests to understand any given issue, the less likely it is that the manager will appreciate the broader or longterm ramifications of the issue.

This may sound philosophically interesting, or mind-numbingly boring, depending on your personal perspective.  A common example might serve to conveniently highlight the issue.

e-Waste Recycling/ Asset Disposal

Every modern office has numerous PC’s, laptops, monitors, printers, mobile phones, and other electronic devices. These devices typically become obsolete before they physically break or cease functioning. It is not uncommon for subordinates to request permission to purchase such obsolescent equipment, and in many countries it is quite common for companies to sell obsolete equipment to employees at bargain prices.

Is this in the best interest of the company? Is this in the best interest of the employees? How should a manager consider an issue such as this, and are there any biases or misaligned incentives that could adversely influence the decision-making process?

The company’s best interests are served if all capital assets are utilized to their fullest potential. If an asset should become non-useful to the organization, the asset should be disposed of in the most appropriate manner, to generate salvage income from the asset, to protect the community and environment from adverse environmental impact, and to always recognize and respect any employee or stakeholder impact or preference.

In the case of a common laptop PC, a well-cared for laptop can function well for many years. Some maintenance may be required during the lifetime of the device, such as battery replacement, memory and/or data storage upgrades, keyboard or display service, etc. Eventually, the performance of the device may no longer satisfy the operational requirements of the user, or the cost to maintain or service the device may exceed the value of the device or may be non-competitive compared with the cost of a new replacement device.

In a well-managed organization, commodity devices such as laptop PC’s can be reassigned to different users or applications to match their performance and condition to the user or application requirements. A top of the line laptop that was suitable for a power-user such as an engineer, field service technician, external sales person, or the ego of an executive when it was purchased new may become completely inadequate for these same functions and applications just 2 or 3 years later. However, many users or applications to not require high performance, especially now that many applications are moving to cloud-based solutions. A basic laptop, even one that is 5 or 6 years old, can still run web browser software suitable to support nearly all cloud-based applications. Even a laptop with a malfunctioning display or a failing keyboard can be very satisfactorily utilized by attaching an external monitor, keyboard, and mouse.

For most organizations and applications, nearly any functional laptop, desktop, or printer can continue to be satisfactorily utilized by properly matching the aging device to the application. And when a device does fail, it can become a source of spare parts for remaining identical devices, assuming that the organization has prudently managed its device procurement strategy to standardize on equipment.

Frankly, if such a device is still functional, or still has useful parts that could be used to maintain similar devices, it should be retained by the organization. When a device no longer has any value to the organization, it should also be expected to offer very little value or interest to employees or other entity except specialized recycling contractors.

So why do so many organizations sell functional (or even non-functional) used equipment to employees?

I strongly suggest that in most cases, these decisions are being made based on misaligned incentives. Supervisors and managers are incentivized to offer used equipment to employees to promote good relationships with employees. Whereas managers should be making decisions on the basis of the best interests of the company (and happy employees are certainly in the best interest of the company), they are actually making these decisions based on self-interest, or being influenced by supervisors or subordinates who themselves are acting out of self-interest.

Does sale or auction of used IT equipment such as laptops to employees promote good relationships? Undoubtedly, there are some employees who would appreciate the opportunity to purchased a used device from the company at a bargain price, especially if the device is being offered well before it has actually reached the end of its useful life. However, the company should also seriously consider whether such a used equipment sale policy can be administered in a way that is fair for all employees? If this program is beneficial to employees, meaning that the employees can purchase the used device for a bargain price compared with other retail sources of such used equipment, then it only benefits those employees who have the interest or opportunity to participate. Employees who are not interested in used IT equipment would not benefit. How many creative programs would the company need to implement to ensure that all employees with their many diverse interests would have an opportunity to receive an equivalent benefit from the company? Good employee relationships cannot be promoted and sustained by special programs that only benefit a small percentage of the workforce.

Environmental protection is certainly an important area of best interest for a company. e-Waste is rapidly becoming a global environmental problem, and companies should ensure that their e-Waste is properly managed to minimize environmental impact. Even a small company has the resources and ability to engage with a qualified e-Waste contractor to dispose of such devices at the end of their useful life. In many cases, companies can recover a salvage value from devices that are consigned to an e-Waste contractor. However, most individual consumers are unable or unfamiliar with e-Waste solutions, especially in less-developed communities and countries. It can be easily argued that a company is failing in its environmental responsibilities when it sells, donates, or otherwise distributes e-devices to individuals or small organizations (such as churches or charity groups) that cannot or most likely will not ensure that these devices are properly recycled when they do reach their rapidly approaching end of life.

I have observed that when management implements a policy to recycle all end-of-life IT equipment utilizing a qualified e-Waste contractor, the quantity of such devices selected to be recycled significantly drops. Departments are suddenly eager to receive an old laptop or desktop that is no longer suitable for its previous function, to address unbudgeted needs or to help stretch their department budgets. Once the misaligned incentive to dispose of useful equipment is removed, incremental value can continue to be extracted from aging but still useful equipment.

To avoid misaligned incentives, managers should always carefully and critically evaluate any program or proposal that seeks to create a benefit or satisfy any unmet need or expectation in a manner that is not absolutely straightforward and transparent. The more lobbying pressure a manager receives in support of a proposal, the more careful and critical the manager must become. Do not yield to popular pressure. Never allow or attempt to create or support any program that seeks to benefit any group of employees by bypassing the budgeting process. If a program is worthwhile and in the company interest, it should be supported by a budget allocation, and all employees should have the opportunity and expectation to realize equal benefit.

Many managers, probably a majority, disagree with my position concerning sale or auction of used IT equipment. I continue to believe that this is a classic case of misaligned incentives influencing policy decisions. I strongly recommend that managers diligentlyavoid implementing misaligned policies such as this. If your organization already has such policies in place, I strongly recommend that you start taking steps to eliminate these misguided programs. If you feel that your employees need and deserve incremental benefits, then create a new benefit or supplement existing benefit programs designed to positively impact all employees. 

Is Your Company Managing You?

There just aren’t enough hours in the day!

Yes, I’ve said this many times myself. Sometimes it feels that you simply have no control over your schedule.

There is no doubt that Industrial Leadership is a serious challenge even in the best of times. There are so many diverse responsibilities to be attended to, challenges to deal with, crises to overcome, and opportunities to pursue.

Just look at the table of contents of this book. Clearly, Industrial Leadership isn’t a narrowly focused expertise or discipline. To survive, let alone achieving any measure of success, the Industrial Leader must diligently oversee all aspects of the company organization, from technical aspects of the manufacturing process, the safety of employees and contractors, product and/or service quality, environmental compliance, financial performance as well as strategic aspects of financial leadership, a broad range of HR tasks including protecting the organization from corruption and protecting employees from exploitation by loan sharks, supply chain strategy including cost strategy, sales and product development, and personal development. There is even a chapter about networking … how can one ever expect to devote time to networking and personal development while attending to all of the other leadership responsibilities?

Major facilities owned and operated by multinational conglomerates typically benefit from a global team of specialists, experienced professionals recruited from peer companies and competitors, and bright young specialists selected from the best domestic universities. However, the majority of industrial facilities are small to medium sized ventures managed by a very small team of professionals who each oversee multiple functions. For example, the Accounting Manager may also take care of Administration and HR. The Operations Manager is also the Maintenance Manager. The Safety Manager oversees the Quality function. The Supply Chain Manager also takes care of Finished Goods. The Managing Director also serves as the Plant Manager and Sales Manager.

In many ways, leading a small industrial facility can be significantly more challenging than running a major facility. However, regardless of the size and scope of the business, the modern competitive environment demands that each employee and each manager be fully utilized, with headcount strictly limited.

Delegate: To Who

My whole team is busy, everyone is working hard. I know I am doing tasks that should be delegated to others. I know that my key management responsibilities are not getting done because I’m working on non-core tasks. However, if I delegate these tasks, either they won’t get done properly, or they will get done at the expense of other important tasks.

You say I don’t delegate effectively. I say I am very willing to delegate, if only I had someone to whom I could responsibly delegate these tasks.

Delegation is a Process, not an Act

Delegation is not simply assigning a task to someone else, like kids passing the hot potato. If it was this easy, everyone could do it.

Your responsibility as a leader is to manage your entire organization to ensure that tasks are prioritized and accomplished in the most effective and efficient manner by the people most capable of doing so. This means managing your managers, managing your organization, and managing yourself.

Many managers, supervisors, and employees focus on tasks that they like, or tasks that get the most unwanted attention. Some tasks may lack priority, many tasks should be redefined, reassigned, or removed from the task list.

You will never be successful at managing your job responsibilities until you manage and mentor your subordinates to most effectively manage their job responsibilities.

Task Inventory

Each organization is unique. Your company has its own set of operational requirements that must be successfully fulfilled in order to meet your business and financial obligations. Each organization also has a unique set of human resources, skills, and other assets to accomplish these requirements.

If you intend to manage these responsibilities, you must first identify the discrete tasks that must be accomplished to do so. Take this seriously; many organizations find themselves spending large amounts of time on tasks which do not directly contribute to achieving the organizational goals. Other tasks that are required are often being performed by the wrong people, in the wrong way, lacking in efficiency, and wasting valuable time and resources.

Take the time to clearly identify the tasks, understand how the tasks are being performed, and evaluate which tasks can be eliminated, combined, streamlined, outsourced, or otherwise improved to make your organization more effective.

Do your Accountants rely on Excel spreadsheets to accomplish various tasks? With modern integrated Accounting software, there should almost never be any requirement to generate or maintain an Excel spreadsheet. Work with your Accounting package supplier to fully automate every function, including report generation and trend charting. A small investment in software configuration will deliver major reductions in labor, as well as minimize opportunities for mistakes (or the dreaded lost file / corrupted file).

You will never be successful in managing the workload in your company until you have clarity on the tasks that your organization is performing.

Process Mapping

Once you have identified the tasks that must be done, you must carefully evaluate how the tasks are being performed.

Process Mapping is a valuable technique to understand and define more complicated tasks. For example, the process of executing a Purchase Order is a great example of a task that should be evaluated using a Process Map.

Prepare to be surprised when you gain visibility on how key tasks are actually being performed. Tasks are typically allowed to evolve seemingly without any logic or reason, until they become convoluted, confused, inefficient wasters of time and talent.

Processes don’t naturally organize themselves into their most efficient form. Teams don’t instinctively understand or appreciate the most effective method of accomplishing a process. Process Mapping is a great tool to identify wasteful tasks, allowing the organization to achieve the most efficient, streamlined process.

A great resource for Process Mapping is “Improving Performance: How to Manage the White Space on the Organization Chart” by Geary A. Rummler and Alan P. Brache.

Task Scheduling and Workload Distribution

Procrastination is a very common human trait. We have all been guilty of procrastinating at one time or another. Some of us are champion procrastinators, never completing any task until the last minute.

After you have rationalized the various tasks performed by your organization, and have worked diligently and creatively to make each task and process as efficient and streamlined as possible, you must consider task scheduling. Determine firm dates for completing various tasks. Never allow or tolerate late or last minute task completion, especially when subsequent tasks such as month end closing depends on timely completion of precursor tasks.

Do not overlook opportunities to achieve a more balanced distribution of workload. Many tasks do not require highly specialized skills. Such tasks simply require a well-defined process and some training to efficiently and effectively follow the process to complete the task.

Do not allow physical or virtual walls to prevent a fair and prudent distribution of tasks. There is no reason why the Administration Officer can’t assist the HR department with time and attendance, or assist Accounting with some tasks. Remember, everyone is working for the same team.

Outsourcing

To achieve the full potential of your organization, your organization needs to focus on its core competencies. Anything that is not integral to your business should be evaluated for outsourcing.

In recent years, payroll outsourcing is becoming more common. This is a good example of using an outside specialist organization to most efficiently execute a very important but non-core task. Payroll is certainly very important; if your staff doesn’t get paid correctly and on time, you can be sure they won’t be your staff for long. They’ll be working for someone else. Yes, important, even vital tasks can be effectively outsourced.

Accounting Outsourcing is becoming increasingly common. Traditionally, accounting was a labor intensive, paperwork intensive function. The flow of paper documents was a fundamental, physical limitation preventing outsourcing.

Today, nearly all accounting functions are performed using third party accounting software packages. All data, whether sales transactions, purchasing and expense transactions, inventory movements, etc., are recorded entirely using integrated software tools. Even more importantly, modern software packages are fully integrated with the Internet, so a transaction entered in one physical location can immediately be processed by someone in the next room or halfway around the world. Physical proximity is no longer a practical limitation to accounting transactions.

Modern Accounting Outsourcing contractors can completely manage nearly all of your accounting transactions, including report generation and flagging potential troublesome trends or issues, from a completely remote location.

Today many companies are also outsourcing some or all of their Maintenance tasks, Warehousing / Logistics, IT, Security, Housekeeping, etc.

Due to scale efficiencies and expertise, outsourcing contractors can often do a better job than your staff, more efficiently, more reliably, and for lower total cost.

Manage Your Company, Don’t Let It Manage You

I often find Managers aren’t really managing anything. These managers could more accurately be called “Caretakers.” They just monitor the company activities, and keep things chugging along.

For some organizations, a Caretaker role is the appropriate leadership model. If your company produces and delivers a well-established product or service, has a stable and loyal customer base, has little opportunity or appetite for growth or product development, and does not face or risk strong competition or disruptive new technology, then the Caretaker role might be ideal.

However, I observe that there are fewer and fewer organizations that enjoy such entrenched and persistent stability that they have no need or incentive to pursue improvements. What I do see is Caretaker managers running companies that desperately need enlightened and inspired leadership to realize their full potential.

I also see managers who recognize that their organization needs to change, evolve, improve, and grow to survive in an increasingly competitive global market. However, they are so overwhelmed with the daily crises, challenges, workload, and both internal and external demands that they are virtually paralyzed. They work too many hours, suffer from stress, and despite best intentions never manage to gain control over their own workload or that of their team.

Do not allow yourself to be managed by the crisis of the day. Do not allow your team to struggle day in and day out, never achieving success in their positions and departments. Don’t succumb to the easy option of throwing more people at the problem. Without a well developed operating environment, more people merely creates more complexity and less transparency, increasing your costs, reducing your competitiveness, and makes it more likely that your organization will never achieve the efficiency that can and must be realized.

Congratulations, you are the Manager. It is time to start Managing. You have many tools in your toolbox. Use them skillfully, and you will become the Manager that your team, company, shareholders, and customers require you to be.

Frank T.

Human Resources: Vital Resources

Industrial leaders are typically focused on the daily priorities of running their manufacturing operation, ensuring that the supply chain functions smoothly, dealing with technical or quality issues, and responding to customer or sales inquiries, issues, opportunities, or complaints.

Unfortunately, too few managers recognize the importance of the Human Resource function, or simply choose to delegate all responsibility for HR to the HR manager.

Industrial Leadership is a team sport. Of course it is reasonable to expect the HR Manager to manage and lead the HR function. The same applies to quality, safety, supply chain, operations, etc.

However, there is a significant difference between delegating and disregarding. I find many managers delegate quality responsibility to the QC department, delegate procurement functions to the Purchasing Department, but completely disregard HR functions.

When I discuss quality with a Plant Manager, I find that the manager is deeply familiar with the quality process, and is well informed about the quality systems and standards to which the company operates. The manager frequently reviews the quality performance reports and charts, and seeks to address any quality issues that may be arising. When outstanding quality performance is achieved, the manager eagerly announces, recognizes, and rewards the team for the achievement. The manager also gets directly involved to mentor the team in overcoming any issue that might be impeding the quality performance.

Many Industrial Leaders do not feel confident or competent when dealing with the Finance or Accounting Department. However, this does not deter most leaders from recognizing the importance of financial performance. They sit with the Accounting Manager on a frequent basis, review the financial performance of the organization, seek to understand any issues, and work directly with the Accounting Manager to address any issues or opportunities. They also closely monitor the P&L if for no other reason than to anticipate the bonus that they are likely to earn, or to make changes to minimize any losses and protect their job and career.

Regretfully, I too frequently observe that the HR department rarely receives the same quality of engagement, oversight, and support from the Plant Manager that other departments enjoy. Too many Plant Managers treat the HR function as little more than an unwelcome distraction from their priority tasks of running a successful business. Discipline, turnover, annual reviews, time and attendance issues, salary actions; don’t bother me with the details, just deal with the issues so I can focus on the important tasks.

HR: Human Realities

HR should never be viewed as a distraction. The HR function is certainly not less important than quality, supply chain, accounting, or sales.

Your employees are truly vital company resources. You depend upon each individual, as well as each group, team, or function, to perform their responsibilities properly, professionally, reliably, and consistently. You expect, or at least hope for, loyalty and enthusiasm from your employees. As your business develops, you need each employee to improve, expand, and grow his or her skills and experience to best support the company to achieve its broadest organizational objectives.

You have undoubtedly taken VIP visitors on a tour of your facility. You proudly take your visitor to show them the heart of your operation; the most important piece of equipment or the vital process that fundamentally defines the success of your business. You proudly describe the process details, the developmental history of the process, the key process parameters, the performance statistics such as the high output yield or the very low loss or waste. You proudly introduce the supervisor to your visitor by first name, and you may even know the names of many of the operators and technicians involved with the process.

Your VIP visitor clearly understands that you are proud of this fundamental process, are deeply engaged with the process, and understand all technical and operational details of this process inside and out. As you conclude the plant tour, your VIP has total confidence that you are the captain of your vessel, and that you and your vessel are shipshape You are fully prepared, competent, and qualified to navigate through the most difficult water and dangerous weather to deliver your passengers and cargo to your destination safely and on schedule.

Now, imagine that your VIP visitor doesn’t want to tour your facility. Instead, you are asked to take the VIP visitor on a tour of your HR department.

Are you capable of giving the same quality of introduction to the HR department? Are you confident to discuss the details of the HR department, the fundamentals of your HR policy, the developmental history of your HR process, the vital HR statistics such as turnover, sickness, employee training and development, disciplinary actions and the intervention steps to promote responsible behaviors and avoid incidents that lead to disciplinary violations. Can you explain to the VIP the aspects of your HR function that you are most proud of, and describe the current initiatives that you are pursuing to take your HR function to the next level of achievement?

At the end of your HR department tour, would your VIP visitor have the same level of confidence in you? Most likely, the VIP would leave the tour concerned that you’re obviously not familiar with the charts, can’t plot a course, and if the HR manager depends upon your guidance and leadership, your vessel will most likely end up on the rocks or sunk far beneath the waves, with all hands lost.

No Second Chances

Being an Industrial Leader is a very serious business. Mistakes can have very serious consequences. Out on the factory floor, a single major mistake can result in serious disruption of your production process, serious damage to expensive equipment, massive warranty claims for defective products that could threaten the financial health of the business, and could even lead to the death or serious injury of facility employees, contractors, or to consumers of your defective product.

Fortunately, most factory mistakes don’t result in such serious consequences. Our modern industrial processes have safeguards to protect against most if not all foreseeable mistakes.

The most common mistakes involve small changes that just don’t work as well as we might have hoped. We try a new machine or component; if it works we keep it, if it doesn’t we discard it or upgrade it and try again.

If we install a new motor on a machine, and the motor vibrates, runs hot, makes too much noise, or otherwise fails to meet our expectations, we can replace it. The machine doesn’t get angry that we installed a bad motor on it. The machine doesn’t hold a grudge. The machine doesn’t tell other machines that we are thoughtless and incompetent. The machine doesn’t quit and go work for a competitor.

Regretfully, most humans are far less tolerant when they are subject to mistakes, whether real or imagined. If you hire or transfer an employee into a position where their salary is significantly more or less than their peers in the same job, you can be sure that someone will perceive this as a mistake and will not be happy. Are you going to raise everyone’s salary to match the highest salary? Are you going to cut the high salary to match the average for the position? Are you going to terminate or relocate the new employee to solve the problem, even if the employee has performed well in the position and prefers to stay? Is everyone or anyone going to understand and accept your solution to the problem? Will you or your management team ever be forgiven for making the mistake?

Most HR mistakes do not lead to loss of life, though workplace violence is a modern reality. Disgruntled employees can cause great trauma and disruption to a workplace. Nearly all HR mistakes carry serious consequences, and most mistakes can be very difficult to satisfactorily address and resolve.

HR issues involve real people, and mistakes or issues can directly and seriously impact both the employee and the employee’s family. Terminations are especially disruptive and damaging to an employee and family. Hiring too many people, with the intention of keeping the best and terminating the poor performers, can have devastating consequences on those individuals who are terminated. Did they fail to perform adequately, or did you fail to recruit them responsibly?

If you are an Industrial Leader who thinks you can delegate and disregard HR issues, secure in the knowledge that you are devoting your time to the more important priorities of your company, you are seriously mistaken.

VR Department

You are not the Accounting expert, but you diligently monitor the Accounting Department, ask responsible questions, seek to provide support and encouragement, and strive to improve your personal accounting and finance skills.

You are not the Quality expert, but you have carefully read and considered your Quality Manual, you have studied the ISO 9000 process, you have participated in surveillance audits, quality reviews, and supplier audits. You routinely review the quality performance statistics and reports. You promote and support the quality process and the quality department, and you work to expand and enhance your knowledge of quality management.

You are not the Process Engineer, and you might not have an engineering degree, or have a degree in an unrelated engineering discipline. However, you recognize the importance of process integrity, you have worked diligently to understand the process fundamentals, and you understand the risks and hazards associated with the process. You engage with the process experts, and you seek responsible opportunities to continuously improve the process to maximize the operational and financial performance of the business to best serve your shareholders, stakeholders, and customers.

Just because you are not an HR expert either, do not make the mistake of failing to give equal attention to the HR department. I don’t recommend that you rename your HR department, because it might cause confusion both internally and externally. However, I strongly recommend that you think of your HR function as being the Vital Resources Department.

You have a lot of diverse responsibilities. You have daily challenges that are competing for your time and attention. It is too easy to relegate HR issues to the bottom of your priority list, where they will languish until the issues grow into crises.

Manage your HR Department just as you do any other vital organizational function or department. Even though you are not an HR expert, you must accept and internalize the vital importance of the HR function.

You must carefully read and understand the Employee Manual and all other HR Policies and Procedures. You are the leader of the company; you have the big picture. You understand how all the pieces of your corporate puzzle fit together. Does your Employee Manual and HR Policies and Procedures integrate properly into your vision of your organization?

I find that there are typically small issues, and sometimes major issues, where HR documentation is not properly optimized to achieve the best performance for the organization. Does this mean the HR manager failed? Almost certainly not. What it does mean is that the HR Manager doesn’t have access to the same “big picture” or “helicopter view” that the Plant Manager or Managing Director has. It is always the responsibility of the leader to ensure that each piece of the management puzzle fits properly and optimally into the overall organizational puzzle.

You must be a partner and mentor to the HR Manager. Provide your best support and encouragement to the HR function. Ensure that the HR department has the resources they require to most effectively and efficiently discharge their responsibilities.

Seek every opportunity to improve your HR skills and competencies.

When you take care of your Vital Resources with the same diligence and intensity as you devote to your other business functions and departments, you will achieve the maximum performance and efficiency from each of your individual employees, groups, teams, and departments. Your organization will never achieve its full potential unless your Vital Resources Department receives the support, supervision, and recognition that it deserves.

Frank T.

Conquering Corruption

“Trust, but verify.”

— Ronald Reagan

 

When the word “corruption” is mentioned, the thoughts of many people run to politics and politicians. However, the dark world of corruption is far deeper and broader, encompassing much more than just political corruption.

In Industry, there are many opportunities for corruption to rear its villainous visage. If we think in terms of industrial economics, there are incentives to engage in corrupt acts in both procurement (input) and sales (output) functions.

Most industrial managers are well aware of the US Foreign Corrupt Practices Act (FCPA) and the UK “Bribery Act 2010.” These laws cast broad nets to ensnare wrongful actors primarily involving bribery or kickbacks in favor of sales or supply contracts, especially involving foreign government officials.

The FCPA and Bribery Act are very serious laws, and managers must fully respect and diligently comply with the provisions of these laws. If you as a manager have any doubts or questions concerning the coverage or details of these laws, you should do some urgent research and if necessary seek professional advice.

The good news is that output side corruption or bribery requires resources. Anyone seeking to engage in output side corruption needs to have some resources at their disposal to realistically execute these corrupt acts. You as manager, assuming of course that you are not corrupt and reject corruption as a business tactic, can effectively protect against most forms of FCPA or UK Bribery offenses by maintaining strict control over budgets, and absolutely refusing to fund or authorize any spending that might directly or indirectly be used to sponsor corrupt acts.

At the risk of oversimplification, management holds the purse strings, and therefore a responsible manager can realistically protect against most if not all forms of output corruption and bribery.

Congratulations, this means that you as a responsible and engaged manager have a very good tools and opportunities to prevent corrupt output acts involving your organization, and hence can realistically protect yourself from prosecution and incarceration.

Unfortunately, this does not mean that you get a free pass on corruption and bribery.

Many industrial organizations have been seriously damaged, and in some cases completely destroyed and bankrupted, due to what I call input corruption.

Input Corruption

Competition for most products and services is fierce, and growingly increasingly intense. Competitors are continuously improving the quality of their products, and are simultaneously driving costs out of their supply chain and internal processes to maximize their competitive strength.

Some competitors, realizing that they are unable or unwilling to compete on a fair and level plane, seek to tilt the competitive odds in their favor.

The dark and secretive world of corruption is, by its nature, difficult to comprehend and understand. The economic incentives of corruption can be significant for the successful participants. This leads to a very creative environment and an incredibly diverse range of corrupt practices designed to benefit the corrupt sponsors and their conspirators in crime.

Industrial Corruption 101

OK, let’s learn about being corrupt.

Virtually every department, position, and activity can be corrupted. However, one of the most common targets for corruption is in the procurement activity.

Suppliers are desperate to sell their products and services. Competition is fierce, and the stakes can be very high. Failure to win an order can mean the failure of the company and ultimately bankruptcy. Even if a supplier is not facing bankruptcy, the pressure and incentives to win an order can be very high.

Procurement corruption can therefore be very lucrative for the participants, and can be initiated by either the purchasing officer or by the supplier. In either case, a kickback incentive is negotiated in favor of a successful purchase order.

Make no mistake, regardless of whether procurement corruption is initiated by the purchasing or supplying organization, the cost of corruption is paid in full by the purchaser, i.e. your organization.

Maintenance or services are another common area for input corruption. Even if the service supplier is competitively selected by a non-corrupt procurement process, ample opportunities exist for corrupt actors to benefit from corrupt practices.

A very common corrupt service scheme is invoicing for excessive or unnecessary services. An inside conspirator, such as a maintenance engineer, agrees to validate invoices and documentation for services in excess of those actually provided, and possibly authorizing unnecessary replacement parts, in favor of a kickback on a portion of the incremental profit earned by the corrupt service supplier.

I find that most honorable managers are quite clueless when it comes to the incredible diversity of input corruption opportunities. I don’t claim to be an expert either. Perhaps only those that have worn black hats in their past can fully appreciate the power and creativity of dark influences.

Believing in Ghosts

You can’t seek a cure unless you are ready to acknowledge the problem.

Many managers have expressed concerns to me that they think they have a corruption problem in their organization. However, they lack evidence, and don’t know what to do.

How can you act when you have no evidence of wrongdoing?

In many cases, acknowledging that corruption possibly or even likely exists within an organization is akin to acknowledging a belief in ghosts. You worry about its existence despite a lack of hard evidence.

Corruption is Corrosive! 

You might not have hard evidence of input corruption in your organization. However, rest assured that your staff is aware of its spectral presence. They might not know the details, because dark influences shun the light and leave precious little evidence.

However, the staff quickly recognizes that some people have more disposable income than they should have. They notice secret conversations, when certain individuals frequently go outside to have private mobile phone conversations. They observe favoritism, when it seems like someone is especially friendly with a particular vendor, or becomes very defensive when a vendor change is suggested.

It is also common for staff to wonder why Management doesn’t recognize these same signs. Surely the boss has noticed this same curious behavior. Is the boss incompetent, or is he / she part of the corrupt conspiracy?

Do not allow corruption to corrode your team loyalty, cohesion, trust, and morale.

Anti-Corruption Inoculation

You are the leader of an Industrial Organization. You must protect your organization from Corruption. Don’t wait until you have solid evidence of a crime; you may never be lucky enough to get such evidence.

Your integrity is also on the line. You may not be involved in corruption, you may not support corrupt acts of your staff, your motives may be entirely noble and your heart pure. Unfortunately, your staff has no way of knowing that. Your staff will simply witness the circumstantial evidence of Input Corruption, and you will be blamed for being either complicit or incompetent.

Don’t waste another day. You must implement a pro-active program to eliminate and prevent corruption.

Create an Anti-Corruption Policy: Prepare a clear, concise, written policy. Your policy should:

  • Affirm your commitment to operate your business ethically and with integrity.
  • Strive to compete on a level playing field and to provide a level playing field for your suppliers to compete to serve the company.
  • Prohibit and prevent all forms of corruption and bribery, and to implement programs to promote integrity, honesty, and accountability in the exercise of all responsibilities and duties.
  • Implement and maintain internal systems and controls to prevent unethical conduct by employees, ensure good governance, and instill the values of integrity and accountability.
  • Provide communication channels for employees and stakeholders to confidentially report suspicious circumstances without risk of reprisal.

Communicate Your Anti-Corruption Policy: You are the boss. You are the leader. You are the moral compass for your organization. You must clearly and strongly communicate that your organization absolutely has no tolerance for any form of corruption.

Do not trust your deputy managers to communicate your policy. Do not take any risk that your policy or your message is diluted during dissemination. Accept this as your responsibility, and discharge it with resolute enthusiasm and sincerity.

Engage Directly with Suppliers: Input corruption cannot occur without the cooperation and complicity of suppliers. Again, do not allow your message the opportunity to be diluted during dissemination.

Be clear, be strict, be honest. State in the most clear terms that your organization values its relationship with its product and service suppliers, and that your success is built upon the success of your relationships with your supply chain. Indicate that your organization places its highest emphasis on honest, honorable, and mutually valuable relationships. Indicate that corrupt acts, no matter how small, have no place in your supplier relationships. Gifts or other forms of incentives, esteem, or gratitude exceeding a token or nominal value are not welcome. Emphasize that any corrupt acts, regardless of form or method, are completely unacceptable and will be dealt with in the most strict and severe manner.

Most importantly, include the anti-corruption statement and Whistleblower Contact Information to allow suppliers to report any corrupt action or inquiry.

I recommend that you establish a multi-tiered communication strategy to ensure that your message reaches each supplier, and that the receipt is validated.

But I have 1,000 suppliers, and even more prospective suppliers … how can I possibly communicate to all of them?

Welcome to the 21st Century. With our diverse digital infrastructure, there is never any excuse for not being able to communicate with one or one million people.

Bidders: With every bid, require your prospective bidders to submit a signed acknowledgement accepting your company’s anti-corruption policy. This should be signed by an authorized director, and I suggest that you also collect signed copies from the manager(s) of the relevant supplier departments. You need to be sure that your anti-corruption message has been received and understood by the people who are in a position to engage in, prevent, or witness corrupt acts.

Suppliers: Each supplier should be required to sign and return your company’s anti-corruption policy at least annually. If a single supplier provides multiple products from different divisions or locations, be sure that each division / location has signed and returned an acknowledgement form.

I also recommend that your anti-corruption policy be clearly referenced on your standard Purchase Order and Purchase Requisition forms. Most importantly, ensure that the whistleblower hotline contact information is provided. You must maximize the risk that a corrupt act or inquiry will be reported and acted upon, to have the best hope of preventing a corrupt act from even being considered.

Quality: Be sure to build your anti-corruption program to eliminate opportunities for evasion.

Most likely your organization has a Quality Department, and follows a quality policy manual that includes supplier qualifications and validation.

I think you can agree that anti-corruption is a quality that you wish to encourage and enforce among your supply chain.

I suggest that you directly involve the Quality Department in receiving, recording, and validating the anti-corruption acknowledgements from suppliers. By diversifying the responsibility for anti-corruption among multiple departments, you significantly increase the likelihood that your system cannot be compromised.

Localized Standards

Today most Industrial facilities are located overseas. Our parent companies insist that we comply with the USA standard “FCPA” or the UK “Anti-Bribery Act”. However, our employees may wonder why they should be seriously concerned with compliance to foreign standards.

We are a sovereign nation, we have our own culture, laws, and standards. Why should we subjugate ourselves to foreign laws and standards?

The simple answer is that your company exists in a globalized business community, and that FCPA and other laws and standards are relevant to your business regardless of where it is located.

However, why limit yourself to compliance only to these important but “foreign” laws.

Most countries and jurisdictions have their own very good anti-corruption initiatives. If you are serious about anti-corruption, I recommend that you seriously look for local initiatives to compliment your FCPA and Anti-Bribery compliance programs.

Here in Thailand, for example, the Thai Collective Action Council against Corruption (Thai CAC) is taking a high profile public leadership position against corruption. The Thai CAC offers membership and certification programs for companies to declare and demonstrate their intent to eliminate all forms of corruption.

By getting your company directly involved with respected local anti-corruption initiatives, you are clearly indicating through both words and deeds your determination to eliminate corruption from your organization.

Risks and Rewards

Ok, perhaps you agree that input corruption is a dark problem that needs to be addressed. You think you may have a problem, and you would like to take some prudent steps to minimize your exposure.

Congratulations, acknowledging the problem is a major step towards solving it.

However, you were looking for a silver bullet, and all I have given you is a new level of bureaucracy to further complicate your business systems.

Thanks a lot!

If you and your team view this as another level of bureaucracy, this program will fail. Frankly, if you allow your team to view any of your internal initiatives  and policies as just another level of mindless bureaucracy, your programs are doomed for failure.

Is Safety just another level of mindless bureaucracy? Is Quality and ISO 9000 mind numbing bureaucracy. Do you allow your team or yourself to be seen to be just going through the motions to comply with Corporate edicts without enthusiasm?

You are the boss, and your integrity is always on the line. If you allow your team to think that any program or policy is just a bureaucratic waste of time, you compromise both the program and your personal integrity. You must either defend the policy and ensure that it is implemented in the most efficient, effective manner, or you must fight to eliminate the program. Industry today is too competitive to allow wasteful programs to be perpetuated.

However, if you are an enlightened manager, if you have experienced or witnessed the destructive impact of Input Corruption, you will quickly value the importance of an effective Anti-Corruption program.

Do spoken and written words really make a difference? Absolutely!

The vast majority of your staff want to work for a high quality, honorable, safe company. They will be proud to serve a company that does not allow a few rogue individuals to leverage their positions to generate personal profit at the expense of the organization.

By creating a highly visible, well documented, and rigorously enforced anti-corruption policy, you significantly increase the risk inherent in any corrupt activities. If the risk is too high, potentially corrupt individuals will not seek the rewards to be gained from corrupt acts.

Eliminating the scourge of corruption from your organization is hard, but far from impossible and eminently well worth the effort. Take prudent, pro-active steps to create, communicate, implement, and execute a strong anti-corruption policy.

You can and must inoculate your business to protect it from any and all forms of corruption and corrupt influences.

Frank T.

Loan Sharks Circling

Is there no end to the number and types of issues that an Industrial Leader must deal with?

Loan Sharks are prevalent here in Thailand and throughout most of Asia, but predatory loans of various types are a global phenomenon.

In the USA, many employees get trapped into Payday Loans, which are small loans with high interest rates and fees of up to 400% on an annualized basis.

Unlike Payday Loans in the USA, which are legal, loans from Loan Sharks are illegal in most jurisdictions. Unfortunately, they remain prevalent, widespread, and highly destructive to those unfortunate individuals who become trapped by predatory loan agents.

Many company work rules forbid employees to loan money to each other for profit. Here is an example of language that is common in many Thailand based work rules:

An Employee shall not acquire any advantage by money lending among Employees, play illegal lottery, be a collector or a member of a money pool, or perform any activity for profit. 

In nearly every company that I have managed here in Thailand, I have run into issues concerning Loan Sharks. From my many discussions and relationships with companies and business leaders in other countries, Loan Sharks and predatory loans are a scourge that impacts employees everywhere.

Not the Company’s Business

Okay, I understand that Loan Sharks are scum, and that predatory loans are a terrible trap that ensnares many victims. However, why do I need to worry about this problem. I already have enough problems to manage in my factory.

Life is always going to be a challenge, and my employees and their families will sometimes suffer minor or major crises. Do I need to be personally involved every time someone’s puppy dog gets run over by a car?

Employee Retention and Loyalty Is Your Business

Yes, it is true that even with the best of intentions, an Industrial Leader cannot take responsibility for solving every problem that an employee might encounter. We can and always should be compassionate, but there are genuine limits on what issues we can and should seek to address.

The financial security and personal safety of your employees must be a priority. Predatory loans and loan sharks can and often do sink your employees deep into debt with almost no hope of salvation. When an employee is paying nearly all of his salary directly to a loan shark, the employee loses the capacity to be a loyal and responsible employee. Escaping the clutches of the loan shark is frequently the single highest priority of an ensnared victim.

It is not uncommon for a loan shark victim to simply disappear, individually or as an entire family. You lose a valued employee, and the employee loses a job, perhaps a career, and certainly his or her reputation as a loyal employee.

Shark Warning: No Swimming

I will suggest that the worst Loan Shark is the one who is working for your company, ensnaring your valued employees.

In my personal experience, employee Loan Sharks are extremely common, and extremely damaging. These in-house Loan Sharks are frequently in positions of authority, such as foremen, supervisors, or department managers. They loan money to employees, including subordinates in their own departments, then use their position of authority to enforce repayment of the loan.

I have personally encountered several instances of Loan Sharks operating inside my companies. Each shark was in a supervisory position, and had ensnared a number of victims. Some victims managed to pay back the loans, others sunk deeper into debt and despair as egregious interest charges mounted.

One revelation common to each case was that the staff in general was well aware of the Loan Sharking activities. Most of the employees were well aware of the rumors concerning who was Loan Sharking, and who were victims. People are generally poor at keeping secrets, and desperate people share their despair with their friends and colleagues.

Unfortunately, rumors about rules violations (and indeed law violations) such as Loan Sharking typically only reach the ears of Sr. Management when the problem becomes severe. By that time, employees may assume that Management must also know of the problems and the rules violations, and wonder why Management takes no action to address the problem. Management integrity can be seriously impacted even though the manager is truly unaware of the problem and would be sympathetic if aware.

Shark Repellant

Don’t assume or hope that your company doesn’t have problems with Loan Sharks. Most likely you already have at least one active Loan Shark on your staff, or you soon will. Without a proactive policy, eventually (likely sooner rather than later) someone on your team will take advantage of another employee and ensnare them with a predatory loan.

Check the law in your jurisdiction. Be sure you understand what the law says about predatory loans, non-bank loans, and loan sharks.

Check your work rules. If your work rules don’t clearly and strictly prohibit money lending among employees, revise them accordingly. Naturally, you should always consult with a lawyer or other legal authority to ensure that your rules are properly written and are enforceable.

Most importantly, you as leader must very clearly, loudly, and publicly announce that lending money among employees is strictly prohibited, and anyone taking advantage of another employee by lending money will be strictly punished. This message must be repeated periodically, probably every six months, certainly not less than annually. Your organization must clearly understand that your company culture of care and respect for fellow employees means that predatory loan sharking is completely unacceptable and will not be tolerated.

Teaching Financial Responsibility

Eliminating predatory loan sharking within the organization is very important, and must be taken seriously by management.

However, management should also seek to provide employees with basic financial skills and advice to enable them to effectively manage their money and protect their families.

I encourage companies to include Personal Financial Skills training for all employees. Training can be provided in the form of a seminar, a take-home pamphlet, a series of 5 minute “tool box talks”, and/or other forms of engagement and outreach. It takes some effort to assemble a financial responsibility program, but it is well worth the effort.

Actively promote employee loyalty and tenure as a source of financial stability. Employees who are employed for several years can often qualify for bank loans, whereas “job jumpers” have difficulty gaining bank credit.

Don’t neglect discussing employee health and personal safety practices. Many people fall into debt and get ensnared by loan sharks due to unexpected medical expenses. A healthy and responsible lifestyle, especially avoiding accidents and injuries from contact sports, intoxicated driving, irresponsible motorcycle riding, or unsafe home repairs, can eliminate many if not most unexpected major medical expenses.

Do not wait until loan sharks ensnare and devour your employees and destroy your team loyalty and motivation. Protect your staff and organization today.

Frank T.

New Car Smell: Preserving the Pride

Do you ever sit down and talk with your industrial employees? Do you really get to know them? Do you learn about their troubles and triumphs?

For many factory employees, one of the most proud events in their life is when they buy their first new car. Buying a new car, or even a nice used car, is a major accomplishment and financial commitment. A new car also represents a significant emotional event, announcing to the world that through hard work and dedication, the employee has achieved a very visible symbol of personal success.

I have watched my employees beam with pride as they park their new car in the parking lot. They choose a safe spot where their precious vehicle is unlikely to be bumped by a carelessly opened door. They wash and wax the car to protect the paint from damage. They drive carefully, and don’t follow too closely to other cars or especially trucks to ensure that their car doesn’t get chipped by debris. They don’t let anyone smoke, eat, or drink in their new car; they want to enjoy the new car smell as long as possible.

They also take their car in for routine maintenance, strictly following the recommendations of the owner’s handbook. Oil changes, tire rotations, filters; nothing but the best of care for the beloved new car.

Alas, the new car smell fades over time, and with it fades the pride of ownership. Parking at the back of the lot is too inconvenient; better to take the closest spot available and risk having a door bumped. Washing and vacuuming the car takes time and effort, and the car is surely going to get dirty again the next time it rains.

Fortunately, the car doesn’t seem to mind if an oil change is delayed or skipped entirely. The car owner saves a bit of money, and there is no immediate evidence that the car has suffered due to a skipped maintenance task. The car still (usually) starts every morning, and despite the fact that it is no longer shiny, smells like an old gym locker, and makes strange knocking and squeaking noises, it still manages to carry its owner from one place to another.

Any modern car, even an economy model, can deliver several decades and hundreds of thousands of kilometers of safe transportation if responsibly cared for. The reliability and durability of a modern car is truly amazing.

However, it also seems most true that those individuals who can least afford to replace an aging car are most likely to neglect the care and preventative maintenance of the car. Once the new car smell is gone, neglect replaces pride, complacency takes the place of care, and the reliability of the car rapidly degrades along with its appearance and value.

Okay, I understand that this short story is not surprising. You tell me that this is simply human nature. Love fades. Familiarity breeds contempt. What does this have to do with Industrial Leadership anyway?

Our facility is filled with equipment and systems that are vital to the success of our business. In many cases, the condition of our equipment is not just a matter of performance and efficiency, but human safety and environmental protection can also be compromised by poorly maintained equipment.

Joint Ownership

As a manager, you can observe how an employee takes care of his or her car, but you don’t have any input or control over whether the employee is a responsible car owner or not.

However, you are responsible and accountable for the equipment and systems in your facility.

If you expect your facility to operate safely and reliably as it was designed, and to deliver the maximum operational performance and efficiency with the minimum environmental impact, you need to ensure that your equipment and systems stay “like new”.

Many managers say that they want their employees to “take ownership” of their various tasks. Nothing wrong with this concept. However, the manager must remember that ultimate accountability remains with the manager. Therefore, this is fundamentally a policy of joint-ownership.

Preserving the New Car Smell

Yes, complacency is part of human nature. That does not make it inevitable or desirable. A responsible manager must work to conquer complacency.

I can’t tell you how many times I’ve toured industrial facilities, and seen important equipment that was dirty, scratched, dented, obviously abused, and clearly unloved. A six month old machine that looked like it had already suffered six years of extreme abuse. When the machine then fails prematurely, the manager and team insist that the machine was defective or inadequate. It is the supplier’s fault for supplying an inadequate machine.

Complacency can be conquered. The antidote of complacency is pride. Pride of ownership. Pride of performance. Pride of accomplishment.

An enlightened, responsible manager always insists that each employee or team maintain their equipment and systems in “as new” condition. Not merely clean, but shiny and bright. It is not adequate to merely operate the equipment as it was designed to be operated, it must also be cared for lovingly.

Equally importantly, the manager must recognize and reward employees and teams for their success in maintaining the new car smell. This must be an engrained, continuous activity, a habit, a deeply imbedded aspect of company culture.

But We Have a Janitor

Pride cannot be outsourced. A janitor can sweep floors and empty the garbage cans, but never allow the vital care and cleaning of equipment to be delegated to a janitorial or contractor team.

The manager should always insist that the employee or team responsible for a machine or system also be responsible for the care and cleaning of the system. Allow the employees the opportunity to develop pride in their equipment, just like the pride they show for their first new car.

Care and cleaning is an investment in the long term reliability, efficiency, and effectiveness of the equipment. As manager, you must ensure that you are allocating your employees enough time, along with the tools and other resources, required for them to complete these vital tasks. Don’t expect to preserve the new car smell if you refuse to allocate adequate time and resources, and/or fail to recognize and reward performance.

Be a responsible co-owner of the equipment, and insist that the equipment is preserved every day and every hour of every day to ensure that the new car smell, the shine, and the brand new performance and reliability lasts for the full life of the equipment.

Be Consistent

Don’t expect to be successful if you only implement the new car smell operating philosophy for selected special pieces of equipment and/or only for new equipment. There is no unimportant equipment in your facility, nor are there any unimportant processes or people.

As managers, we don’t always have the luxury to start with a new facility, new equipment, enthusiastic and well trained new employees, and eager new customers. The new car smell philosophy can and should be applied to all equipment and systems, regardless of age or condition.

Don’t expect an employee to have pride of ownership and operation until the employee can also feel pride in his / her equipment. If the equipment is old and dingy, clean it, paint it, restore it. Absolutely fix or remove any broken or unnecessary accessories.

Do not tolerate chips, dents, and scratches that are past evidence of abuse. Tolerance of past abuse is an invitation for ongoing and future abuse.

It may not be practical to restore the machine to “as-new” condition, like an antique car in a museum. However, it is always practical and in fact it is essential that equipment be restored to a condition that affirms that the machine is still vital and valuable.

Rental Equipment

Don’t allow any exceptions for leased or rented equipment, or for equipment provided by contractors or partner organizations.

Care for your leased forklift trucks, your leased office equipment, your leased company car or truck, exactly the same way as you treat the equipment you own.

Remember, your team is totally committed to Safety First as the path to achieving Operational Excellence. Insist that your team always strive to achieve and demonstrate Operational Excellence regardless of the task involved or equipment utilized.

When Outside Help is Required

When significant PM or major maintenance is required, insist that the employee stay with the machine to supervise the care and maintenance. If the employee doesn’t have the necessary training or skill to perform the maintenance, naturally it is very important that the employee leave these tasks to the skilled specialist technicians. However, they should still remain engaged in the maintenance process, watching and learning from the technicians, and ensuring that the technicians treat the equipment with the same care and pride as the employee owner / operator.

Always insist that proper tools are used and proper procedures are followed. If you only provide your team with crappy adjustable wrenches and home made hammers, don’t be surprised to find your valuable equipment stripped and beaten.

Good tools are expensive.

However, bad tools are twice as expensive!

And even worse, poor tools, and/or the wrong tools, are frequently unsafe. Don’t tolerate unsafe or unprofessional performance from your production employees, your maintenance staff, or your third party service technicians.

“New Car Smell” is Addictive

Habits take time to form, and once established, can be just as hard to break. However, addictive substances can quickly capture a person and be very difficult to overcome.

Both legal and illegal addictive substances are a terrible scourge on our society. By making reference to “new car smell” being an addictive substance, I do not mean to demean, diminish, or disparage the genuine problem of substance abuse and addiction.

The direct personal pride that arises when a team and company seeks to maintain the new car smell is very powerful and persistent. And in many ways it is shares many attributes with a true addiction.

You will find that your team is eager to come to work every morning to get a new “fix” of new car smell. They will actively seek opportunities to increase the dose of new car smell they can get every day. Their behavior will be modified by this addiction.

Employee retention and loyalty will be enhanced, because employees won’t want to suffer the withdraw symptoms if they can’t get their daily dose of new car smell.

Recruiting new employees is also enhanced, as existing employees will be eager to share their addiction with their trusted friends, allowing them to also experience the high that comes from pride in a job well done.

Be a champion for new car smell in your workplace. Get your team addicted. Put the “high” in High Performance.

Frank T.

Leaders are Readers

Our modern capitalist economy is a highly competitive environment. This is especially true for Industrial Manufacturing and Industrial Services. Globalization has recently drawn dozens of under-developed and emerging countries into the global capitalist economy. The global supply of productive resources, commodities, and labor has thereby grown significantly and rapidly. However, the global demand for products and services has seriously lagged behind the growth of supply. Welcome to the new world of hyper-competition, where only the fittest organizations will survive.

Survival of the Fittest

As the leader of an Industrial organization, you need to manage, motivate, mentor, and monitor your company to survive and excel in this competitive environment. Good intentions and hard work are important and noble attributes, but alone they are not sufficient to lead your organization to realize its full potential.

The successful leader of a high performance organization needs to develop a diverse repertoire of relevant skills and experience, and constantly refresh, update, and expand this knowledge, in order to provide the high quality guidance and direction an organization requires to achieve and maintain success.

The Technological S Curve

Technological development and innovation is not a new phenomenon. Humanity has been innovating and constantly pushing the envelope of knowledge and technology since man first learned to harness fire and developed the wheel.

Technological development is not, and has never been, a linear process. Knowledge and technology develops exponentially. This was true for the Gutenberg printing technology, the steam engine, electricity, aviation, and our various digital technologies. Moore’s law is not unique to the computer chip. The exponential development theory underpinning Moore’s law was equally valid for each of the aforementioned technological innovations.

The difference between the printing press and the computer chip is that the time scale for technological development has been compressed. This is also a feature of technological S curves. As new technologies build upon previous discoveries and innovations, the pace of development and distribution of technology increases. An S curve is much more noticeable to mortal humans when the development takes place over a period of a decade or less. It has historically been much more difficult for us to recognize the exponential nature of technological development when the development timescale was on the order of one or more centuries.

S Curves don’t merely describe the pace of technological innovation. Nearly everything in our professional environment is undergoing exponential change. This includes government regulations, domestic and international taxation, social change, economic change, geopolitical change. The whole world is becoming a fast moving blur.

You Can’t Get There From Here

With the constantly accelerating exponential changes that our world is experiencing, a manager must work diligently to keep pace with the changes. You may manage to navigate the way to your destination using an out of date map, but you will certainly encounter serious delays and detours along the way. If your competition is using an up to date map, or more likely, using Google Maps with real-time traffic advisories, you have no hope of beating your competition to the destination.

Lifelong Learning

If you want to keep pace with our rapidly evolving world, and ensure that your skills and experience remain up to date, you need to seriously commit to lifelong learning.

Reading the local newspaper, watching CNN or the BBC, and following updates on Facebook and Linked-In is OK for keeping up to date on basic current events, but sorry, this does not constitute lifelong learning.

Despite the proliferation of digital technology over the past decade, the best sources of knowledge remains old fashioned books. Well respected authors and experts continue to pour their knowledge and wisdom into new books each year. The competition for book sales and royalties continues to improve both the quality and quantity of books available.

The good news is that it is no longer even necessary to go to a bookstore to buy your books (good news unless you happen to own a bricks and mortar bookstore). If you still prefer traditionally printed books, Amazon is a great source. If you are like me and have made the transition to eBooks, you already know that Apple iBooks and Amazon Kindle offer digital versions of virtually all current fiction and non-fiction books, as well as the classics.

A Diversified Portfolio

As a business leader, you face a diverse range of professional challenges and opportunities. You need to pursue a diverse range of professional knowledge if you wish to lead your organization to achieve its full potential.

Certainly, if you are a manager, you should read books on management and leadership. If your primary responsibility is sales, there are many great books on selling, marketing, customer relationship management, etc.

However, don’t make the mistake of focusing too narrowly on your core competency or primary area of responsibility. Don’t limit yourself to becoming a “one trick pony.”

Work diligently to expand your knowledge. Exercise your mental faculties. Expand your academic and intellectual horizons. Broaden your mind. Enrich your intellect. Seek interesting new cliches to use in your future essays.

In the past few years I have read quite a few economics books. I don’t expect to start a new career as an economist. However, by studying both current and historical economics, I am much better able to understand, evaluate, and utilize economic trend and forecast data that is an important factor in our business strategy development.

I also read books on geopolitics. Geopolitics involves elements of economics, leadership, strategy, tactics, intelligence, positioning, signaling, and history. The goals may differ, but business leadership and political leadership utilize many of the same skills and tools as does industrial leadership.

Corporate Governance, Science, History, Management, Sales, Philosophy. There is a nearly endless range of non-fiction topics that can directly or indirectly enrich your skills as a business leader and your overall success and satisfaction in life.

I spend most of my personal development time reading non-fiction books. However, probably around 25% of the books I read are fiction. I usually choose classics for my fiction diet, such as Mark Twain, H.G. Wells, Edgar Rice Burroughs, Arthur Conan Doyle, Jules Verne, and Charles Dickens. I occasionally also read modern fiction. Fiction of course provides enjoyment and relaxation, and represents an important break from intellectual pursuits.

However, don’t underestimate the value of fiction as a source of leadership and strategic advice and inspiration. Fiction also helps expand your social and empathic skills, which are vital to your role as a leader.

Readers are not necessarily good leaders. However, true leaders are always readers.

Frank T.

Networking or “NotWorking”

Management gurus typically recommend that Sr. Managers and Executives spend at least 30% of their time engaged in professional networking.

If this advice is to be believed and followed, we should on average allocate 12 hours per standard 40 hour work week to networking.

There is little doubt that a prudent, rational professional networking strategy can greatly benefit a manager. A strong professional network ensures that the manager enjoys a diverse array of skilled and experienced professional resources to draw upon, in addition to knowledge derived from professional seminars and conferences, to support the manager in delivering superior management performance and direction to the organization.

If you are self-employed or enjoy a great deal of autonomy, congratulations. You have a great deal of flexibility in determining how much or how little networking you wish to do, assuming you are effectively managing your affairs and not allowing your affairs to manage you.

However, if you, like most of us, have a direct supervisor, such as the CEO, who is not an enlightened and effective networker, you may have quite a challenge justifying time spent away from the office.

“NotWorking”

If your networking activities are not generating actionable, easily observable results, then perhaps you are NotWorking instead of Networking.

A lot of useful networking is done on the golf course. Evening cocktails with the local networking group or chamber of commerce can also be productive. However, though these “social” networking events can be productive and useful, individual social networking events can also prove to be a waste of time and resources.

I enjoy attending various social networking functions, and I believe that they are an important resource for the professional manager, especially if the social function is carefully selected. However, I typically consider these to be my low-priority networking activities.

Interestingly, most of the managers I know seem to feel that social networking is the only type of networking event. I promise not to judge executives for whom networking is a necessary exercise to relieve the stress of a fast-paced, high pressure job, and to enjoy a few hours of liquid therapy with professional peers.

However, let’s also agree that this is not the most effective way to achieve the benefits of a proper networking program. This is professional “NotWorking”, not Networking.

Putting the “Work” in Networking

Managing an Industrial Manufacturing or Service company is a significant professional challenge. The manager is faced with a wide range of both challenges and opportunities, distributed across a broad spectrum of disciplines. Even a highly experienced manager won’t have the necessary skills,  expertise, and or resources required to provide leadership the team requires to execute all these tasks independently.

Facing an unfamiliar task or challenge is highly stressful for even the most cool or most highly medicated manager. Your company and team doesn’t expect you to instantly have the answer to each and every challenge. However, it is quite reasonable to expect an experienced and competent manager to be able to rise to a challenge and promptly find a prudent and viable solution.

A professional network is a diverse collection of friends, peers, associates, and acquaintances having knowledge, skills, and experiences that are complimentary and useful. If you are a plant manager, the lady who sells fruit down at the market probably doesn’t qualify as a resource for your professional network. However, don’t think that cultivating relationships exclusively with peers having jobs and experiences most similar to yours constitutes a satisfactory and effective professional network. You face a diverse portfolio of challenges, you need a diverse portfolio of professional friends and resources.

Networking in Action

In my professional community, I have some favorite networking venues and resources that I am confident provides me with strong and diverse professional resources, and also directly contributes to my quest for continuous education, improvement, and lifelong learning.

Here in Bangkok, we have a number of excellent Chambers of Commerce, including the American Chamber of Commerce of which I am a member. I routinely attend meetings of the Business and Economics Committee, the Customs and Excise Tax Committee, the Legal Committee, the Aerospace Committee, and the Energy and Environment Committee. I also routinely attend the AMCHAM Monthly Luncheon.

It has not escaped my notice that I am one of the few industrial managers attending most of these meetings. Does that make me a contrarian? Perhaps. However, it also means that I keep myself well informed and abreast of current issues and developments in the areas of corporate tax, customs; the domestic, regional, and global economic environment; best practices in environmental management, and the status and forecast for the vitally important energy industry. The knowledge I acquire makes me a better manager and leader. And the relationships I develop ensure that I can promptly access highly qualified professional support whenever I need it. Naturally, I am also a humble resource for members of my professional network who might seek my advice or insights.

I also maintain memberships in a few other professional organizations and societies, and carefully budget my time to attend events that are most likely to deliver the maximum amount of benefit for the investment of time required.

Who You Gonna Call?

Social media and a wide variety of digital resources, including professional resources such as Linked-in, are rapidly changing the landscape for establishing and maintaining a professional network. However, the business card has not yet gone out of style.

I always seek to exchange business cards with new professional contacts. At least once per week I go through my business cards and enter names, titles, and brief details into my Contacts List. I also search each contact name in Linked-in, and make contact requests for those professionals who are Linked-in members.

I do of course exercise some judgment concerning whom I enter into my contacts list and connect with on Linked-In. However, I try not to be too selective, because when a crisis erupts, you never know what resources you might need urgently. Ten years ago I had a shooting in my factory. Two of my employees were seriously wounded by a fellow employee, who then fled and avoided capture by the police for several days. Immediately following the shooting, I urgently needed a professional security company to secure and protect my plant site while the police conducted their investigation and tracked down the gunman. The shooting happened at 3:00 am, and thanks to my contacts list I had the mobile phone number of a highly respected security professional. I woke him up at 6:30 am, and we had armed guards at the site by mid-morning.

To provide the best leadership and service to an Industrial Manufacturing or Service company, a manager must diligently cultivate a diverse portfolio of professional contacts, and should routinely attend conferences and seminars to expand and update the knowledge and skills required to manage, monitor, and mentor the team. This is a demanding and challenging chore, which justifies the Work in NetWorking.

Frank T.

Is Teamwork Killing Your Company?

Management experts always emphasize the benefits of teamwork for creating and maintaining a strong organization. It is clear that an effective team can accomplish more than a individual or a collection of individuals working independently. Members of teams also typically demonstrate improved morale, work more efficiently, and develop and execute better solutions to problems.

Industrial Teams

Industrial products and services companies typically have a number of teams operating simultaneously to achieve overall organizational objectives. The most common teams in organizations are the various departments, such as Accounting, Purchasing, Maintenance, Production, Human Resources, Administration, and Sales. These teams are effectively permanent; they are established at the birth of the company, and persist as long as the company does.

Teams may also be established on the manufacturing floor, such as an assembly team, a painting team, an electrical PM team.

Most companies also develop one or more cross-functional teams, consisting of members selected from various departments or other teams. These cross-functional teams are more likely to be temporary in nature, and are formed to address complex tasks such as major projects, quality or efficiency initiatives, or organizing the annual New Year party.

Teams are truly an essential feature of modern businesses.

The Trouble with Teamwork

Most managers fail to recognize that even a great tool such as Teamwork needs to be carefully monitored and managed. Without responsible oversight and management, teamwork can evolve into a destructive force that can reek havoc within the organization.

You’re Not on My Team

Most cultures encourage and value cooperation and teamwork. Asian cultures, and the cultures of agrarian or recently-industrialized economies, tend to emphasize cooperation and conformity over individuality, and are therefore more likely to be team-oriented.

However, in most organizations that I have had the privilege of closely observing, teamwork quickly degenerates into a “members-only” club. The Accounting Team develops a strong shared identity and mutual trust and respect, but don’t like or accept the Maintenance Team. The Purchasing Team enthusiastically cooperates and shares information with each other, but don’t like the Production Team. The Sales Team maintains an outward focus and primarily interacts with customers, rarely interacting with any of the other teams. Each team thinks they are the most important team, and yearns for the respect that they deserve.

Without careful management, strong effective teams frequently erect virtual walls to isolate and protect their team from unwanted outside influences or interference. Just as an effective team can greatly enhance the efficiency and performance of its members, a team can also create very powerful barriers that inhibit cross-functional performance and can cripple an organization.

Early in my management career, I struggled with the destructive aspects of teams working in isolation. Even in a small office, a small workshop, or a modest sized industrial site, it is amazing that a virtual wall can be more effective than a physical wall or a great physical distance in isolating teams from each other and disrupting cooperation. A manager can easily deal with a physical wall or barrier, or reorganize the office layout to reduce the distance between teams. However, virtual walls can be very persistent and pervasive.

Shared Identity

Yes, we want and need to encourage and develop strong, effective teams. However, we must diligently guard against “members-only” teams. Once a team builds barriers, the power of teamwork makes it very difficult to remove the barriers to restore cross-functional cooperation and to maximize overall organizational performance.

In my experience, the most effective way to prevent team isolation is to create a strong shared organizational identity. Management must strongly promote an organizational identity, and ensure that every employee believes that their status as a member of the organization overrides their membership in any subordinate teams or departments.

Each organization should carefully consider and decide on an appropriate shared organizational identity. This shared identity should then be consistently promoted to all employees. Most people value being a member of a group, want to be proud of their membership in the group, and seek to be a good member and support of the group.

All In The Family

I personally like to promote the concept of Family as the shared identity for my organization. I explain to my team that a family consists of a diverse group of individuals, young and old, male and female (and any of the gender classifications recently proposed by our friends in the USA), having different education, skills, jobs, experiences, and preferences. The members of a family typically work independently of each other, but they always share a common bond and respect for each other. Members of a family eagerly work to achieve common goals.

Most of us spend more of our waking hours together with our fellow employees than we do with our biological families. It is therefore quite important for both harmony and performance that we treat our fellow employees as family members, and place the interests of our industrial family higher than those of our department, team, or other sub-grouping.

Teamwork will always remain a vital tool and skill for achieving maximum task performance. However, without a strong, inclusive, shared organizational identity, teamwork can and most likely will become a divisive and destructive force which will diminish overall organizational performance.

Consistently cultivate a shared organizational identity to ensure that the organization can derive maximum benefit from teamwork while maintaining harmony and cooperation throughout the organization.

Frank T.