(214) 450-7864 Holloway@5thOI.com

In any given factory or shop on any given day, there is a fantastic dynamic at work that spells success or failure. If the business model is sound and management is not contributing to the failure of the business, then attention should be paid to the employees. We have all worked with someone who is a drain on the company. Indeed, we often wondered how they ever were hired, and worse, why they were still around.  The unfortunate fact are the odds that these folks will ever change are remote. There may not be much one can do about these sorts of failures, but they should be brought to light nonetheless. We all know these types, they are:

The Royal Highness – This employee blueblood believes that some, if not all, of the tasks required to do the job are beneath him. In certain instances, he will try to pawn them off on an unsuspecting Doofus and then provide total blame when things go bad. Often, he has a very high opinion of himself, yet it is all smoke with nothing burning. Most have little talent; in rare cases, he combines some Scammer techniques and works his way into a management role. Most everyone that has ever worked with the Royal Highness realizes what he is, and if a management role is ever assumed it is short lived.

The Scammer – These rascals are shrewd and cunning and can often outperform everyone else in the department if focused on the job at hand. Unfortunately, they spend far too much time and energy scheming and defrauding the business or planning ways to manipulate another employee into doing something for their own self-interests. They gain satisfaction in “getting over” on the company. They are extremely competitive and view management and upper management as adversaries; anytime they get something by management they feel they have won.  When directed properly and compensated appropriately, these employees can be a star.  Often, they do what they do for the challenge and excitement and keep doing it for the self-perceived rewards.

The Gadfly – This insect is so deeply absorbed in the office politics, business rumors (about the competition or their own company), or the various assignments that other employees are working on that they lose focus on what their job is supposed to be. The Gadfly has talent and passion, but it is misdirected. Often these employees are not challenged enough.  With aggressive management styles and increased workload, the Gadfly can succeed. Caution: The Gadfly might be a Chronic Ache in disguise. It is difficult to discern and sometimes a metamorphosis occurs.  Once this change occurs, it becomes a manager’s nightmare – they combine rumor, myth, and talent to become an amazing burden.

Doofus – This employee is simply the employee that just cannot think. They often hurt themselves or break equipment, cannot remember various tasks, and require almost constant supervision. It is unclear how this employee got to the position they are in, because if they were interviewing for their job, they would not stand a chance. Often these employees are friendly and would do anything you ask.  They will work long hours and rarely complain. The problem is most of their work could have been done in a fraction of the time.  They are a drain on the company and a burden on the team and their boss.  Many times, it is believed the Doofus either is a substance abuser or has legitimate mental or psychological problems – nobody could be like that without a good explanation.

The Chronic Ache – This pain produces more lost time and contributes to the overall downfall of the group or department more than any other employee. The Chronic Ache will complain about everything and make it exceedingly difficult for other employees to remain positive. They believe the company owes them and has taken advantage of them.  There is a recognizable grey mist of discontent that follows them wherever they go, and they can suck the life out of anyone with the bad fortune of asking them about their day. This employee is typically shuffled around to various departments.  A boss may take them on as a test of their management metal, or they may inherit them because they were blindsided or railroaded into taking the Chronic Ache.

It can be difficult on management to deal with these various types.  Often, employees exhibit only nuances of these characteristics and in some cases, they can work their way through them.

“I see employee failures every day, little failures hopefully,” said Chris Aldrich, Vice President of Mechanical Drive Components Inc. “It is a necessary part of the learning process. I think employees fail on a grander scale because of inexperience. Life is a series of failures and reactions to failures. It’s what you gain from failure that makes you a real person. Often a company must put forth the right training, as well, rather then give lip service.”

Sometimes the employee also is over-employed. Their skills or experience do not match job description – a bad fit. They could also be under-employed, bored, burned out, or depressed. They may also have the martyr syndrome, thinking they work harder and longer than everyone else does – but still cannot get their job done.

Alternatively, they have mastered the passive aggressive behavior. “Oh, nobody told me about that…”  There are even those who are perfectionists, who can never complete anything because it’s never quite good enough. They are afraid of failure.  Then there are the procrastinators.  These employees wait until the last minute to start projects.  Fortunately, procrastinators usually seem to always pull it out in the end. I should know…

Manmade Failures – Failure of Leadership

If physics is the science of pushing matter around, then management is the science of pushing people around. With physics, great things can be accomplished. With management, business can flourish. Anytime a group of people is assembled to complete a task, and co-exist, management is required. Families, sports teams, military forces, production staff – all of these require management. But managers must be well organized, well trained, have the subordinate’s best interest at heart and maintain a steady driving force. That’s not how it always works.

Often, management is the sole reason why a company fails. Not unlike an unbalanced bearing or a hot running motor, management failure can be predictable, and the root cause can be understood. Of course, understanding why a motor fails is far easier then understanding why a manager has failed.

There are loads of reasons why management failure occurs, but bad managers can basically be characterized into four groups. (The bad ones may belong to two or more!)  They are:

The Roach – The manager that lacks integrity.  This creature is greedy, may look to capitalize at the expense of its subordinates, can be dishonest, immoral, and unethical, lack accountability, be very inwardly fearful and have a huge, displaced ego.  They believe that their market understanding, and vision supersedes the corporate objective.  They also know how to play upper level management. They typically throw subordinates under the bus while offering up solutions that may have been suggested by another subordinate.  The chance of the Roach giving credit where it is due is very unlikely.  Of the four categories, the Roach has the greatest survival skills.

The Hack – The manager that lacks ability and knowledge as it pertains to the business and or subordinate management skills.  They possess little if any market intelligence.  Traits also include a lack of organizational skills, follow through / follow-up, and an inability to motivate or inspire subordinates. They may have difficulty retaining or even recruiting the right subordinates. They often micro-manage or over analyzes to the point of paralysis. They ask for input and ideas but never implement any of them. An interesting defense mechanism is a creation of bureaucracy so that ideas and decisions have to go through numerous approval processes. The inability to foster a team or provide adequate training/mentoring while not setting clear goals and expectations define the Hack. The Hack can also be critical of categorizing bad managers into four groups.

The Emotional Buffoon – The manager that lacks behavioral competencies.  They are non-empathic or in some rare cases too empathetic which can take away from team objectives by catering to the emotional flamboyancy of some team members.  Most often, though, they have an inability to understand and or listen to subordinates needs or wishes. They can be too emotional or quick tempered and lack rationality and/or emotional intelligence.  Sometimes these creatures are thought to be tough or demanding yet many achieve their power through coercion.  Subordinates show little if any dedication or loyalty to this socially inept manager.

The Scared BurnOut – This poor beast shows little or no initiative.  They lack courage to be vulnerable or tough.  They cannot or will not speak their mind or stand by their convictions because time and or energy has passed them bye.  They are the tired work horse that spent too many years in the field and yet the thought of dropping out of their management position would destroy them.  In many cases the Scared Burn Out was one of the absolute best at what he or she did. Years or management abuse and a constant high level of performance pursuit have taken its toll.  The SB would best serve the company as an individual contributor.

There is a balance that must be struck, and a manager has to understand his subordinates while producing a cohesive plan for success. One production manager I spoke to, when asked why he thought some managers failed, told me the following.

            “Managers are control freaks. No doubt about that. It’s how they got where they are. At that point, they will struggle mightily unless they learn to perform a 180-degree turn. Delegation means you are not going to do it…. someone else is. Delegation requires courage. Managers can destroy months of their own efforts in not trying to get workers to take initiative, take risks and use imagination to reach for the brass ring when they around someone’s shoulders, grab the wheel and make a course correction. Quite frankly, they would have been much better off invoking the courage to keep their hands off the wheel and retaining the worker’s loyalty and energy.  As a manager, I have never done so well as when I stayed out of peoples’ way and got them the resources they need. I keep my hands and feet away from the moving machinery. And I appreciate it very much when my boss does the same.”

In another interview, a line worker said:

“The greatest failures I saw in bosses occurred when they did not give their workers credit for knowing how to do their jobs. I had to laugh at a couple of occasions in my career. Twice, upper management brought in consultants to look at the way we did things and re-invent us. Basically, what the consultants did was what upper management should have been doing: They talked to the production, distribution and sales and office people and made recommendations along the lines of what the people who were doing the jobs suggested!”

According to Helanie Scott, President of Align-4-Profit, the keys to management success are “being sincerely interested in what it takes to engage your staff in a way that gets them to take full accountability and ownership.  To be a successful manager, or leader for that matter, you must be able to be flexible and put your ego in the passenger seat.” Ms. Scott has established a business built on the shoulders of failure. The paradox is that although people rarely change, businesses can and do.

Method Failures in Business

There may not be anything more difficult than working on spelling words with your eight-year-old son when he would much rather be outside fishing, playing basketball or skateboarding. Most every parent has experienced this frustration, and some give in to their child’s repeated demands to leave the books behind for a breath of fresh air. Exercise is good for a child, no argument there. Racing around to the point of near exhaustion will not get the child any closer the being able to spell twenty words containing three or more syllables. Why is that? The obvious answer may not be the correct answer. Being outside provides a period of freedom. A field or woods provides countless opportunities for self expression as well as a cathartic release of built-up frustration and anxiety. So why can’t learning how to spell provide the same joy?  The answer is found in the way in which the task is introduced as well as the method of teaching and learning. A successful teacher and student will explore various ways to make learning an activity of enjoyment, self-expression, and creativity. Unfortunately, there are many teachers and students who do not approach teaching and learning this way and the result is frustration, anxiety and even failure. One can easily draw a parallel with business.

In business, there have been dozens of reasons why companies fail – overexpansion, poor capital structure, overspending, bad business location, poor execution with an inadequate business plan, failure to change, ineffective marketing, underestimating the competition, holding on too long to an idea, believing your own marketing spin, keeping non-performers. The list could go on and on and on.

 

As a young lad, I remember going to The S. S. Kresge Company (we used to call it Kresgees) to buy Snicker Bars for fifteen cents or to sit at the lunch counter with my Father and munch on BLTs.  The store offered an assume selection of model airplanes, inexpensive jeans, an endless supply of Goldfish (real Goldfish, not the little cheesy crackers!) and the ever-exciting Blue Light Special.  Years later, the store changed its name to Kmart and then problems began.

 

I spoke with Bill Hannon who worked for The S.S. Kresge Company for twenty-two years prior to its demise.  Bill has worked for an industrial chemical company as a sales and service representative spending countless hours in various manufacturing facilities.  According the Hannon, the comparisons between Kmart’s failure and the various problems that certain US manufacturing facilities experience are remarkably similar. Most MBA textbooks will recite all sorts of financial reasons yet many never seem to address the business dynamic which occurs on a daily basis. The following are different reasons for business failure:

 

Uncontrolled Control – upper management takes away control of the floor from the managers. Often a manufacturing line is unique to a particular plant.  In a manufacturing environment, the floor manager, plant engineer or line manager has oversight and authority to make production decisions based on experience and knowledge.  A plant that adopts a one-size-fits-all mentality and takes away a floor managers power to make critical decisions may be doomed to fail.  In the case of Kmart, they discontinued autonomy at the local level by taking away the buying decisions, display choices, and the local advertisements.  The company centralized and systemized everything, which stifled creativity.  Local store managers at one time had APA, which stood for Authorized Price Adjustment.  The Store Manager could increase or decrease various prices to increase sales and/or profits.  This power was taken away from the manager.  The Store Managers had key insight into how and why their customers bought what they did, and they adjusted prices to suit the economic climate.  The corporate headquarters did not understand the customers the way the Store Managers did, and sales suffered.

 

Cut Costs / Chop Heads – reduce compensation and eliminate your experience base and you will eliminate your business.  The equipment in a manufacturing plant is often customized to maximize throughput while reducing downtime.  When a company eliminates an employee, who spent several years understanding the various intricacies of a machine or a business the company is sure to suffer.  In 1987, Kmart purged the District and Regional Managers.  According to Hannon, “They canned people that were over 40 years old. The employees that built the company with over 20 years experience were replaced with recent college graduates with salaries and impossible over-rides.”  Kmart also eliminated stocks options.  At one time, managers were able to apply up to 20% of their income to stock options.  Department leads could apply 10% of their income and stock clerks and register personal could apply 5% to purchase stock at 50% off the buy price.  The company eliminated fiscal incentives such as commissions, bonuses, and ‘spiffs’.  Financial reductions have always proved to be a major factor in reduced employee morale. The employees felt they were overworked and underpaid.  Employees were asked to unload trucks, set-up displays, cover registers without proper compensation.  Kmart also eliminated the departments that were successful but did not have high profit margins.  When sales would slump, the company would enforce “cost control” which meant reducing payroll.  Another interesting phenomenon happened.  The company began to experience product loss not due to shoplifters but rather to employee theft.

 

Take Away the Soul – break a company’s spirit and break the company.  A facility or business has a unique spirit.  When that spirit or business soul is compromised, no acquisition will save it.  Take a walk into any excellent manufacturing facility and you can feel the spirit.  From the sight of clean tools to the lack of scrap, the plant produces and succeeds.  The line workers face reflect pride.  The plant hums with a certain tempo. Kmart’s original Blue Light Special established a carnival like atmosphere.  Employees that announced the Blue Light special were trained to act like carnival barkers.  In a low voice they would begin “Shoppers, for the next few minutes”, they then would yell “Are you listening!  For the next few minutes, we have …,” They were taught to romance the product and establish a sense of urgency.  Ironically, The Blue Light Special was a flashing red light on a cart.  The Blue Light Special was discontinued for several years.  Recently it was reinstated with a picture of a blue light.  There was no excitement.  The special was not special.  When Kmart tried to expand into other markets with stores such as The Sports Authority, Walden Books, and Builders Square, it was met with failure. The Sports Authority (acquired in 1990) and Walden Books (acquired in 1994) were sold off in 1995.  Builder’s Square stores were closed in 1999.  None of the store ventures proved successful.  There are as many theories as opinions why the acquisitions failed.  Wall Street analysts believed that Kmart was guilty of a failed board that could not provide leadership and a management team that could never settle on a strategic course long enough for it to take hold.  Kmart lost its spirit and soul.

 

Cave Dwellers – inability to use technology.  When data is stored and properly analyzed, it is exceptionally powerful.  Manufacturing facilities that have a strong understanding of raw material inventory, quality control, process downtime and production entitlement will succeed.  Information is power.  Wal-Mart’s information system is legendary.  From inventory to procurement to customer purchases, Wal-Mart understands it business climate better than any company does.  They also pressure suppliers to reduce prices and the vendors comply due to the large volumes purchased.  Wal-Mart stepped up with information technology and aggressive sourcing while Kmart stalled.  Kmart inventories were reduced due to the lack of expertise and a faulty inventory system.

 

Kmart was born in 1962, the same year that saw the birth of Walmart WMT -0.3%, Target TGT +0.1%, and Woolco. Its owner, the S.S. Kresge Company, needed to jumpstart its stagnated variety store business. Kresge’s plan to build a national discount department store chain seemed like a good remedy. The earliest Kmart stores sold hairpins, fur coats, men’s suits, bowling balls, diamond rings, and 3 for-a-dollar sub sandwiches. Its home department carried everything from lumber to paint to hardware. The stores catered to their suburban customers and sold what they wanted and needed.  In 1994, Kmart operated 2,486 stores globally, including 2,323 discount stores and Super Kmart Center locations in the United States. On January 22, 2002, Kmart filed for Chapter 11 bankruptcy protection. Kmart closed more than 300 stores in the US and laid off 34,000 workers as part of a restructuring. On May 6, 2003, Kmart officially emerged from bankruptcy protection.  On November 17, 2004, Kmart announced its intention to purchase Sears, Roebuck and Company.  Kmart maybe on a slow road to recovery but will never be the powerhouse of Wal-Mart or even Target.   Manufacturing facilities can learn valuable lessons from the mistakes that Kmart made.  From 2005 through 2019, Kmart was a subsidiary of Sears Holdings Corporation and is now a subsidiary of Transform SR Brands LLC. Sears Holdings (SHLD) filed for Chapter 11 bankruptcy on Oct. 15, 2018.1 A wave of store closures and deals in desperate attempts to stay afloat failed to save the struggling retailer, which listed $6.9 billion in assets and $11.3 billion in liabilities in the filing.

 

Nuff said…