The rage was directed at the traditionally beleaguered manufacturing manager. However, it was the president himself who had implemented decisions that ultimately resulted in the October crisis. The president was suffering with a misunderstanding of manufacturing - he was suffering from the inability to predict net effect.
Every decision in manufacturing causes three conditions: The primary result is what you experience immediately. The secondary response is the changes that occur due to the stimulus of the primary result. Permanent change is the permanent effect of the decision. But there is an interplay among the types of effects that eventually produce a net effect; and effective managers need to learn to accurately predict net effect.
That's the problem with decisions based entirely on primary results -- they are so "obviously" beneficial that we do not dare to explore the secondary responses or the permanent changes. Often, managers become willingly blind to indicators that the net effects may be disastrous. We need to develop the discipline to analyze and anticipate secondary responses and permanent changes. Then we can accurately predict net effects.
When we advance a ship date, what will be the secondary response? Schedules will be changed. Other orders will be deferred. Materials are re- allocated. Other materials are set aside. MRP reschedules hundreds of orders. WIP swells. Orders ship late and incomplete. Manufacturing costs ratchet up one unnoticed click.
The secondary response made to the decision of the president to expedite the new product was monumental. Engineering ceased efforts to design for manufacturability. The lab quit "fooling around" with extended testing of componentry. Thousands of parts were made early, then scrapped as revisions poured out of Engineering. Errors were rampant. Scarce peak season capacity was lost. Fab parts for high-profit models were of low priority, so production, shipments and billings fell off. The president made a secondary-response decision to subcontract fabricated parts at a cost of 300% of the in-house costs. The cost of production nearly equaled the selling price. Design flaws plagued performance and reliability. Warranty claims soared.
Managers must understand psychology of the workplace in order to predict permanent change and net effect.
What is the permanent change that will result from repeated end-of-the-month shipping rushes? First, reconsider the secondary responses. Then, understand the conditions perceived by employees as they struggle through the rushes and subsequent lulls. The inconsistency is obvious. There is the injustice of poor-planning-on-your-part-constitutes-an-emergency-on-my-part. The fatigue of overtime. The stress of "will we make it or will we not?" What will people predictably do to protect themselves?
The first answer is obvious. They will work to eliminate end-of-the-month shipping crunches. If they fail in that effort, they will develop protective mechanisms to deal with the unacceptable. The "I don't care" attitude will often prevail, as in: "It's defective, but if it's good enough to ship on the 31st of last month, it's good enough to ship on the first day of this month. Ship it!" In the case of the home heating appliance manufacturer, the permanent changes that resulted were harsh. The work force had been company-oriented, involved and participative. In a scant 90 days, it became every-man-for-himself oriented. Mid-managers turned self-protective.
Scrap rates degraded from one-half of 1% to a full 17% in two years. Profit margins showed similar decay. All of the top performing mid-managers were gone within 24 months. The company degenerated from being the innovative leader of the industry to a peddler of second-best goods. Unless the company can reverse its decline, it will likely be out of business within three years.
1) Understand the real value of your action -- the primary result. Normally, the primary result is positive; that's why you made the decision.
2) Predict the secondary response. The secondary response is a natural outgrowth of the primary decision -- it is something that has to happen. It's a cause-and-effect relationship.
3) Predict the human reaction to the secondary response. The human reaction is the permanent change that occurs as people respond to a changing environment (the secondary response). Permanent changes are the conditions that affect the business for the longest time. Permanent change is what affects the bottom line the most.
The most common error made by American managers is overestimating the value of the primary result and underestimating the value of the permanent change. It follows that we incorrectly anticipate the net effects of our decisions.
The permanent changes that you must cultivate are changes that encourage people to become willingly involved in the success of the business. Once you have a workforce that is willingly involved, high-level success will follow. That's the net effect you want.