Is No 'Easy Rider'
Accountability, Confrontation two keys to success at Harley-Davidson
With A Cause
Who is accountable for productive meetings.
Merrill Lynch relies on measurements for
success and customer satisfaction
Change Is No Change At All
by Peter Block
Balance Sheet: Hidden Costs of Open Book Management
by Cathy Kramer
Business News Briefs
for a Change
to the Editor
||Views For A Change |
H. James Harrington Responds
Organizations change locations for many reasons, which
can vary from financial, to environmental, to workforce skill levels or
availability. Because there is no one reason for relocating an operation,
the starting point for any initiative to persuade an organization to reconsider
relocation is to understand the driving factors behind the relocation decision
and to determine if there is any possibility for changing it.
To accomplish this, a group of employees, managers, local business people,
local government officials and organized labor representatives should be
formed. This group would meet with the organization's executive team to
understand why the operation is being relocated. This team should be sure
that it collects and quantifies any financial or performance data and also
identifies less tangible reasons for the move. Today, moves are frequently
made for non-financial reasons. For example, I helped an organization move
out of South Korea to mainland China not for cost reasons, but because the
products manufactured in China were much more reliable. Until you probe
deeply to understand why the organization is relocating, there is no way
you can develop a scenario that will change management's mind. Frequently,
management communicates financial reasons when the real problem relates
to cycle time, quality, employee commitment, high employee turnover rates,
poor location, poor transportation, lack of necessary public education facilities
or technical skills of the people in the present area. I am finding today
that relocation is driven less by financial reasons than by other considerations.
Even when you understand why the executives have decided to relocate the
organization, do not limit your strategy to meeting management-perceived
advantages of the new location. Everything else being equal, other considerations
may change the balance in your favor. The team should define improvements
that will be made from the present performance in all the following areas
if the operation is not relocated:
o Cycle time
Based upon your question I am assuming that you believe
the organization is relocating primarily for financial reasons. With this
assumption, the following are some other ideas about things that could be
considered to reduce the present operating costs.
1. A local tax break could
be given to the organization for the next five years.
2. Often the cost of training a new workforce and the learning cycle
related to the new workforce are not fully considered in the transfer plans.
For management and professional people, these costs vary between $30,000
and $50,000 per person. The team should point out these high costs.
3. The poor-quality cost of the present operation should be compared
to the poor-quality cost projected in the new location. Through the use
of techniques such as Business Process Improvement tools like Express, present
poor-quality cost can be cut by 50 percent, often reducing in-process cost
by 10 percent and support cost by 25 percent.
4. Suggest that the organization use self-managed work teams that
commit to a specific productivity improvement within the next 12 months.
This is another way to reduce costs.
5. The employees can put at risk a portion of their pay equivalent
to the difference between the two-tier hiring system. This risk money would
be paid out as a bonus if the committed improvements were met on schedule.
6. Local community colleges could provide training at a minimum cost
to upgrade present personnel for a specific period of time. This should
not become a standard practice since the government should not compete with
profit-making organizations that do training and consulting. The employees
should commit to attend a minimum of 80 hours of skill level community college
training each year on their own time if the organization covers the college
tuition and books for all classes that are completed successfully.
7. The present order management system can be redesigned to increase
product terms and decrease in-process inventories.
8. The local city government can help offset the cost of transferable
It is important the team conducts a risk analysis that defines the level
of risk in meeting the projected performance at the proposed location compared
to the risk of meeting the proposed improved performance at the present
Today, we live in a very harsh reality. Often by the time an organization
announces its intent to relocate, there have been a number of contracts
already signed that make it impossible for the organization to reverse its
decision. Organizations are truly international buyers, international manufacturers,
and international sellers. Communities that cannot compete in today's international
markets have not earned the right to keep their industries. If your community
is losing one organization, it is often difficult or even impossible to
stop this particular relocation, but it is a big warning sign that preventive
action should be quickly implemented to stop other organizations from relocating
as well. The first thing the community needs to do is identify the organizations
that are critical to its survival. Then these organizations' performance
should be compared to similar organizations around the world. If any of
these organizations are not in the upper 10 percent of the organizations
in their field, the community should work with these organizations to improve
their performance so there will be no reason for them to relocate in the
future. For any community to remain viable and to provide employment for
its people, it must establish an infrastructure that is competitive with
other communities throughout the world.
Maybe its time for communities to set tax rates based on profitability of
their corporations rather than property values. Think of the incentive for
the community to contribute to organizational profitability.
John Runyan Responds