Management Follies-Manager Hubris

One of the biggest lies perpetrated upon businesses is that managers — people who run the business — don’t need to understand the product or the internal processes. Many who are in the business of running businesses firmly believe in this lie and because cynically, they want this lie to be propagated throughout the commercial world so that they can leap from company to company, industry to industry like so many rabbits. They need to make themselves more marketable in the job market, to the detriment of American industry. 

The problem with being completely ignorant of the product that they are ostensibly presiding over is that those managers, for a lack of any understanding of the nuances of their industry, will inevitably apply the same shop-worn formula to a myriad of problems: everything looks like a nail when all you know is how to hammer. It is this kind of  hubris that has permeated my experience in the companies that I have worked for.

A company was rolling out a new product to the market and the heat was on to deliver the product to an existing and loyal customer. There was a technical issue, and the engineering team was working at resolving the problem through finding the root cause. As it turned out, the problem came from the concatenation of many related problems that had dominoed. As the problems persisted, it became obvious that the best way to resolve the issue was to be patient and stay disciplined, work through all the coupled problems step by step until every bug and every coupling effect was resolved. This approach was not acceptable to a particular manager as the heat was on. His solution? “Let’s take all the smart people in the company, bring them to one place and lock them in a room until they come up with the answer.” Even as the engineering team was spending hours on discovering and resolving problems, he wanted to hold a tea party and by PFM  (Pure F___ing Magic) come up with THE solution. Why? So that he can be the hero. Fortunately, cooler heads prevailed.

I was working on a project involving commercializing a technology that the company had just acquired. We were just setting up our project plan and preparing for the long process of turning an idea into reality. This process usually takes many years because the concept had to be fleshed out, a steady evolution of progressively more realistic conceptualizations had to be turned into a manufacturable product. Prototypes had to be built, tested,  and verified. Depending on the complexity of the product, the process of commercialization could take many years.

As we were figuring out how to address the breadth and depth of the task ahead of us, word came that our CEO had already called on the CEO of a potentially large customer about the product and sold him on the idea. He promised the customer 1,000 units within the year. We, the project team, were stunned and stupefied: we didn’t even have a working prototype and he had promised 1,000 units within the year. Of course, no one in the inner circle of senior managers had the courage to tell him that this was an impossible task because he had surrounded himself with Yes-men. Even if we were able to produce the 1,000 units, I was pretty sure that we would have killed someone in the process.  When someone eventually told him that it was impossible, the CEO was unrepentant, he essentially told the direct project managers that they didn’t understand marketing and we all should be grateful to him for both selling the product and lighting a fire under engineering and manufacturing. I left the company before the product was delivered, I had heard that the sales were not as described by marketing, but it took nearly five years.

Early in my career, I worked for a manufacturing company that made custom products: highly individualized and highly profitable. There was a loyal customer base, but the products are so specialized that the customers rarely buy these products in high volumes. They would order maybe 10-20 units every five or ten years, but they always paid a premium for the special  product. The trick to making a profit in those environs is to become known in the industry for a great product that is worth the price, i.e. safe and reliable. These products were difficult to design, engineer, and manufacture but they had a very high profit margin, because the customers would pay any cost for the product. The CEO of that company came from a commodities background, he was used to selling lots of the same identical products — like lightbulbs —  every month. The key in  the commodities market is to make as many of the same things as fast as possible and the sales strategy is to drop the per unit prices without going in the red and entice the customer to buy more than they think they will need; profits are made in volume while designing in planned obsolescence so that the customers need to buy the same product repeatedly and regularly.

Our vaunted leader’s plan for the existing product was to follow his commodities market addled instincts, he moved manufacturing offshore to take advantage of the low labor rates, reduce cost,  and then ship the products back to North America by cargo ships since these products each weigh nearly a ton. Of course, the delivery schedule must fit the shipping timeline into the delivery schedule. It takes the cargo ships a few months to travel the distance, which imposes  hard milestones on the schedule, which in turn places time pressure on the front and back end of the schedule. Most of the customers understood this better than this vaunted leader, so they built in penalties on the delivery contract so that every delay meant penalties, less profits, for the company.

The vaunted leader’s response to that problem was to have engineering create a line of generic major component parts of the product so that these parts are waiting in the warehouse before the customers even ordered. When the customer came with their orders, the thinking went, the design engineers would customize the product to the customer specifications while using the generic parts. The problem is that the generic component parts places hard design constraints on the designer’s ability to be flexible with their design for the customer’s specification; in the end, they are often unable to meet the customer specifications because of these constraints. What resulted was that these generic parts were mostly not usable and sat unused in the inventory while the same scheduling issues persisted. In the meantime, the learning curve for the offshore manufacturers was steep, the quality was impossible to maintain, what resulted was that the warranty cost shot through the roof and the company gained a reputation for bad quality.

In an effort build new business, this vaunted leader committed the company to reentering the commodity product markets, the same markets that the previous regime had abandoned because they realized that they could not compete with overseas production cost for making the same thing over and over again. Where the company could have invested in new technology,  the vaunted leader restarted the commodity product line by buying ready-made commodity products from overseas and re-name plating the imported products so that they appeared to be produced in North America. Engineering and manufacturing  did not know how the products were built,  did not understand the characteristics of the design, and more importantly, really wanted nothing to do with the third-party products. The customer support for the product was non-existent, as the engineers tasked with supporting the product had no idea what they were dealing with; the products once again stayed in the warehouse as inventory and the warrantee costs accumulated since the service department had no idea what to do when the product was returned.

In my last days there, the company was suffering through a down business cycle exacerbated by the poor decision making. There was talk that we were going to sell the company or worse, close the doors forever, which was when the gallows humor busted out. As a lark, we started the rumor that instead of severance pay each person would be given some of the parts from the low volume products and some of the commodity products that no one wanted and that would be the severance package. Ridiculous. But the rumor flew around the company in less than a day because people believed that the vaunted leader is capable of such actions.

These are some of the more egregious decision-making disasters borne of hubris, of managers believing in their own PR. Please understand that I am NOT saying that all managers need to know the minutiae of the products or the process, but they do need to have the humility and the curiosity to learn the nuances for  the very business that they are responsible for, find people who they can rely upon to tell them the truth, check their egos at the door, abandon the formulaic, and then double check their own biases. It seems those have been impossible to ask for.