Management Follies-There is Something About Airplanes

One of the major perks with being the CEO of a major corporation is that the CEO get to use the company plane if they have one. For some reason, people who manage really let the airplane thing get to their heads.

One company I worked for had a fleet of private business jets flying out of one of the smaller local airports, of course all the managers at all levels try to get a free ride on the company jet, a sign of virility in Manager World. What’s not to love, no hassles at the airport security, no check in lines, and you can come and go as you please. The corporate presidents and VPs keep the fleet pretty busy however. One day I was shopping at a department store and a guy came up to me because he saw I had one of the company polos on and asked me if I worked for them. I said yes. He said he was one of the corporate pilots. We got to chatting and I asked about the very famous CEO of the corporation, a man who was known for his foul temper and stone-faced countenance. He said he had no problem with the man, he was always very pleasant with the flight crew. The pilot said that the CEO was always appreciative and humble around the crew. But, he said, not all the executives were that way. He said the younger ones, the ones who had just climbed on the fast track were as arrogant as they come. They would come to the plane on the tarmac and drop their garment bags at the foot of the stairs and expected the crew to bring the bags on board for them. The irony was that the pilots probably made more per year than the junior executives. The pilot said that he would disabuse them of their arrogance quickly by announcing over the PA right before takeoff that the garment bags left at the foot of the stairs would be left there when they took off, so if it was anything they needed, the junior executives would need to schlep it up to the plane. He said, with great satisfaction, that they all scrambled like puppies to grab their garment bags.

Apparently one of the junior execs reported the pilot’s insolence to his immediate superior. The guy was shocked when he was called into the CEO’s office and was ripped a new one.  The story got around, and it never happened again.

Another company, one that was not as profitable or as large as the previous company, had a small fleet of a few private prop planes. In order to justify the expense, the CEO ran the planes like a bus service. Most of the non-offshore plants were placed in the southern states to avoid union labor. They also resided in very small towns, so driving to the plant from the nearest commercial airport would take longer than the flight on a commercial airline. The idea was to run two routes, one east and one west. The pilots would go out in the morning and hit all the plants, three or four of them on each route. The pilots would stop for lunch and then take the backward loop and pick people up on the way back in the afternoon. Just like a transit bus. I thought that was clever when I heard the scheme. Turned out this was a way for the CEO to pay for his airplane habit. He was an ex-air force pilot and wanted to indulge in his flying but didn’t want to pay for all the planes that he wanted to fly, so he had the company buy the planes. Kudos to him for coming up with a scheme that actually made sense. The airplanes were the first thing that the private equity firm sold when they unceremoniously took over that company.

One of the companies I worked for had a tradition of having the board of directors hold their regular meetings at different plants. The idea was to let those on the board see the factories and to also pretend like they cared about the workers, have a grand plant tour, an all-hand meeting, and pretend to enjoy being with the little people. When it came time for the meeting to come to where I was, we had to scrub the plant from top to bottom. Essentially stopping any productive work from being done for about a month before the meeting.

When the day came, we were told that the schedule had been slipped by a few hours. It turned out that the corporate jet had picked up all the directors at their respective cities and flew to our little town. The board of directors sat around and pow wowed at a local hotel while the plane turned around to pick up a stray director that was left behind because he couldn’t or wouldn’t meet the flight schedule.

This is an old story that passed around quite a bit at the multinational company where I worked. It happened well before I started to work there, but it is so outrageous that it became company lore. The company was one of the top ten largest corporations in the US at that time. The CEO of the entire corporation was well known to be quite arrogant, very much into his perks, and personified the word entitled. One thing that he did was to make sure that all his minions, VP and up, at headquarters bought homes in the same gated community where he has the biggest house.

He announced that he was taking a grand tour of the corporation divisions  in Europe. Everyone started to prepare for this visit months in advance, preparing charts and product samples to show off to the gros fromage from America. When the CEO arrived at the private airport in Italy, all the heads of all the European divisions were lined up next to their charts and posters and ready to give their prepared elevator speech to the CEO.  

It caused more than a big stir and not a little bit of confusion when the CEO walked right past them into a waiting limo and drove away.  Of course, all the European big shots were left sweating and pondering what they did to make the CEO do what he did. As it turned out, this was all a head fake. The CEO needed to take a trip to visit his newly bought winery in Italy and he took advantage of the company plane and made it a work trip. He had no intention of talking to anybody that had to do with the European companies.

It gets better.

On the return trip, the CEO loaded the company jet with cases of wine from his Italian winery. He brought it all back with him and flew into the private corporate airport. He had the cases of wine unloaded and taken up to the boardroom. All the senior managers, senior corporate vice presidents, directors and all the presidents of the divisions were called into the meeting.  They were standing there and looking at these stacked up cases of wine. Some thought that this was their reward for doing a good job and that they were going to get a bottle of wine or a case for all their hard work. Nope.  The CEO had them take a number of bottles of wine so that they can sell them to their friends and family at the CEO ordained price and then turn the money over back to the CEO.

A more recent private jet story involves the CEO of yet another top ten US corporation. This was exposed in a newspaper story.  Whenever this CEO flew over to Asia, he naturally took the company plane to save him some time because his time was valuable, and he could not be bothered to fly commercial. Many corporate CEOs have the same habit.  What was exposed was that he also had a second jet following the first jet, just in case the first jet had mechanical issues; this way the CEO didn't have to wait around for a second jet and be left stranded. Two jets flew to Asia and all the local cities that he visited just so that the CEO had a backup.

He was properly excoriated in the press as well as by his board of directors. The irony was that the company had a full-blown marketing campaign going about corporate responsibility and their determination to make solving the global warming problem a corporate priority. This all came out of course just when his seat was getting blistering hot because the stock prices were in the dumps. He was unceremoniously kicked out by the board, but he did walk away with a nice golden parachute.

So. If you want to be a CEO? You better have an airplane fixation. Or is that the other way around?

 

 

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.