Clause 61: The Pushback Blog

Because ideas have consequences

The Steering Committees

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I first saw this joke in the nineties:

A Japanese company and a North American company decided to have a canoe race on the St. Lawrence River. Both teams practiced long and hard to reach their peak performance before the race.

On the big day, the Japanese won by a mile. The North Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat.

The senior management of the American company investigated the outcome. They found the Japanese had 8 people rowing and 1 person steering, while the North American team had 8 people steering and 1 person rowing. So the American company management hired a consulting company and paid them a large amount of money to recommend a solution that would avoid a defeat next time.

The consultants advised that fewer people should be steering the boat, while more people should be rowing.

To prevent another loss to the Japanese, the rowing team’s management structure was totally reorganized to 4 steering supervisors, 3 area steering superintendents and 1 assistant superintendent steering manager. They also implemented a new performance system that would give the 1 person rowing the boat greater incentive to work harder.

It was called the “Rowing Team Quality First Program”, with meetings, dinners and free pens for the rower. There was discussion of getting new paddles, canoes and other equipment, extra vacation days for practices, and bonuses.

The next year the Japanese won by two miles. Humiliated, the North American management laid off the rower for poor performance, halted development of a new canoe, sold the paddles, and canceled all capital investments in new equipment. The money saved was distributed to the Senior Executives as bonuses and the next year’s racing team was outsourced to India.

This joke became popular because so many people in so many companies could relate to it. Its popularity is evidence of how accessible its themes were. So think about stacking up all these companies, and you have an economy. The people steering the boat are typically middle-class people. In real life they sit at desks in an air-conditioned office building. In real life, the person rowing the boat is often hourly and may have to punch a time clock.

There are many middle-class jobs that are more about steering than rowing:

  • The gatekeepers are the people who can say no, but they can’t say yes — at least not the final yes. If you want to create value, you have to get past the gatekeepers to do it. The attractiveness of being a gatekeeper is that you don’t have any risk as long as you say no. Therefore, gatekeepers only open the gate if there is no way they can be second-guessed.
  • The auditors come around to tell you how you did it wrong. Auditors do not produce any value themselves; their role is to find fault in what others do. I’m not talking about auditors who work for accounting firms and who inspect the financials of publicly traded companies; they provide essential transparency for investors. I am discussing people who have built jobs out of setting standards without ever having to deliver value in conformance to those standards themselves. They have wired themselves into situations where others are accountable to them but they are accountable to no one. Great work if you can get it.
  • The expeditors appear to be very necessary, because they are overcoming all this friction in order to help the actual doers get things done. The expeditors know how to get past the gatekeepers and satisfy the auditors so that the people actually producing and selling can be left in peace to do so. Many expeditors are very good at what they do, and in the current climate little could get done without them. Unfortunately, they have had to specialize in these very unnecessary skills at the expense of skills for delivering value directly.

Much of what we know today as middle-class Corporate America consists of gatekeepers and auditors obstructing the delivery of value and expeditors overcoming the obstruction in order to permit any value to be delivered. But as there are more people working relative to the overall wealth being created in the American economy, there is not enough wealth to sustain the middle class. Wages are labor’s share of wealth production; with less production, there is less to share. This is the undiscussable fact in the decline of the middle class.

The evidence of decline is certainly there, and easily found:

http://www.dailyfinance.com/2013/02/06/middle-class-decline-infographic/

http://www.cnbc.com/id/100485257

http://www.dailyfinance.com/2012/09/13/the-real-source-of-the-middle-class-money-woes/

One would never recognize this problem when looking at gross domestic product (GDP). This is because it is actually a measure of spending, with the assumption that corresponding value is being created. One only has to walk around workplaces that are described by the allegory above to realize that assumption is no longer valid. The gatekeepers and the auditors get paid; those payments are indistinguishable from payments to productive people when totaling up GDP. We are actually flying blind in terms of how much real wealth our economy creates.

I recall an incident when I worked in a manufacturing facility. I was in a meeting, sitting with eight other people in an air-conditioned conference room, where there was nothing settled, nothing finalized and no actions identified. On the other side of the wall was the factory floor, where hourly employees who were tethered to their workstations until break were producing the wealth to pay for all this. I wanted to go out to the floor and apologize to these people for having participated in this waste that their efforts were carrying.

One has to feel sorry for the expeditors, because they are the first people to find themselves without chairs when the music stops. Upper management thinks that they shouldn’t be necessary, and they have a point. But, having tolerated all the other people who are in the value-prevention game, the expeditors have been made essential. When expeditors get laid off, they are usually blindsided; they rightly thought they were vital to “getting anything done around here.”

The middle-class bubble is going to pop, because all these middle-class jobs are not creating enough wealth to perpetuate themselves. We are already approaching the endgame.

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Written by srojak

June 27, 2013 at 3:22 pm

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