Sunday, October 09, 2005


Delphi's demise

From the Dayton Daily News:
Delphi has 31 plants in 13 states. The company has 185,000 employees worldwide, including about 13,000 in Dayton, Warren, Sandusky and Columbus.
We feel a personal sadness at the slow decline and bankruptcy of Delphi and we've had quite a few friends, and their parents before them, who worked for Delco and later Delphi in the Dayton and Columbus regions. One friend is one of Delphi's top engineers. One of our physics instructors was a major Delphi consultant for many years.

To be sure, the potential impact on 5,700 workers in the Dayton area will be enormous. They aren't lost yet, but we remain very pessimistic about their ability to keep their pay, benefits and pensions. There is some discussion in investment circles that Delphi's bankruptcy will cause a chain reaction up and down the stream, including the possibility of forcing GM into bankruptcy.

In looking at Delphi situation, and thinking about how they got in the situation they are in, we say up front that we have a strong sympathy for unions and union members. We also say up front that the comments from both sides are mostly a red herring (except for the slimey decision to up the executives severance packages).

Taking in the view from the 35,000-foot level, it's important to note one thing: Plenty of companies are making plenty of money supplying the auto industry. Just ask some of the executives that operate the plants that supply Honda located up and down SR 33, I-71, I-75, I-70.

What's happened with Delphi, however, is the result of terrible management and bad seeds that were planted years and decades ago including a parent company (GM) who acted as if it couldn't give a shit about Delphi's well-being and was willing to squeeze Delphi in order to offset it's own mismanagement. Delphi, in turn, had a long, long history of treacherous labor-management relationships. This is no chicken or the egg matter. The lousy management set the stage for the lousy history with the UAW.

But, rather than go into the details of this, and with bankruptcy a threat in many other industries, we'd rather take note of some of the thinking by two of our favorite enlightened managers who don't believe in blaming their workers, or blaming another nation, or blaming the EPA or blaming anybody but themselves.

We'll start with some appropriate ideas from management consultant Peter Block, author of an extremely important book, Stewardship. In Stewardship, Block observes that the American workplace is one of the few places in the country where we insanely and unquestionably accept that democracy stops at the front door.
The [corporate] governance system we have inherited and continue to create is based on sovereignty and a form of intimate colonialism. These are strong terms but they are essentially accurate. These become the means of dominance . . . It is not that we seek dominance, but our beliefs about getting work done have that effect.

. . .

Democracy cannot thrive if we only experience it for a moment of voting every two to four years. If day in and day out we go to a workplace that breeds helplessness and compliance, this becomes our generalized pattern of response to the larger questions of our society, and in fact most other aspects of our lives.
Regarding economic failures of an enterprise, Block cuts to the chase of who is at fault in situations like we find at Delphi:
An economic crisis for any organization means it is failing in its marketplace. In some fundamental way it is unable to serve its customers. And if it is unable to serve its customers, it means it has failed to serve its own people.
Block has long been a critic of corporate patriarchy and instead advocates for a special kind of economic partnership that he calls stewardship, that has four components: 1) Employees at all levels engage freely in defining the enterprises purpose, vision and values; 2) Everyone has a right to say no and to disagree; 3) joint accountability all the way up the ladder; and 4) absolute honest.

Granted, this all sounds unbelievably idealistic and pollyanna-ish. The problem is that several companies have tried this - in union and non-union environments - and it has worked.
One of the best and most easily accessible accounts of a stewardship-like approach is contained in an amazing book called The Great Game of Business, written by Jack Stack.

Stack was once the plant manager of an International Harvester (now Navistar) engine remanufacturing plant in Springfield, MO. A few years after becoming plant manager, IH was facing bankruptcy and problems in the Springfield plant. Stack organized a group of managers to buy the facility from IH, despite an enormous debt load that came with the plant.

Stack calls his approach "Open-Book Management."
When a company plays the Great Game of Business, all of the employees - from the janitor to the CEO - know exactly what they contribute, what they cost the company, and how they depend on one another to be successful. Everyone starts thinking and acting like owners, not as traditional employees who are just "doing the job."

Fads like TQM, reengineering, and the customer service movement fail because they keep people focused on the tools of business . . . rather than on the overall success of the company. Open-book management uses the company's own financial statements to show how the business works.
Stack describes how giving information isn't enough. He learned the hard way that 95% of his workforce had not enough time nor enough educational background to process the information. In response, he brought in business educators to train his employees (while on the clock) on how to use the financial information and allowed them to review the materials on company time. And, he has had a full equity-sharing program in since the beginning.

In writing this post, we realize that we potentially are exposing ourselves to accusations of naivity and a failed grasp of the inherent inequities capitalism demands. Readers will have to take our word that we are far, far from naive on these matters.

Yet, we'd ask our critics if you had a business, how would you run it? If you had been the head of Delphi or the UAW what would you have done different from what they have done. Other than the inane proposals to cut the Delphi employees' wages and benefits to the Wal-Mart level, we have yet to see any analysis that shows that a different outcome was possible.

Had we been able to roll back the hands of time, we believe that the principles of Stewardship and Open-book management are two strong alternatives that could have provided a different outcome than the economic tragedy that is unfolding around Delphi.


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