I swallow hard. "Lou, you're telling me that we were penal- ized for doing the right thing? That reducing the excess inven- tory was interpreted by our books as a loss?"
"Yes," he replies, still looking at his papers.
"Well tell me, what was the impact-in numbers?"
"Our actual net profit was well over twenty percent in each of the last three months," he says flatly.
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I stare at him. I can't believe my ears.
"But look at the good side," he says sheepishly, "now that the inventory has stabilized at a new, low level, this effect won't dis- turb us any longer."
"Thank you very much," I say sarcastically and turn to leave.
When I reach the door I turn around and ask him, "When did you discover this phenomena? When did you find out that we were turning much more profit than the targeted fifteen per- cent?"
"A week ago."
"So why didn't you tell me? I could have used these facts very effectively in the plant review."
"No Alex, you couldn't have used them at all, it just would have confused your story. You see, everyone evaluates inventory this way, it's even required by the tax authorities. You didn't stand a chance. But I did discuss it at length with Ethan Frost; he understood it perfectly."
"So that's what happened, you fox. Now I understand why Ethan became so supportive," I say, sitting back down.
When we've finished grinning at each other, Lou says in a quiet voice, "Alex, I have another issue."
"Another bomb?"
"You might call it that, but it's sort of a personal matter. Ethan told me that he's going with Bill Peach to the group. I know that you will need a good divisional controller, someone who has experience in the more diverse subjects that are dealt with at the division level. I'm just one year from retirement; ev- erything that I know is old-fashioned. So..."
Here it comes, I say to myself. I must stop him before he states that he doesn't want to come with me. Once he says it, it'll be much harder to change his mind.
"Lou, wait," I interrupt him. "Look at the work that we've done in the last few months. Don't you think..."
"That's exactly what I was about to bring up," he interrupts me in turn. "Look at it from my point of view. All my life I've gathered numbers and compiled reports. I've seen myself as somebody who has to supply the data, as an impartial, objective observer. But the last few months have shown me to what extent I was wrong. I wasn't an objective observer; I was following, al- most blindly, some erroneous procedures without understanding the far-reaching, devastating ramifications.
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"I've given it a lot of thought lately. We need financial mea- surements for sure-but we don't need them for their own sake. We need them for two different reasons. One is control; knowing to what extent a company is achieving its goal of making money. The other reason is probably even more important; measure- ments should induce the parts to do what's good for the organiza- tion as a whole. What's become apparent to me is that neither of these two objectives is being met.
"For example, this conversation we just had. We knew very well that the plant had drastically improved, but the distorted measurements have almost condemned us. I'm submitting effi- ciency reports, product-cost reports, and now we both know to what extent they just lead workers and management alike to do what's bad for the company."
I've never heard Lou talk for so long. I agree with every- thing he just said, but I'm totally confused. I don't know what he's getting at.
"Alex, I can't stop here. I can't retire now. Do me a personal favor, take me with you. I want the opportunity to devise a new measurement system, one that'll correct the system we have now, so that it will do what we expect it to do. So that a controller can be proud of his job. I don't know if I'll succeed, but at least give me the chance."
What am I supposed to say? I stand up and stretch out my hand. "It's a deal."
Back at my desk I ask Fran to call Bob Donovan in. With Lou on one side and Bob on the other, I'll be free to concentrate on the two areas I know the least, engineering and marketing.
What am I going to do about marketing? The only person I appreciate in that department is Johnny Jons; no wonder Bill has decided to take him along.
The phone rings. It's Bob.
"Hey Al, I'm sitting with Stacey and Ralph, we're really cook- ing. Can you join us?"
"How long will it take?" I ask.
"No way to tell. Probably 'til the end of the day."
"In that case, I'll pass. But Bob, we need to talk. Can you get away for a few minutes?"
"Sure, no problem."
And in no time, he enters my office. "What's up, boss?"
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I decide to give it to him straight, "How'd you like to be responsible for all production of the division?"
The only thing he manages to say is a long "Wow." He puts his big body in a chair, looks at me, and doesn't say any more.
"Well, Bob, surprised?"
"You bet."
I go to pour us coffee and he starts to talk to my back. "Alex, I don't want that job. Not now. You know, a month ago I would have grabbed the offer with both hands. It's way beyond what I expected."
Puzzled, I turn around, a cup in each hand. "What's the matter Bob, afraid?"
"You know better than that."
"So what happened in the past month to change your per- spective?"
"Burnside."
"You mean he made you a better offer?"
He fills the room with his booming laughter. "No, Alex, nothing like that. What gave me a new perspective was the way we handled Burnside's urgent order. I learned so much from how we handled that case that I would rather stay in this plant and develop it further."
Surprises all around me. I thought I knew these people. I expected it would be impossible to convince Lou, and he almost begged me for the job. I didn't expect any problems with Bob, and he just declined my offer. It's really annoying.
"You'd better explain," I hand him his cup.
Bob's chair squeaks in protest as he fidgets. If I were staying here longer, I would have ordered a more massive chair just for him.
"Haven't you noticed how unique the events of Burnside's order were?" he says at last.
"Yes, of course. I've never heard of the president of a com- pany going to thank the workers of a vendor."
"Yeah, yeah, that too. But look at the whole chain of events. Johnny called you with an impossible client wish. He didn't be- lieve it could be done, and neither did the client. And on the surface, it was impossible. But we looked into it. We considered the bottleneck availability, we considered the vendor limitations, and we came back with something pretty unusual.
"We didn't say a flat no, or a flat yes, and then miss the due
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date by a mile, as we used to do. We re-engineered the deal; we came back with a counter-offer that was feasible and that the client liked even more than his original request."
"Yes," I say, "it was good work. Especially considering what came out after that. But that was a peculiar set of circumstances."
"It was peculiar because normally we don't take the initiative -but maybe there's a way to make it standard. Don't you see? We actually engineered a sale. We-in the plant, in production-en- gineered a sale."
I think about it. He's right. Now I start to see where he's heading.
Bob, probably misinterpreting my silence, says, "For you it's not a big deal, you always looked at production and sales as two links in the same chain. But look at me. All the time I'm buried out on the shop floor, thinking that my responsibility is to put out fires, and viewing the sales department as snake oil salesmen, spreading unrealistic promises to our clients. For me, this event was a revelation.
"Look, we give sales a rigid lead time for each product. So if it's not in finished goods, those are the numbers they should use to promise to clients. Yeah, they deviate from it, but not by much. Maybe there should be another way. Maybe the quoted lead times should be done case by case, according to the load on the bottle- necks. And maybe we shouldn't regard the quantities required as if we have to supply them in one shot.