Short-sighted Managers (Oxymoron)

If you have even worked one year in a corporate environment, it's easy to relate evidence of management short-sightedness. This does not say anything good about American management. In the next day or two, I'm going to try to create a mental model of what a manager should be and do.

Most, if not all, evidence of managerial short-sightedness is the result of being overly worried about money. Or rather worried about money in the wrong way. I've seen management throw all sorts of money into partitions, floor plants, even re-doing the all-important lobby, but when faced with a drain on their skilled people, will refuse to devote a penny to keeping them.

One business fact that a lot of managers (and their clueless support functions such as accounting, contract management, etc) miss is that there is a cost to doing business. Yes, there is such a thing as spending too much money to do business, but there also is a threshold over which 'efficiency' in spending is counter-productive.

A case in point: In the mid-70's (just out of college for me, I'm old but not that old ;-), I worked for a manufacturer of medical ultrasound equipment. At that time, they were the leaders in medical ultrasound. They owned the market. Unfortunately due to management decisions, by the early '80's they were shutting the whole plant down and getting out of that business. The factory was structured such that assemblies were built and tested, then assembled into the unit which was tested and calibrated by final test. Final test consisted of perhaps 15 to 20 test techinicians of various capabilities. One of the things that this manufacturer did that I applaud is that they hired most of their test technicians from the local electronics schools. They trained them on-the-job. What they didn't do, and, of course, this was to 'save' money, they would not increase their pay sufficiently as their skills increased. The obvious resulted. The good technicians would soon discover they could make a lot more working for someone else and be gone. The poor technicians would remain knowing that they wouldn't be able to deal with a different job. As a result, this company had a 'hard core' of incompetent techs supplimented with a revolving door of good techs who were just passing through.

So what was the result of their attempts to 'save' money. Between the training new techs just to have them leave & the deadwood left behind, it essentially cost them more money than they would have spent to keep their employees. But the critical clue here is that that loss of money was not directly visible. You would have had to dig a little to see the loss.

This is right in line with the law of management that we've already enumerated: A Manager will do what is easy. Since the loss of margin from poor technicians was not directly evident from glancing at a spreadsheet, management did not see it.