About growing the economic pie

March 3, 2014
By: Tim Heston

At The FABRICATOR's Leadership Summit, held last week in Austin, Texas, industry executives talked about growing the economic pie. One keynote speaker recalled how his business effectively grew the pie, thanks to open book management.

Much of modern political debate has centered on who gets the biggest piece of the pie—the money pie, that is. Liberals say the rich have gotten too much of that pie, and perhaps some pieces should be redistributed to the rest of us. Conservatives argue that wealth redistribution runs counter to the ideals of capitalism.

So who should get what amount in the economic pie? Chris Kuehl, economic analyst for the Fabricators & Manufacturers Association, International, just wants a bigger pie.

His point: As long as people are happy and getting what they need, with sufficient access to money and credit, who cares if the rich continue to get richer? Of course, if people are unhappy not getting what they need—a reality faced by the unemployed, underemployed, and working poor—we need to grow the pie.

Kuehl expounded on this point at The FABRICATOR’s Leadership Summit, organized by the Fabricators & Manufacturers Association, International. The event, co-located with FMA’s Toll Processing Conference, drew more than 200 industry executives to Austin, Texas, last week.

So how do you grow the pie? Kuehl mentioned that, among other things, we need to have the right people for the right jobs; we need the right connections between education and the needs of communities and businesses; and we need a modicum of predictability from the government at all levels. (His audience chuckled a bit about that last wish.)

During Thursday morning’s keynote address, Jack Stack gave an idea of how business leaders may be able to grow the pie—dramatically. The president and CEO of Springfield, Mo.-based SRC Holdings Corp. purchased International Harvester’s engine remanufacturing division in 1983. He didn’t go in with venture capital or a large amount of cash. Instead, he and a dozen business partners put together $100,000 and borrowed nearly $9 million. Yes—million; that’s an 89-to-1 debt to equity ratio. That would be scary today, and it was even scarier in the high-interest landscape of the early 1980s.

He turned the business around and set up an employee stock ownership program that has allowed many employees to retire and cash out as millionaires. Many have gone on to launch their own businesses, growing the pie.

How did Stack grow the pie so effectively? When you boil it all down, it comes down to communication and translation: specifically, translating the language of manufacturing into the language of business.

Stack, who wrote a bestselling book about his adventure called The Great Game of Business, introduced SRC to open book management. Every employee can speak the language of business and, most important, connect actions in running a manufacturing floor to the firm’s financial statements. During every management meeting, each executive “owns” a line item on the income and cash flow statement, be it sales, materials expenses, or anything else.

The idea has some significant implications. Say a fabricator practices open book management, which allows everyone to plainly see that about 75 percent of revenue comes from customers in just one industry sector. Everyone from the brake operator to the vice president of sales is on the same page. They’re not thinking about a specific work center efficiency metric in their area of the plant. They’re thinking of the business as a whole. They’re thinking about diversification.

What if the company has some prospects in the electronics enclosure business, a sector that may require some intricate forming? Managers and even operators in the brake and punch press areas may suggest specific form tools or certain brake tooling upgrades to handle the work flow better.

They’re not thinking about reducing cycle times in punching and forming. That’s manufacturing-metric speak. Instead, they’re connecting the dots between tooling and market competitiveness. They thinking less about parts per hour and more about being competitive in another market. That’s business-speak.

Everyone has their eye on the pie, and they all work together to grow it. Such worker engagement really could form the foundation of an incredibly dynamic economy.

The FABRICATOR’s Leadership Summit returns to Orlando, Fla., Feb. 25-27. 2015.

Tim Heston

Tim Heston

Senior Editor
FMA Communications Inc.
2135 Point Blvd
Elgin, IL 60123
Phone: 815-381-1314