Critical Chain - Eliyahu M. Goldratt [42]
"Assume it stays at current prices," he said.
As far as I could tell, at current prices this company would never be profitable, but how can you say such a thing to someone who just bought it?
I remembered the joke about the person who committed himself to teach a dog to read in three years. He hoped that in three years the dog would die or the owner would die. Knowing how frequently steel prices oscillate, "In two years," I confidently said. Thank God he didn't ask me to justify it.
Rather, he asked how much money I thought had to be invested. For this I had a detailed, accurate answer. But once again he refused to look at the papers, he just wanted to know the bottom line. I hated it. But he was the one who signed my checks, so I told him: twenty-two million, three-hundred and forty thousand dollars. Approximately.
"I see," was his only comment. And then . . . And then he just said that the limo would pick us up at seven tomorrow morning, and accompanied me to the door.
Next morning they were waiting for us in a big meeting room. All the top managers, about twenty of them. We shook hands and then Don took over.
He told them that he didn't know much about the steel industry, and even less about their operation. And he asked them to help him to understand better because the more he knew, the less likely he would be to impose stupid decisions on them. He didn't leave any doubt that he was going to make some decisions.
Then he said that he had read all their financial reports, but that these reports did not tell him a thing about how they actually operate their company. He knew that for a long time "tonsper-hour" has been the prime operational measurement in the steel industry. And he asked them if they thought they were doing a good job monitoring tons-per-hour.
They thought they were. For about half an hour they explained, in detail, how they do it; on a work-center level, a departmental level and on a plant level. They explained how the data is gathered and processed. They presented the resulting reports and the graphs of tons-per-hour per shift, per day, per week, per month, per quarter, per year.
Throughout the explanation Don was very encouraging. When they were through, he agreed that there was no doubt that they were doing a thorough job monitoring tons-per-hour. He asked me for my opinion. I said I was impressed; that only now did I realize the meaning of a Prime measurement with a capital P.
Don was quiet for a while. And so was everybody else. At last he said that he was convinced that they were doing a good job monitoring tons-per-hour. What he was questioning was, should they?
For them it was heresy. In their world, the steel world, tonsper-hour is one of the pillars of their paradigm. It took them some time to digest that they are allowed to question it.
Don was flooded with reasons why they must monitor tonsper-hour. In my eyes, I must tell you, many of the suggested reasons sounded like "we must monitor it because we always monitored it." Don listened intently. He didn't interfere even when they started arguing among themselves.
Finally, when they calmed down, he reminded them that the main reason for an operational measurement is to induce the departments to do what is good for the company as a whole.
They had to agree.
At that stage, Johnny put up a transparency.
I know that it's difficult to read from the screen, so I'll read it, the same way that Don did.
Don started from the bottom. In the steel industry, each department is judged according to how many tons they process per hour; the measurement of tons-per-hour is the prime operational measurement, statement 500.
He then quoted the famous phrase, "Tell me how you measure me and I'll tell you how I'll behave." He didn't have any problem getting agreement that most people behave in accordance with the way they are measured, 510. Then he reached the conclusion that in the steel industry, we are bound