Let’s talk about “cost reduction”

copied from Adrian Lospa

Let me tell you a story…

There was a global company operating in many countries around the world. At one point, like all the “successful” companies, it got hit by a crisis. This affected the required product volumes by shrinking the customer needs. If the customers do not need the same volume of products, then the company needs to produce less. And now we come to the “cost reduction” measures in one of the countries were this company was located.

Managers: The sales are low, the production is low, this means we don’t need the same number of people to perform the work. Hmm, so let’s fire some people (not managers, of course), and let’s buy new company cars!

Employees: Wait, what? somebody from the corner asked.

Managers: Common, the managers said, you must understand us, our cars are around 5 years old and are not safe anymore… Don’t you care about our safety?

Employees: Then how come the company doesn’t have money to keep all the employees but affords to buy new cars?

Managers: You just don’t understand, actually we came with a cheaper solution, have you heard about operational leasing? It costs us less than buying new cars, it’s a so great that we thought about this!

Employees: No, I have no idea what operational leasing is, I have an old car..

Managers: Believe us, this is the right thing to do, and by the way, we need to fire around 30% of the current workforce. And let’ not forget about the stationery and printing costs! Please print on both sides of the paper if you really need it and think thoroughly if you really need colors or you just can stick with black and white! This will help us to lower the costs and to prove that we are engaged and protecting the environment! Please bear with us and understand the situation, we also have another great measure meant to help us! We will cut down the transportation costs! We will not pay anymore the bus transportation for each employee, we will hire a company to take all of you to work and back home!

Employees: How about the “old” cars? Can we buy them if those are “obsolete”?

Managers: Let’s not ask for those kind of favors, we will sell the cars to the company from where we will take the new ones! And by the way, in one or two years, when the crisis will be over, we can re-hire some of you!

Employees: Wow, thank you…

Managers: In the meantime, we wish you luck in finding another job so that you can take care of your family!

Employees: Gee, thanks..

How Soft Skills Impair Problem-Solving

If you observe carefully, you will notice that the people with the best problem-solving skills tend to have poor social skills, while those with the best social skills tend to be poor problem-solvers. The former are curious and go deep into their analysis of a problem to understand its root causes and identify solutions that result in tangible and verifiable improvement. Analysis by the latter is superficial and results in band-aid solutions. Band-aid solutions give the appearance that problems have been solved, and so band-aids are merely political solutions to problems, not an actual solution based on the true source of problems. Band-aid solutions maintains the status quo; they do not result in fundamental improvements to products or processes.

You will also notice that those who are able to create the best band-aid solutions to problems invariably rise to high levels within an organization. To senior leaders, band-aids are as good, if not better, than actually solving the problem, because the status the quo and good appearances are highly valued symbols of expert leadership. The really good problem-solvers — the reformers — remain stuck at lower levels of the organizations where they must fight against the band-aid solution specialists to win favor for their thorough analyses and concordant solutions. And they usually lose.

Because of their deficits in social skills, the best problem-solvers tend to be organizational misfits (detached disturbers of the corporate peace) and are treated as outcasts. Their career path is usually limited; such is the reward for being a good critical thinker — someone who is able to discern the facts and reveal the truth. The band-aid problem-solvers easily fit in, are recognized as “team players” or “key players,” and are treated as favorites within the organization. The favorites, largely indifferent to facts or the truth, quickly rise and are amply rewarded for their limited skill set. It is no surprise that the key requirement for joining an executive team or board of directors is good “good chemistry” — having the requisite social skills. Problem-solving skills are assumed to be “a given” and therefore unimportant to the overall task of corporate supervision.

I have spoken to many business leaders over the years in my job as a university professor. When asked what they are looking for in our graduates, they almost always comment on the need for them to have better soft skills. Rarely do they say students need better critical thinking and problem-solving skills. That makes some sense because, to greater or lesser extents, students have been taught to think critically and problem-solve since elementary school — about 14 years’ worth of education.

The inverse relationship between soft social skills and the critical thinking necessary to be an excellent problem-solver leads to big expensive problems. Business leaders who desire social skills are, knowingly or not, asking for employees to weaken, if not cripple, their critical thinking and problem-solving skills and develop into band-aid problem-solvers. This perfectly fits the needs of business: fast, easy solutions to problems that consume few resources and which require little actual change in thinking and doing. All you have to do is think of the disastrous Boeing 737 Max development program, Wells Fargo’s culture of fraud, Equifax’s data breach, General Electric’s stunning downfall, the Morandi bridge failure, BP oil well explosion, and defective Takata airbags. These are just a few examples illustrating the ubiquity of band-aid problem-solving in business and their catastrophic consequences.

Business is nothing if not a daily flood of problems. Problem that are solved with band-aids invariably recur and perpetually cost the company its resources — all the while the CEO proclaims the need for sparing and judicious use of company resources. Deep problem-solving exposes the truth so that improvement can be made. But if band-aid solutions are the preferred type of solution to business problems, to keep up appearances and maintain the status quo, then the truth is only rarely revealed and problems continue to linger. And when senior leaders finally do decide they want employees to be better problems-solvers, the top of the organization is weighed down band-aid problem-solvers who refuse to learn or practice deep problem-solving. So there are no executive role models for employees to learn from.

This explains why Lean transformation efforts regularly result in the appearance of improvement but fail to achieve material and information flow and Just-in-Time. Occasionally, someone is good at both social skills and problems-solving. But, they are usually not great at either. To achieve flow, you need people who are better at problem-solving than social skills. That means the truth-telling misfits can no longer be treated as outcasts. Yet, treating the problems-solvers as misfits and outcasts has long been institutionalized and is a habit that leaders rarely break.

The further spread of Lean management depends to a large degree on elevating the problem-solving iconoclasts in the organization and intensely training the band-aid solution specialists to become actual problem-solvers. We know from experience that both are difficult to do. So perhaps a solution is for business leaders is to not emphasize the need for soft skills. Instead, the capabilities of new hires and current employees should be tilted towards critical thinking and problem-solving skills because that is what business, given its daily flood of problems, needs most. The perpetual question is this: Can senior leaders welcome the disturbing truth that comes from independent thinkers?