The Goal: a process of Ongoing Improvement



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The Goal A Process of Ongoing - Eliyahu Goldratt

You’re just playing a lot of games with numbers and words.
For a few minutes there in Chicago’s O’Hare, I did try to think about what
Jonah had said. He’d made a lot of sense to me somehow; he’d had some
good points. But it was like somebody from a different world had talked to
me. I had to shrug it off. I had to go to Houston and talk about robots. It was
time to catch my own plane.
Now I’m wondering if Jonah might be closer to the truth than I first thought.
Because as I glance from face to face, I get this gut hunch that none of us


here has anything more than a witch doctor’s understanding of the medicine
we’re practicing. Our tribe is dying and we’re dancing in our ceremonial
smoke to exorcise the devil that’s ailing us.
What is the real goal? Nobody here has even asked anything that basic. Peach
is chanting about cost opportunities and "productivity’’ targets and so on.
Hilton Smyth is saying hallelujah to whatever Peach proclaims. Does anyone
genuinely understand what we’re doing?
At ten o’clock, Peach calls a break. Everyone except me exits for the rest
rooms or for coffee. I stay seated until they are out of the room.
What the hell am I doing here? I’m wondering what good it is for me—or any
of us—to be sitting here in this room. Is this meeting (which is scheduled to
last for most of the day) going to make my plant competitive, save my job, or
help anybody do anything of benefit to anyone?
I can’t handle it. I don’t even know what productivity is. So how can this be
anything except a total waste? And with that thought I find myself stuffing
my papers back into my briefcase. I snap it closed. And then I quietly get up
and walk out.
I’m lucky at first. I make it to the elevator without anyone saying anything to
me. But while I’m waiting there, Hilton Smyth comes strolling past.
"You’re not bailing out on us, are you Al?’’ he asks.
For a second, I consider ignoring the question. But then I realize Smyth might
deliberately say something to Peach.
"Have to,’’ I say to him. "I’ve got a situation that needs my attention back at
the plant.’’
"What? An emergency?’’
"You can call it that.’’


The elevator opens its doors. I step in. Smyth is looking at me with a
quizzical expression as he walks by. The doors close.
It crosses my mind that there is a risk of Peach firing me for walking out of
his meeting. But that, to my current frame of mind as I walk through the
garage to my car, would only shorten three months of anxiety leading up to
what I suspect might be inevitable.
I don’t go back to the plant right away. I drive around for a while. I point the
car down one road and follow it until I’m tired of it, then take another road. A
couple of hours pass. I don’t care where I am; I just want to be out. The
freedom is kind of exhilarating until it gets boring.
As I’m driving, I try to keep my mind off business. I try to clear my head.
The day has turned out to be nice. The sun is out. It’s warm. No clouds. Blue
sky. Even though the land still has an early spring austerity, everything
yellow-brown, it’s a good day to be playing hooky.
I remember looking at my watch just before I reach the plant gates and seeing
that it’s past 1 
P
.
M
. I’m slowing down to make the turn through the gate,
when—I don’t know how else to say it—it just doesn’t feel right. I look at the
plant. And I put my foot down on the gas and keep going. I’m hungry; I’m
thinking maybe I should get some lunch.
But I guess the real reason is I just don’t want to be found yet. I need to think
and I’ll never be able to do it if I go back to the office now.
Up the road about a mile is a little pizza place. I see they’re open, so I stop
and go in. I’m conservative; I get a medium pizza with double cheese,
pepperoni, sausage, mushrooms, green peppers, hot peppers, black olives and
onion, and—mmmmmmmm —a sprinkling of anchovies. While I’m waiting,
I can’t resist the 
Munchos
on the stand by the cash register, and I tell the
Sicilian who runs the place to put me down for a couple of bags of beer nuts,
some taco chips, and—for later—some pretzels. Trauma whets my appetite.
But there’s one problem. You just can’t wash down beer nuts with soda. You
need beer. And guess what I see in the cooler. Of course, I don’t usually


drink during the day . . . but I look at the way the light is hitting those frosty
cold cans. . . .
"Screw it.’’
I pull out a six of Bud.
Twenty-three
dollars and sixty-two cents and I’m out of there.
Just before the plant, on the opposite side of the highway, there is a gravel
road leading up a low hillside. It’s an access road to a substation about half a
mile away. So on impulse, I turn the wheel sharply. The
Mazda
goes bouncing
off the highway onto the gravel and only a fast hand saves my pizza from the
floor. We raise some dust getting to the top.
I park the car, unbutton my shirt, take off my tie and coat to save them from
the inevitable, and open up my goodies.
Some distance below, down across the highway, is my plant. It sits in a field,
a big gray steel box without windows. Inside, I know, there are about 400
people at work on day shift. Their cars are parked in the lot. I watch as a
truck backs between two others sitting at the unloading docks. The trucks
bring the materials which the machines and people inside will use to make
something. On the opposite side, more trucks are being filled with what they
have produced. In simplest terms, that’s what’s happening. I’m supposed to
manage what goes on down there.
I pop the top on one of the beers and go to work on the pizza.
The plant has the look of a landmark. It’s as if it has always been there, as if
it will always be there. I happen to know the plant is only about fifteen years
old. And it may not be here as many years from now.
So what is the goal?
What are we supposed to be doing here?


What keeps this place working?
Jonah said there was only one goal. Well, I don’t see how that can be. We do
a lot of things in the course of daily operations, and they’re all important.
Most of them anyway . . . or we wouldn’t do them. What the hell, they all
could be goals.
I mean, for instance, one of the things a manufacturing organization must do
is buy raw materials. We need these materials in order to manufacture, and
we have to obtain them at the best cost, and so purchasing in a cost-effective
manner is very important to us.
The pizza, by the way, is primo. I’m chowing down on my second piece
when some tiny voice inside my head asks me, But is this the goal? Is cost-
effective purchasing the reason for the plant’s existence?
I have to laugh. I almost choke.
Yeah, right. Some of the brilliant idiots in Purchasing sure do act as if that’s
the goal. They’re out there renting warehouses to store all the crap they’re
buying so cost-effectively. What is it we have now? A thirty-two-month
supply of copper wire? A sevenmonth inventory of stainless steel sheet? All
kinds of stuff. They’ve got millions and millions tied up in what they’ve
bought —and at terrific prices.
No, put it that way, and economical purchasing is definitely not the goal of
this plant.
What else do we do? We employ people—by the hundreds here, and by the
tens of thousands throughout UniCo. We, the people, are supposed to be
UniCo’s "most important asset,’’ as some P.R. flack worded it once in the
annual report. Brush off the bull and it is true the company couldn’t function
without good people of various skills and professions.
I personally am glad it provides jobs. There is a lot to be said for a steady
paycheck. But supplying jobs to people surely isn’t why the plant exists.
After all, how many people have we laid off so far?


And anyway, even if UniCo offered lifetime employment like some of the
Japanese companies, I still couldn’t say the goal is jobs. A lot of people seem
to think and act as if that were the goal (empire-building department
managers and politicians just to name two), but the plant wasn’t built for the
purpose of paying wages and giving people something to do.
Okay, so why was the plant built in the first place?
It was built to produce products. Why can’t that be the goal? Jonah said it
wasn’t. But I don’t see why it isn’t the goal. We’re a manufacturing
company. That means we have to manufacture something, doesn’t it? Isn’t
that the whole point, to produce products? Why else are we here?
I think about some of the buzzwords I’ve been hearing lately.
What about quality?
Maybe that’s it. If you don’t manufacture a quality product all you’ve got at
the end is a bunch of expensive mistakes. You have to meet the customer’s
requirements with a quality product, or before long you won’t have a
business. UniCo learned its lesson on that point.
But we’ve already learned that lesson. We’ve implemented a major effort to
improve quality. Why isn’t the plant’s future secure? And if quality were
truly the goal, then how come a company like Rolls Royce very nearly went
bankrupt?
Quality alone cannot be the goal. It’s important. But it’s not the goal. Why?
Because of costs?
If low-cost production is essential, then efficiency would seem to be the
answer. Okay . . . maybe it’s the two of them together: quality and efficiency.
They do tend to go hand-inhand. The fewer errors made, the less re-work you
have to do, which can lead to lower costs and so on. Maybe that’s what Jonah
meant.


Producing a quality product efficiently: that must be the goal. It sure sounds
good. "Quality and efficiency.’’ Those are 
two nice words. Kind of like
“Mom and apple pie.”
I sit back and pop the top on another beer. The pizza is now just a fond
memory. For a few moments I feel satisfied.
But something isn’t sitting right. And it’s more than just indigestion from
lunch. To efficiently produce quality products sounds like a good goal. But
can that goal keep the plant working?
I’m bothered by some of the examples that come to mind. If the goal is to
produce a quality product efficiently, then how come Volkswagen isn’t still
making Bugs? That was a quality product that could be produced at low cost.
Or, going back a ways, how come Douglas didn’t keep making DC-3’s?
From everything I’ve heard, the DC-3 was a fine aircraft. I’ll bet if they had
kept making them, they could turn them out today a lot more efficiently than
DC-10’s.
It’s not enough to turn out a quality product on an efficient basis. The goal
has to be something else.
But what?
As I drink my beer, I find myself contemplating the smooth finish of the
aluminum beer can I hold in my hand. Mass production technology really is
something. To think that this can until recently was a rock in the ground.
Then we come along with some know-how and some tools and turn the rock
into a lightweight, workable metal that you can use over and over again. It’s
pretty amazing—
Wait a minute, I’m thinking. That’s it!
Technology: that’s really what it’s all about. We have to stay on the leading
edge of technology. It’s essential to the company. If we don’t keep pace with
technology, we’re finished. So that’s the goal.


Well, on second thought . . . that isn’t right. If technology is the real goal of a
manufacturing organization, then how come the most responsible positions
aren’t in research and development? How come R&D is always off to the
side in every organization chart I’ve ever seen? And suppose we did have the
latest of every kind of machine we could use—would it save us? No, it
wouldn’t. So technology is important, but it isn’t the goal.
Maybe the goal is some combination of efficiency, quality and technology.
But then I’m back to saying we have a lot of important goals. And that really
isn’t saying anything, aside from the fact that it doesn’t square with what
Jonah told me.
I’m stumped.
I gaze down the hillside. In front of the big steel box of the plant there is a
smaller box of glass and concrete which houses the offices. Mine is the office
on the front left corner. Squinting at it, I can almost see the stack of phone
messages my secretary is bringing in my wheelbarrow.
Oh well. I lift my beer for a good long slug. And as I tilt my head back, I see
them.
Out beyond the plant are two other long, narrow buildings. They’re our
warehouses. They’re filled to the roof with spare parts and unsold
merchandise we haven’t been able to unload yet. Twenty million dollars in
finished-goods inventory: quality products of the most current technology, all
produced efficiently, all sitting in their boxes, all sealed in plastic with the
warranty cards and a whiff of the original factory air—and all waiting for
someone to buy them.
So that’s it. UniCo obviously doesn’t run this plant just to fill a warehouse.
The goal is sales.
But if the goal is sales, why didn’t Jonah accept market share as the goal?
Market share is even more important as a goal than sales. If you have the
highest market share, you’ve got the best sales in your industry. Capture the
market and you’ve got it made. Don’t you?


Maybe not. I remember the old line, "We’re losing money, but we’re going to
make it up with volume.’’ A company will sometimes sell at a loss or at a
small amount over cost—as UniCo has been known to do—just to unload
inventories. You can have a big share of the market, but if you’re not making
money, who cares?
Money. Well, of course... money is the big thing. Peach is going to shut us
down because the plant is costing the company too much money. So I have to
find ways to reduce the money that the company is losing....
Wait a minute. Suppose I did some incredibly brilliant thing and stemmed the
losses so we broke even. Would that save us? Not in the long run, it
wouldn’t. The plant wasn’t built just so it could break even. UniCo is not in
business just so it can break even. The company exists to make money.
I see it now.
The goal of a manufacturing organization is to make money.
Why else did J. Bartholomew Granby start his company back in 1881 and go
to market with his improved coal stove? Was it for the love of appliances?
Was it a magnanimous public gesture to bring warmth and comfort to
millions? Hell, no. Old J. Bart did it to make a bundle. And he succeeded—
because the stove was a gem of a product in its day. And then investors gave
him more money so they could make a bundle and J. Bart could make an
even bigger one.
But is making money the only goal? What are all these other things I’ve been
worrying about?
I reach for my briefcase, take out a yellow legal pad and take a pen from my
coat pocket. Then I make a list of all the items people think of as being goals:
cost-effective purchasing, employing good people, high technology,
producing products, producing quality products, selling quality products,
capturing market share. I even add some others like communications and
customer satisfaction.


All of those are essential to running the business successfully. What do they
all do? They enable the company to make money. But they are not the goals
themselves; they’re just the means of achieving the goal.
How do I know for sure?
Well, I don’t. Not absolutely. But adopting "making money’’ as the goal of a
manufacturing organization looks like a pretty good assumption. Because, for
one thing, there isn’t one item on that list that’s worth a damn if the company
isn’t making money.
Because what happens if a company doesn’t make money? If the company
doesn’t make money by producing and selling products, or by maintenance
contracts, or by selling some of its assets, or by some other means . . . the
company is finished. It will cease to function. Money must be the goal.
Nothing else works in its place. Anyway, it’s the one assumption I have to
make.
If the goal is to make money, then (putting it in terms Jonah might have
used), an action that moves us toward making money is productive. And an
action that takes away from making money is non-productive. For the past
year or more, the plant has been moving away from the goal more than
toward it. So to save the plant, I have to make it productive; I have to make
the plant make money for UniCo. That’s a simplified statement of what’s
happening, but it’s accurate. At least it’s a logical starting point.
Through the windshield, the world is bright and cold. The sunlight seems to
have become much more intense. I look around as if I have just come out of a
long trance. Everything is familiar, but seems new to me. I take my last
swallow of beer. I suddenly feel I have to get going.


6
By my watch, it’s about 4:30 when I park the 
Mazda
in the plant lot. One
thing I’ve effectively managed today is to evade the office. I reach for my
briefcase and get out of the car. The glass box of the office in front of me is
silent as death. Like an ambush. I know they’re all inside waiting for me,
waiting to pounce. I decide to disappoint everyone. I decide to take a detour
through the plant. I just want to take a fresh look at things.
I walk down to a door into the plant and go inside. From my briefcase, I
get the safety glasses I always carry. There is a rack of hard hats by one of
the desks over by the wall. I steal one from there, put it on, and walk inside.
As I round a corner and enter one of the work areas, I happen to surprise
three guys sitting on a bench in one of the open bays. They’re sharing a
newspaper, reading and talking with each other. One of them sees me. He
nudges the others. The newspaper is folded away with the grace of a snake
disappearing in the grass. All three of them nonchalantly become purposeful
and go off in three separate directions.
I might have walked on by another time. But today it makes me mad.
Dammit, the hourly people know this plant is in trouble. With the layoffs
we’ve had, they have to know. You’d think they’d all try to work harder to
save this place. But here we’ve got three guys, all of them making probably
ten or twelve bucks an hour, sitting on their asses. I go and find their
supervisor.
After I tell him that three of his people are sitting around with nothing to
do, he gives me some excuse about how they’re mostly caught up on their
quotas and they’re waiting for more parts.
So I tell him, "If you can’t keep them working, I’ll find a department that
can. Now find something for them to do. You use your people, or lose ’em—


you got it?’’
From down the aisle, I look over my shoulder. The super now has the
three guys moving some materials from one side of the aisle to the other. I
know it’s probably just something to keep them busy, but what the hell; at
least those guys are working. If I hadn’t said something, who knows how
long they’d have sat there?
Then it occurs to me: those three guys are doing something now, but is
that going to help us make money? They might be working, but are they
productive?
For a moment, I consider going back and telling the supervisor to make
those guys actually produce. But, well . . . maybe there really isn’t anything
for them to work on right now. And even though I could perhaps have those
guys shifted to someplace where they could produce, how would I know if
that work is helping us make money?
That’s a weird thought.
Can I assume that making people work and making money are the same
thing? We’ve tended to do that in the past. The basic rule has been just keep
everybody and everything out here working all the time; keep pushing that
product out the door. And when there isn’t any work to do, make some. And
when we can’t make work, shift people around. And when you still can’t
make them work, lay them off.
I look around and most people 
are
working. Idle people in here are the
exception. Just about everybody is working nearly all the time. And we’re not
making money.
Some stairs zig-zag up one of the walls, access to one of the overhead cranes.
I climb them until I am halfway to the roof and can look out over the plant
from one of the landings.
Every moment, lots and lots of things are happening down there. Practically
everything I’m seeing is a variable. The complexity in this plant—in 
any


manufacturing plant—is mind-boggling if you contemplate it. Situations on
the floor are always changing. How can I possibly control what goes on?
How the hell am I supposed to know if any action in the plant is productive
or non-productive toward making money?
The answer is supposed to be in my briefcase, which is heavy in my hand.
It’s filled with all those reports and printouts and stuff that Lou gave me for
the meeting.
We do have lots of measurements that are supposed to tell us if we’re
productive. But what they really tell us are things like whether somebody
down there "worked’’ for all the hours we paid him or her to work. They tell
us whether the output per hour met our standard for the job. They tell us the
"cost of products,’’ they tell us "direct labor variances,’’ all that stuff. But
how do I really know if what happens here is making money for us, or
whether we’re just playing accounting games? There must be a connection,
but how do I define it?
I shuffle back down the stairs.
Maybe I should just dash off a blistering memo on the evil of reading
newspapers on the job. Think that’ll put us back in the black?
By the time I finally set foot inside my office, it is past five o’clock and
most of the people who might have been waiting for me are gone. Fran was
probably one of the first ones out the door. But she has left me all their
messages. I can barely see the phone under them. Half of the messages seem
to be from Bill Peach. I guess he caught my disappearing act.
With reluctance, I pick up the phone and dial his number. But God is
merciful. It rings for a straight two minutes; no answer. I breathe quietly and
hang up.
Sitting back in my chair, looking out at the reddish-gold of late afternoon,
I keep thinking about measurements, about all the ways we use to evaluate
performance: meeting schedules and due dates, inventory turns, total sales,
total expenses. Is there a simplified way to know if we’re making money?


There is a soft knock at the door.
I turn. It’s Lou.
As I mentioned earlier, Lou is the plant controller. He’s a
paunchy, older man who is about two years away from retirement. In the
best accountants’ tradition, he wears horn-rimmed bifocal glasses. Even
though he dresses in expensive suits, somehow he always seems to look a
little frumpled. He came here from corporate about twenty years ago. His hair
is snow white. I think his reason for living is to go to the CPA conventions
and bust loose. Most of the time, he’s very mild-mannered—until you try to
put something over on him. Then he turns into Godzilla.
"Hi,’’ he says from the door.
I roll my hand, motioning him to come in.
"Just wanted to mention to you that Bill Peach called this afternoon,’’ says
Lou. "Weren’t you supposed to be in a meeting with him today?’’
"What did Bill want?’’ I ask, ignoring the question.
"He needed some updates on some figures,’’ he says. "He seemed kind of
miffed that you weren’t here.’’
"Did you get him what he needed?’’ I ask.
"Yeah, most of it,’’ Lou says. "I sent it to him; he should get it in the
morning. Most of it was like the stuff I gave you.’’
"What about the rest?’’
"Just a few things I have to pull together,’’ he says. "I should have it
sometime tomorrow.’’


"Let me see it before it goes, okay?’’ I say. "Just so I know.’’
"Oh, sure,’’ says Lou.
"Hey, you got a minute?’’
"Yeah, what’s up?’’ he asks, probably expecting me to give him the rundown
on what’s going on between me and Peach.
"Sit down,’’ I tell him.
Lou pulls up a chair.
I think for a second, trying to phrase this correctly. Lou waits expectantly.
"This is just a simple, fundamental question,’’ I say.
Lou smiles. "Those are the kind I like.’’
"Would you say the goal of this company is to make money?’’
He bursts out laughing.
"Are you kidding?’’ he asks. "Is this a trick question?’’
"No, just tell me.’’
"Of course it’s to make money!’’ he says.
I repeat it to him: "So the goal of the company is to make money, right?’’
"Yeah,’’ he says. "We have to produce products, too.’’
"Okay, now wait a minute,’’ I tell him. "Producing products is just a means to
achieve the goal.’’
I run through the basic line of reasoning with him. He listens. He’s a fairly


bright guy, Lou. You don’t have to explain every little thing to him. At the
end of it all, he agrees with me.
"So what are you driving at?’’
"How do we know if we’re making money?’’
"Well, there are a lot of ways,’’ he says.
For the next few minutes, Lou goes on about total sales, and market share,
and profitability, and dividends paid to stockholders, and so on. Finally, I
hold up my hand.
"Let me put it this way,’’ I say. "Suppose you’re going to rewrite the
textbooks. Suppose you don’t have all those terms and you have to make
them up as you go along. What would be the minimum number of
measurements you would need in order to know if we are making money?’’
Lou puts a finger alongside his face and squints through his bifocals at his
shoe.
"Well, you’d have to have some kind of absolute measurement,’’ he says.
"Something to tell you in dollars or yen or whatever just how much money
you’ve made.’’
"Something like net profit, right?’’ I ask.
"Yeah, net profit,’’ he says. "But you’d need more than just that. Because an
absolute measurement isn’t going to tell you much.’’
"Oh yeah?’’ I say. "If I know how much money I’ve made, why do I need to
know anything else? You follow me? If I add up what I’ve made, and I
subtract my expenses, and I get my net profit—what else do I need to know?
I’ve made, say, $10 million, or $20 million, or whatever.’’
For a fraction of a second, Lou gets a glint in his eye like I’m real dumb.


"All right,’’ he says. "Let’s say you figure it out and you come up with $10
million net profit . . . an absolute measurement. Offhand, that sounds like a
lot of money, like you really raked it in. But how much did you start with?’’
He pauses for effect.
"You see? How much did it take to make that $10 million? Was it just a
million dollars? Then you made ten times more money than you invested.
Ten to one. That’s pretty goddamned good. But let’s say you invested a
billion dollars. And you only made a lousy ten million bucks? That’s pretty
bad.’’
"Okay, okay,’’ I say. "I was just asking to be sure.’’
"So you need a relative measurement, too,’’ Lou continues. "You need
something like return on investment... ROI, some comparison of the money
made relative to the money invested.’’
"All right, but with those two, we ought to be able to tell how well the
company is doing overall, shouldn’t we?’’ I ask.
Lou nearly nods, then he gets a faraway look.
"Well....’’ he says.
I think about it too.
"You know,’’ he says, "it is possible for a company to show net profit and a
good ROI and still go bankrupt.’’
"You mean if it runs out of cash,’’ I say.
"Exactly,’’ he says. "Bad cash flow is what kills most of the businesses that
go under.’’
"So you have to count cash flow as a third measurement?’’ He nods.


"Yeah, but suppose you’ve got enough cash coming in every month to meet
expenses for a year,’’ I tell him. "If you’ve got enough of it, then cash flow
doesn’t matter.’’
"But if you don’t, nothing else matters,’’ says Lou. "It’s a measure of
survival: stay above the line and you’re okay; go below and you’re dead.’’
We look each other in the eye.
"It’s happening to us, isn’t it?’’ Lou asks.
I nod.
Lou looks away. He’s quiet.
Then he says, "I knew it was coming. Just a matter of time.’’
He pauses. He looks back to me.
"What about us?’’ he asks. "Did Peach say anything?’’
"They’re thinking about closing us down.’’
"Will there be a consolidation?’’ he asks.
What he’s really asking is whether he’ll have a job.
"I honestly don’t know, Lou,’’ I tell him. "I imagine some people might be
transferred to other plants or other divisions, but we didn’t get into those
kinds of specifics.’’
Lou takes a cigarette out of the pack in his shirt pocket. I watch him stamp
the end of it repeatedly on the arm of his chair.
"Two lousy years to go before retirement,’’ he mutters.
"Hey, Lou,’’ I say, trying to lift him out of despair, "the worst it would


probably mean for you would be an early retirement.’’
"Dammit!’’ he says. "I don’t 
want
an early retirement!’’
We’re both quiet for some time. Lou lights his cigarette. We sit there.
Finally I say, "Look, I haven’t given up yet.’’
"Al, if Peach says we’re finished—’’
"He didn’t say that. We’ve still got time.’’
"How much?’’ he asks.
"Three months,’’ I say.
He all but laughs. "Forget it, Al. We’ll never make it.’’
"I said I’m not giving up. Okay?’’
For a minute, he doesn’t say anything. I sit there knowing I’m not sure if I’m
telling him the truth. All I’ve been able to do so far is figure out that we have
to make the plant make money. Fine, Rogo, now 
how
do we do it? I hear Lou
blow a heavy breath of smoke.
With resignation in his voice, he says, "Okay, Al. I’ll give you all the help I
can. But....’’
He leaves the sentence unfinished, waves his hand in the air.
"I’m going to need that help, Lou,’’ I tell him. "And the first thing I need
from you is to keep all this to yourself for the time being. If the word gets
out, we won’t be able to get anyone to lift a finger around here.’’
"Okay, but you know this won’t stay a secret for long,’’ he says.
I know he’s right.


"So how do you plan on saving this place?’’ Lou asks.
"The first thing I’m trying to do is get a clear picture of what we have to do to
stay in business,’’ I say.
"Oh, so that’s what all this stuff with the measurements is about,’’ he says.
"Listen, Al, don’t waste your time with all that. The system is the system.
You want to know what’s wrong? I’ll tell you what the problem is.’’
And he does. For about an hour. Most of it I’ve heard before, it’s the kind of
thing everybody’s heard: It’s all the union’s fault; if everybody would just
work harder; nobody gives a damn about 
quality; look at foreign labor

we
can’t compete on costs alone; and so on, and so on. He even tells me what
sorts of selfflagellation we should administer in order to chasten ourselves.
Mostly Lou is blowing off steam. That’s why I let him talk.
But I sit there wondering. Lou actually is a bright guy. We’re all fairly bright;
UniCo has lots of bright, well-educated people on the payroll. And I sit here
listening to Lou pronounce his opinions, which all sound good as they roll off
his tongue, and I wonder why it is that we’re slipping minute by minute
toward oblivion, if we’re really so smart.
Sometime after the sun has set, Lou decides to go home. I stay. After Lou
has gone, I sit there at my desk with a pad of paper in front of me. On the
paper, I write down the three measurements which Lou and I agreed are
central to knowing if the company is making money: net profit, ROI and cash
flow.
I try to figure out if there is one of those three measurements which can
be favored at the expense of the other two and allow me to pursue the goal.
From experience, I happen to know there are a lot of games the people at the
top can play. They can make the organization deliver a bigger net profit this
year at the expense of net profit in years to come (don’t fund any R&D, for
instance; that kind of thing). They can make a bunch of no-risk decisions and
have any one of those measurements look great while the others stink. Aside
from that, the ratios between the three might have to vary according to the


needs of the business.
But then I sit back.
If I were J. Bart Granby III sitting high atop my company’s corporate tower,
and if my control over the company were secure, I wouldn’t want to play any
of those games. I wouldn’t want to see one measurement increase while the
other two were ignored. I would want to see increases in net profit 

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