Talking heads.
To be clear, I am not talking about the late '70s band that gave us the classic song Burning Down the House. I am talking about those often-self-proclaimed experts — influencers to use the current term — who are the go-to staple of the media to help fill the vast void of factual information and analysis.
I’m reminded of the ending of the classic western movie The Man Who Shot Liberty Valance where the sage newspaper editor remarks, “When the legend becomes fact, print the legend.” We’ve always lived in a world of opinion, facts be damned. It’s why there are still advocates out there proclaiming that the earth is flat, the moon landings were staged on earth, that Big Foot exists, aliens have been secretly living in Area 51, and a host of other fantasies.
Credibility probably should be earned, yet often it is just automatically bestowed on people. Take Jack Welch, arguably a hugely influential expert in business management. Books abound about Jack such as Jack Welch and The GE Way, Winning, and the self-authored Jack – Straight from the Gut. These best sellers often were required reading in various business schools. Jack often was being interviewed about business topics. He was a particularly influential talking head, with some experience to back it up.
Yet, as a prior GE stockholder, I look back on Jack’s legacy with less than rose colored glasses. As someone who has been through multiple training sessions on the value of Six Sigma and participated in some of the negative aspects of its implementation, I’m a little less convinced he had all the answers. I’ve read countless stories over the last two decades of the experiences of multiple companies that embraced Jack’s philosophies. Some good, some less so.
Jack’s position is all about how cost reduction is the key to business success. The bandwagon he and other industry icons jumped on focused on short-term profits at the expense of long-term success. The foundation of this had to be grounded in hard data, firm cost projections on alternatives where there would be clear declared winners. Choices A, B, C, D and E would need to be fleshed out well enough to clearly indicate that Choice B was the least costly, and offered the quickest return on investment.
The philosophy of cost reduction saw off-shoring as mandatory — the migration of industries to cheaper labor markets and of intellectual property to less expensive regions. These cost reduction efforts more recently have been questioned in light of the supply chain challenges exposed during the COVID pandemic, and the ongoing regional shifts in technology expertise.
Taken to an extreme, Jack’s philosophies on cost reduction meant that ideas engineers knew from experience were wastes of time had to be fully investigated to prove that their experiences and intuitions were correct.
Another extreme was that any investment had to have demonstrable ROI. One example I experienced was having to cost-justify buying a second computer monitor for myself to improve my own efficiency — a topic on which I’m perhaps a qualified expert. I’ve had the fortune of working on dual monitors for three decades and my efficiency, quite frankly, goes to hell when I have to work off a single monitor. I even offered to bring my own monitor from home to save the company money, but that was not allowed.
No, I had to prove that a company-purchased second monitor was an efficiency gain for me. Furthermore, I had to expand the scope of the project to cost justify dual monitors for other engineers and managers. And because information technology (IT) investment originates at the corporate level, the project had to make sense at other divisions as well.
Jack would likely be amazed at the bureaucracy his cost reduction philosophy created.
What seemed obvious to me was that a second monitor might cost $250, some labor to procure, install and some electrical cost to operate on an on-going basis, and some added heat load to the building’s HVAC system. A typical contract engineer’s rate might conservatively be $50/hour. Saving just an hour a month because of having dual monitors easily paid for the investment, in my mind.
It seemed obvious to me that we could improve our expensive engineers' efficiencies by buying them an inexpensive second monitor. But no, I had to prove it through a six-month Six Sigma project engaging a Six Sigma company black belt. This six-month cost reduction project I would have to embark on in just the labor alone for me, the black-belt and the project approval bureaucracy far exceeded the cost of my one desired second monitor. But perhaps it made sense if we were to get all the corporation’s engineers to have one.
I understand investment decisions require supporting data and have risk. But there are always discretionary budget items that do not necessarily need a rigid decision making process.
My roots go far enough back that I recall having to fight management to buy Apple computers that would be shared between pairs of engineers working on a NASA Space Shuttle program. As a manager (and woodworker), I actually built five custom lazy-Susan turntables to allow these computers to be swung between two people.
I even go farther back than that in the technology timeline where I was the fortunate sole operator of the department’s one and only computer, working as a civilian co-op engineer for the Navy operating a Tektronix 4052 workstation.
Even further back in technology, when I began work at a truck manufacturer one of my older associates recalled the prehistoric days when the entire department shared their one TI calculator in the bull pen of drafting tables. Do you remember slide rules? I actually have a very nice Keuffel & Esser one almost a meter long from the 1950s. It probably was the envy of other engineers at the time, I don’t know it’s history but my uncle used it in his work.
Efficiency improvement needs are sometimes blatantly obvious to those doing the work, but less so to the ones who authorize the spending.
Often all expenses need to be cost justified, thanks to the expert advice of talking heads like Jack Welch. Taking risks is often not in the investment cards. Management demands data to make decisions easy and unreproachable. Experience seems not to matter for much; you have to prove investments to business decision makers before you can make them. All decisions have to be validated before investments are made. Unless of course you are in charge, and then its okay to mandate riskier investments.
Someone reminded me recently that innovations don’t necessarily happen through cost reduction arguing that the light bulb did not evolve from cost reducing efforts on candles.
Long-term success sometimes is paid for through raw research and development — investments that often are made at the cost of short-term profitability. Examples of this are abundant over time. Look at telephony, computers, satellites, underwater cables, televisions, music recording and, yes, trucks.
Let’s get to trucks and truck drivers. Expert groups like the American Transportation Research Institute (ATRI) and others regularly update estimates of the cost of trucking. ATRI’s annual report typically boils “average marginal costs per mile” down to two primary costs: vehicle and driver. For 2023, ATRI’s data for the driver sums to 43% of per mile marginal cost of trucking — that’s driver wages and benefits.
I need to point out that the “cost” perspective has a flaw. The driver is not just a cost, but the primary reason a company has positive cash flow. You know, that nagging “profit” thing. If you had no driver cost, you likely would have no cash flow.
I love it when company advertising proclaims that “our people are our best asset” but then none of the balance sheets seem to have any metrics showing that the people are cash flow producers. People seem to simply be costs in the business accounting world. Even training often is listed as a cost.
Are your drivers just costs? Do your business metrics reflect that without drivers your company would have no earnings? Are your drivers assets or liabilities on your balance sheets? Do all drivers produce the same income for your company? Or do you factor in that some produce more than others?
The same goes for your trucks and trailers. Are they merely tracked as costs? Or are your business metrics smart enough to recognize that trucks and trailers are assets that make money for you? Do you know that a 2024 truck driven well by a motivated driver can exceed 10 MPG fully loaded? For some background on that fact, look at NACFE’s recent Fleet Fuel Study report.
How do you get that motivated driver? Probably starts with getting the new truck, and then a good driver.
A change of mindset might recognize, for example, that drivers are not commodities, but investments. Your success is going to be based on your driver’s performance. If you owned a racing team, you might pay and develop your driver appropriately knowing that you want to have your loads driven by the best drivers — the Michael Shumachers, Lewis Hamiltons, Max Verstappens, Helio Castroneves, Al Unsers, Richard Pettys, Dale Earnhardts, John Forces, etc. You might want to invest in them to keep them around for a while, and help them get better. You might care that they are happy. You might actually even listen to them, occasionally, knowing that they might have good insights on actual operations. Do your drivers have an impact on repeat business from your customers?
Or maybe you just hire and fire drivers regularly, view them as commodities, and accept that high drvier turnover is just typical and there is nothing you can do about it. Maybe you don’t think your drivers impact customer relationships.
Are your trucks and trailers assets or liabilities? Do your future customers care what vehicles your company owns? Are you investing in preventive maintenance? Does your brand equity factor into your truck buying decisions? Are you getting the most efficient vehicles for your operations? Or are you operating older, less efficient trucks? What message does that send your customers?
You could just listen to the expert talking heads that don’t drive for you, don’t make money for you, don’t use your services, don’t know your operations and customers, etc.
It’s really your call.
Just remember that the talking heads don’t have your best interests in mind, only theirs.
They may know Jack, but that may not mean anything to you in the long run.
