I have been flipping back and forth about whether the theme of this post should be the National Association of Manufacturers (NAM) going completely over to the dark side, or about the two polar opposite theories of compensating people. The prime evidence for the first theme and the poster boy for the second are embodied in one person – Caterpillar CEO Doug Oberhelman.
To put this guy in proper perspective, he worked as a repo man in his younger days, in his words “You knock on the door, and you tell somebody you’re gonna take their car away—and usually they’re down on their luck, and their car is the last thing they have.” According to Oberhelman, “It was a fabulous experience.” Not a sobering experience, not an enlightening experience, not one that led him to be thankful that there but for the grace of God go he, not even a tough-job-but-someone-has-to-do-it experience but “a fabulous experience” to take away “the last thing they have”.
At any rate, Oberhelman is now the chairman of NAM – speaking for all of American manufacturing, or so they would have you think. His philosophy: “I always try to communicate to our people that we can never make enough money. We can never make enough profit.” I’ll bet every Cat employee around the world can’t wait to get to work in the morning to help him with that inspirational goal. While every manufacturer supports his advocacy for lower taxes and an end to the regulatory deluge, the truly domestic ones part company with NAM over trade.
For years NAM has been the center of a battleground between those who wanted to use it as a champion for American manufacturing, and the multi-nationals who wanted to use it as a lobbying tool to dupe Congress into thinking that opening the doors from the likes of China, Cambodia and Bangladesh (where they operate) was somehow in the best interests of American manufacturing. In Oberhelman, the MN’s won and there is little NAM has in common with the interests of the thousands of small and mid-sized American manufacturers who operate domestically (and do the bulk of the hiring in the USA).
But it is in the compensation area that Cat and Oberhelman really diverge from the principles of lean and the values of most privately held, domestic manufacturers. Not too surprising, Oberhelman, after moving on from his “fabulous experience” in the repo industry, he rose through the accounting ranks to the top of Cat. Along the way he bought in completely to the notion that people are commodities, to be valued at replacement cost. A Cat worker should be paid for the amount it would take to hire someone to take his place, and not a nickel more.
That approch, usually centered around HR driven wage surveys that try to figure out just what someone with your skills gets paid in the community – then assuming that you should be paid that amount, regardless of much of anything else – misses a fundamental point. It is akin to valuing the family scrapbook lost in a fire at the depreciated cost of the book and the money paid to develop the photos in it. Any value that cannot be clearly and easily quantified in dollars and cents doesn’t exist. It doesn’t take things like attitude, work ethic, loyalty, experience and such into account. Again, it assumes that people are commodities and those intangibles have no value.
Even moderately enlightened companies are moving more and more to compensation schemes that share the wealth –base pay plus an inventive based on profits, cash flow, delivery, quality and safety. They acknowledge that obvious truth that good results in those areas are created by everyone involved – all of the stakeholders. The Oberhelman philosophy – the opposite – is that profits are driven by guys like him; and that any collection of warm bodies willing to show up at Cat in the morning will be equally effective tools for him to use to execute management’s brilliant schemes and make their billion plus profits happen. Therefore, those profits are for the stockholders alone – with a liberal commission due to the likes of him for being the genius who made it happen.
Don’t get me wrong. I am all for profits – the more the better – but they are created by and should be shared by all of the stakeholders. And I have no sympathy for the unions at Cat who are complaining so long and loud. Unions are 100% non-value adding waste and a barrier making effective inter-company communications and teamwork impossible. That said, if I worked for this guy at Cat, and understood just how he thinks, I would be in full solidarity with my union brothers.