"In general it is impossible that manufactures should succeed in America from the high price of labour." -- Thomas Jefferson
"In general it is impossible that manufactures should succeed in America from the high price of labour." -- Thomas Jefferson
To the men who used to work there, it is simply "the plant." This one is on the South Side of Chicago, but it could have been in Buffalo or Detroit, Cleveland or Pittsburgh. This one made automobile parts. But it might have made plumbing fixtures or machine tools, wire products or steel slabs.
Welcome to the postindustrial wasteland. Once home to more than 500 workers, today the factory stands nearly empty, an echoing cavern with windows cracked and grimy. A skeleton crew stands guard, fighting an unusuccessful battle with vandals. Outside, the smokestacks arequiet for block after block, and only the taverns are thriving.
A reborn economy?An entrepreneurial revival? It is easy, amidst the congratulatory hoopla, to forget that the changing patterns of business leave victims in their wake. What happens to the workers from that South Side plant -- or to those from the textile mills of Georgia and the rubber plants of Akron? Are they all expected to start computer outlets in Phoenix?
Analyze the dislocations, and you get no shortage of villains -- or scapegoats. Blame the Japanese, or the low wages paid to offshore workers. Blame the deficit, deregulation, or the dollar. Labor blames management, and management blames labor.
Nor is there a shortage of answers. Some believe that new technologies will boost productivity and make plants competitive once more. Others look to new ways of organizing and motivating people, and to new ideas about ownership -- ideas that promise to replace confrontation with cooperation.
However that may be, a reborn economy that forgets the men and women in "the plant" is doomed at birth.
"They just brainwashed us, buying some time to get this stuff overseas." -- Eddie Nowak
Until he was let go in November 1984, Eddie Nowak had worked for 13 years at the South Chicago Borg and Beck actory, a division of Borg-Warner Corp.
I still think this place could be run as a profitable business. What happened was total mismanagement. They used to make jokes about the product they manufactured. Nothing was put back into this plant. We have machinery in here so old they can't even get parts for it.
They never gave a damn about anybody who worked here. When it got busy, you were the number one guys. But as soon as that push was over with, that was it, you were crap again. They had meetings where they brought us up to the top floor when things were getting bad. They said, "We're going to have monthly meetings with you people; we're going to utilize your knowledge; we're going to call you up and talk to you on a personal, one-to-one basis." It never happened. They just brainwashed us, buying some time to get this stuff overseas.
When I was 21 years old, coming here, I thought I had something good for a long, long time. I'm not saying that this company wasn't good to me moneywise, but they just took the bottom right out from underneath and gave me nothing in return. I worked here for 13 years; I got a slip of paper in the mail that says I'm terminated. Not laid off, terminated. Thirteen years, shot.
If you really think about it, the person who works in this factory spends most of his waking hours here. It's like his home, really. And when that's taken away from you, that's like getting kicked out of your house, somebody taking your home away from you.
I've known people who went to California to try to find work, and came back. People who went to Texas, they're back, too. They talk about the jobs there.Sure, you can open up the paper on a Sunday and see that McDonald's and Burger King want management traionees, starting at $8,500 a year. For a guy just out of high school, it may be something to think about. But if a guy's got two or three kids, he's past mid-age in life, it can't work. Factory work is finished anyway. Pretty soon, it's going to be nothing but services, some guy running around slipping in new computer panels for $7 an hour.
"There's going to be a viable steel industry in this country. It's just not going to be composed of the big companies." -- Peter Dillon
Peter Dillon is vice-chairman of Northwestern Steel and Wire Co., a New York Stock Exchange-traded business founded in 1879 by Dillon's great-grandfather.
People just don't realize what's happening in the steel industry. ten years ago, there were 750,000 jobs. Five years ago, there were 500,000 jobs. Today, there are 225,000, if you're lucky. There's no way we can compete with foreign countries, where 60% of steel manufacturing is either government controlled or government subsidized. All they do is operate seven days a week, three shifts, pumping out the steel. They don't have to worry about a bottom line.
Our best year, 1981, we were just a hair under a half-billion dollars. Since then, we've had the lowest steel consumption since the Great Depression.Our sales have fluctuated all the way down to $168 million.
During this period, we installed two of the world's biggest continuous casters. We updated our furnaces. We added the latest metallurgy. We closed down two mills. We completely gutted one mill and made it two modern mills. We went through a seven-month concession shutdown with the steelworkers on our wire-and-rod division, and we got about a $7-an-hour reduction in wages and benefits. But we haven't made money for the last 14 quarters now. Instead, we've lost more than $97 million.
I think there's going to be a viable steel industry in this country. It's just not going to be composed of the big companies anymore. They're going to be minimill-type operations, closer to their respective markets, with much shorter product lines.
I also think you're going to see a lot more employee ownership of troubled industries, because that's the only way to get people involved in their business. I think that would make a helluva difference. You can't have macho unions and macho managers bashing each other anymore. After companies have achieved significant reductions in wages and benefits, the only time you can go back and ask for more is if you're going to offer people a piece of the rock. Maybe there isn't room for the typical investor anymore; maybe the margins are going to be so tight and the competition so keen that the shareholder and the employee are going to be one and the same.
"They'll sell us a Penn Central, but never a winner." -- William Winpisinger
William Winpisinger has been president of the 825,000-member International Association of Machinists and Aerospace Workers since 1977.
They don't complain about the speculators who are driving up land costs. They don't complain about usurious bankers who drive up capital costs. Instead, they just blame it on the worker. He's the most vulnerable component in the production equation, so take it out on him. Even when they offer us worker participation, ESOPs, and all those other schemes, hey always only want to sell us the losers. They'll sell us a Penn Central, but never a winner.
In the America I was born in, there was an appreciation that we're not going to get better off alone, so we might as well get a little better off together. You get a choice. You can go get the brass ring, try to be the one in a million who becomes a millionaire, or you can contribute what you've got to the group so that we can all get better off together. There are 15 million Americans out there looking for jobs, or so damn discouraged they aren't even looking. There are 50% of the black kids unemployed. This is a boiling pot, and I don't know how Americans can expect to keep foisting all the discomfort on a relative few and expect them to put up with it.
Maybe not immediately, but in the future, I think you're going to see some pretty aggressive conduct and behavior on the part of the workers. This new breed of entrepreneur, particularly in high-tech industries, knows that it's coming; that's why they are so blatantly anti-union. But I suggest to America that if you want to crowd us hard enough, like any other rat, we get cornered, we'll fight.
"I said, 'Would you be willing to sell this company to the employees?' They took it as a joke, like I was some kind of clod." -- William Mazanec
William Mazanec was president of the union at the Monroe Bridge (Mass.) paper mill, a division of Deerfield Specialty Papers Inc. Since the plant was closed last December, he has been trying, so far unsuccessfully, to engineer a worker buyout.
They said the mill was too old and they weren't making the profit they expected. I understand if you are only making a few hundred thousand, the chairman of the board is going to pull the plug on you. But I think that for them to just walk away and close the place down is wrong. Give us a chance. If we can come up with our own management and finances, let us go out and take on the world.
We had a negotiation before the shutdown, and that was one of the things I asked them. I said, "Would you be willing to sell this company to the employees?" They took it as a joke, like I was some kind of clod.
The thing is, the shutdown should never have happened. They had the product. They had the market. And then they wanted to make more profit. So they started cheapening the quality of the paper. They didn't put money back into that mill to keep up with the times, to keep it rejuvenated.
The problem was, the company only wanted us to work efficient from the neck down. The rest didn't count. But everybody has something to give -- not just hours, but ideas. If you can get them giving 100%, you can really do something.
So when the time came to shut down the mill, I asked my people. I said, "Would you be interested in trying to buy this, because without you, nothing happens." They all agreed to take a 10% pay cut. And there are lots of other ways we could save money. It isn't that big a mill -- you don't need three or four vice-presidents earning beaucoup dollars. And there are different ways of running paper machines so you can save money, too; anybody who works there in the mill could see them.
If we can buy the mill, people's attitudes will change. It will be their mill, and their money, and their future on the line. I asked them all to put up $500 each so we'd have something to show the bank up front when we go to borrow money.Five hundred dollars is a lot of money for a guy that has been laid off, but we've already got almost $30,000 over in the bank in North Adams.
Maybe we won't get all the people back to work if we buy the mill. But if we can preserve 70 or 80 jobs, that's something. You're talking about people.This is the only place they've ever worked, 30 or 35 years in a paper mill. What else are they supposed to do?
"They walk through the factory and say, 'Isn't this nice. Oops, Jesus, don't get any oil on my suit." -- John West
John West put himself through Carroll College by working in a heavy manufacturing plant along with his mother and aunt. Starting as a floor sweeper, he progressed to delivering steel and operating the machinery. In 1981, he founded Cadlinc Inc. in suburban Chicago to engineer and maket computer-aided manufacturing systems.
Most of the engineers have come into the factories from the Route 128s or Silicon Valleys. They're coming from the top down, from the design side, the clean side of the factory. And company presidents come out of finance or marketing. They'd take their once-a-month walk through the center aisle of the plant and say, "Isn't this nice. Oops, Jesus, don't get any oil on my suit."
Well, I come at it from the factory floor up. I say, this is where the rubber meets the road, where the money is made or lost. Working process, inventories, management of the flow of materials through that plant, quality of the product, delivery times -- it's all right there. But most electronics engineers or computer people don't want to go rummaging around factory floors. Instead, these bright young engineers from the traditional CAD/CAM companies develop intellectual solutions.
They work, on paper. But no one accepts them.The most common executive attitude is, "We'll give it to them and they've got to do it." But I learned working down there that these guys are pretty doggone smart. You take a good tool-and-die marker and he can blow away 95% of the world in mathematics.
I always ask, Now how would a guy like Pork Chop react to something like this? He was this guy I used to work with. I used to deliver steel to the machines, and to take it out you had to lift it up with a crane, one piece at a time. But Pork Chop came up with a better idea. He had a little metal hook he could hook on the side of the cart and just slide the bar down. He didn't want to strain himself -- and he could do the job 10 times faster.
In Japan, top graduate engineers don't go up in the office. They go to the factory floor, because that's where the action is. That's starting to happen here, too. We're getting the bright young Purdue and Brigham Young grads with degrees in manufacturing engineering. These guys are going onto the factory floor, getting to know the Pork Chops of the world, talking to them and watching them.
"We probably would not have given up a quarter of the company to the employees if it weren't for People Express." -- Frank Borman
Former astronaut Frank Borman has been the president of Eastern Air Lines Inc. since 1975.
We went from being a public utility to being one of the most competitive industries in the country overnight. We were simply deregulated.
Boy, have we changed since then. We've changed with the ownership; we've changed with profit sharing; we've changed with employee involvement. The free market has turned disciplinarian.
We can certaionly compete with the new airlines. The entrepreneur in the airline business doesn't have the advantage he may have in other industries. Most often, people who are successful on their own have a specific idea or a unique product. But the people that start the small airlines have only one advantage: very low labor costs.
What we have to do is adjust to a labor rate that's vastly different from what we've been used to. Carriers have taken different approaches to that. Some have filed Chapter 11 -- Continental. Some of them have used brute force -- American. We've tried to use a middle ground, which is persuasion. We've tried to bargain people down. In return, we've made entrepreneurs out of our employees by including them in the ownership of the operation. But in all candor, we probably would not have given up a quarter of the company to the employees if it weren't for People Express.
The Peoples and Air Atlantas of this world have complicated our lives enormously. But a broad airline with a comparable product with low labor costs, like a Continental, is in my mind a much more significant concern than something like an Air atlanta.
"Our people recognize they're building something far greater than a corporate entity: They're building a philosophy." -- Michael Hollis
Michael Hollis, a former senior fellow at Dartmouth College, left a vice-presidency at the Wall Street investment firm of Oppenheimer & Co. in 1981 to begin the research and raise the $50 million he needed to start Air Atlanta Inc. Flying since February 1, 1984, the airline carried 175,000 passengers -- mostly business travelers -- in its first 11 months. It flies to Atlanta, Miami, Memphis, and New York City.
There's a lot of doom and gloom about airlines, but we're the cutting edge of what's happening in this dynamic industry. If you talk to our people, you'll see how involved they are. They're excited about being a part of something that's new, that's refreshing. Our people recognize they're building something far greater than a corporate entity: They're building a philosophy.
If you look at the great industries of our country, you can see where individuals have put their whole life earnings at risk, have gotten their friends to be part, and invariably have built great confidence. Federal Express is just one example. At Air Atlanta, we have nearly 400 employees in the family, and you need only get on the airplane to see the level of enthusiasm they have for this company and our future together. We train them our way, in the profit-productivity-service mind-set, using a lot of what Fred Smith uses at Federal Express.
I'm from Atlanta, and I want to contribute something to the Atlanta tradition of excellence in transportation. My father as in transportation here 40 years ago: He was a porter for the Southern Railway. I grew up here. I went to the public schools. So I feel that I have a debt to repay.
We're in business to ensure and deliver a high return on our investors' capital. But we're also in business to assure that our employees, those who make it happen every day, get a good return on their investments, the sacrifices and the contributions they make.
"Fred Smith, my name is Skip Carroll. I just wanted to tell you that I'm proud to be working with you." -- Francis Carroll
Thirty-nine-year-old Francis "Skip" Carroll left a job with a messenger service in Chicago 16 months ago to become a courier for Federal Express Corp.
I'd gotten to a point with my other job where he money was not enough to justify staying there. Not only was there no future, there was no pride. There was no thrill of doing something you had never done before, overcoming the downs that arise every day.
Ever since coming to Federal Express, I've had no doubts in my mind that it was the right move. It's a very important job. And it's a thrill and a half to walk in on some of the business superpowers and have them waiting for something that was picked up maybe as late as eight or nine o'clock at night at the other side of the country, and they know you've got it.
It's not the benefits and salary that are the incentive, it's the responsibility. You are given a task to do, and when you leave the building you are not being overseen. There's nobody there to say, "Go faster. Do this. Do that." The payoff is in all the compliments you get.
Sometimes I wish I could see the whole system at work all at once. It's incomprehensible. I would like to be able to see every package picked up, every airplane moving, every conveyor belt that's moving, all at the same time.
I am so envious of the people who lived through the early days of the company. There were times when the payroll was almost not met. But people said, "I'll keep working. I believe in the company." Fred Smith did an interview with Bill Moyers; I've watched it three times. And he said those people were literally "in the trenches" with the company. I wish I could have been there with them in the trenches. Not to win some sort of badge for people to see, but to win that inner glow, to know that I was involved with it, and it worked.
Federal Express is a big part of my wife's and my life. You know, we talk about it every night when I come home. When I knock at the door, my wife gets up to unlock the security lock and says, "Who is it?" I say, "Hello, Federal." I just hope nobody hears that or else our little password is out. Julie and I have made more than $1,000 worth of tock purchases. We only take 5% out of my paycheck now, but we're talking about taking another 1% and having it accumulate for our daughter's education.
I'll sound silly, but I have a premonition that I'll get to meet Fred Smith himself when he comes to Chicago. I know sometime He'll come into my station. And he'll want to stand where I like to stand, at the top of the belt, watching all the packages come out of the container, because the thrill is being able to see them all stretched out. I'll be standing there with the earphones on. I will walk up to him and say, "Fred Smith, my name is Skip Carroll. I just wanted to tell you that I'm proud to be working with you."
"If everybody becomes a Viking raider, the system doesn't work." -- Lester Thurow
Lester Thurow is the Gordon Y Billard professor of management in economics at Massachusetts Institute of Technology.
The current philosophy -- that if we liberate the entrepreneur all the problems will disappear -- is wrong. It's the old American Lone Ranger myth, that the Lone Ranger won the frontier. But of course, the Lone Ranger never existed, not even as a prototype. We settled the West with wagon trains and community barn raisings, not single individuals.
If you imagine a Fortune Hall of Fame, an entrepreneur's mecca, a picture of Henry Ford hangs on the wall. What did Henry Ford do? He invented the assembly line -- a technique to get a group of people to work together better. But that requires something else besides an entrepreneur coming into the system. Look at the Japanese, who are making those kinds of innovations today, like lettiong blue-collar workers do inventory control so that they don't need the white-collar bureaucratic overhead. But in Japan, the blue-collar workers know enough mathematics to put the technique into place. The blue-collar workers in the United States don't. Seven percent of all American 17-year-olds test out as functionally illiterate, compared with only one-half of one percent of the Japanese.
So entrepreneurs are not enough to make the innovations work; we need the right social environment. If you believe entrepreneurs can solve all the problems by themselves, you'll never do the other things that need to be done to make the system work.
Many entrepreneurs today seem to have a short time horizon. They want instant wealth. One of the worst things here at the business school is what I call the Boone Pickens Syndrome. Every kid wants to become a financier and make $800 million in six months. But if every kid did, the whole economy would fall apart. Because Boone Pickens is not doing anything productive in the sense of new products. The Boone Pickenses of the world are the equivalent of the Viking raiders. If you are the Vikings, and other people are plowing, planting, and doing productive things, you can come down and raid them. But if everybody becomes a Viking raider, the system doesn't work; there's nobody to raid. Somebody's got to be out there doing the equivalent of plowing -- which is time-consuming, slow, doesn't make you instantly wealthy, but is absolutely necessary. We should make the plower the hero.
The Japanese may be doing that for us. They're providing that concentrating on building a better product can run the financiers out of business. I'd be willing to bet that we'll see changes in who makes it to the top of the Fortune 500 companies. At the moment, financial people are at the top, but within the next 10 years, I think it will be production people. You promote the people who know how to solve your major problem, and in the next 10 years, that problem will be producing a good product to compete with the Germans and the Japanese.
"What am I supposed to do, come in in my BVDs or some kind of cowboy suit?" -- T. Boone Pickens
T. Boone Pickens, chairman and president of Mesa Petroleum Co., has gained fame or notoriety, depending on your perspective, for his attempts to take over Phillips Petroleum Co., Unocal Corp., and other oil giants.
You see remarks that people are surprised about me: "This guy wears a gray suit with a red striped tie." Well, what am I supposed to do, come in in my BVDs or some kind of a cowboy suit? They act like if you're from Amarillo, Tex., and you're involved in some of these deals, there's got to be something strange. I frequently read, "He wears button-down collars and looks like he came from Wall Street." Well, I do wear button-down collars, and I don't have any trouble fitting in on Wall Street, or in Amarillo, or San Francisco. I consider myself to be an average American man. If I ever go to a sale to buy clothes, all my sizes are gone.
People call me a raider, preying on a vulnerable company. But why is it vulnerable? Because of weak management. Any time that the managers are doing a good job for the stockholders, keeping the stock value up, everything will be just fine. And this is the old raider who came in and put $3 billion in value in about 250,000 stockholders' pockets.
I've been speaking on college campuses for 20 years, and in the '60s I wouldn't have 2 people coming up to say, "How can I do what you did?" They didn't give a damn what I did; they were probably turned off by it. In '84 I made 11 talks on campuses to 28,000 students, and I can tell you this: Today they'll stand in line to come up and ask me a question. Generally, the question is, "How can I get out and do what you did?"
"You've got speculative entrepreneurialism today -- if I become Pet Rock Inc., I'm golden." - Kevin Phillips
Kevin Phillips, a member of former President Nixon's brain trust, is the author of The Emerging Republican Majority and Staying on Top: The Business Case for a National Industrial Strategy. He currently heads American Political Research Corp.
We've had comparable periods glorifying the entrepreneur/businessman in American history. The industries are different today than in the late nineteenth century and the 1920s, but the phenomenon is not new. And both those periods, in turn, lead to a regulatory period bringing everything back in line.
The scary part is the parallels in the international financial context between 1985 and 1929-30. Fly-by-might commodity firms, government securities operations, hustlers with every type of index and call option imaginable; Canadian banks, Texas banks, Ohio S&Ls, insurance firms, medical malpractice firms -- a whole infrastructure of fast and loose financial services and speculative development. I won't say it's teetering, but it's certainly not solid. Boy, is that going to be regulated. It's just a couple of years way.
Entrepreneurial politics gets caught up in gimmicks. Now the President's got the idea that all these poor clowns in the Allegheny Valley can be retrained to be computer technicians. Obviously, that's not even remotely true. Entrepreneurialism involves major hardship for these segments of the economy. Entrepreneurs are always thinking in terms of the cutting edge, but they're not paying attention to the slag heap. What new business can you start in a small town in Iowa when the whole place is crumbling, or in some mill town in South Carolina?
People are trying to get themselves a piece of some stock offering or some start-up or some gimmick before it's too late. It will be interesting to see which of these new companies are still around five years hence. You've got speculative entrepreneurialism today: If I go out and I become Pet Rock Inc., I'm golden. Everyone's trying to grab a piece of what's perceived to be a great way to make a buck.
"There's no point in bemoaning the fact that some people are taking advantage of the system." -- Ian MacMillan
Ian MacMillan is director of the Center for Entrepreneurial Studies at New York University Graduate School of Business Administration.
Obviously, when something is going strongly, people are going to try and jump on the bandwagon. Some of them may be dishonest, and others may be rip-off artists. That's certainly a shame -- but it would be a terrible shame if there were no bandwagon for anyone to jump on.There's no point in bemoaning the fact that some people are going to take advantage of the system.
This wave of entrepreneurs is different from those in the past, particularly in terms of composition. You have many more women, more blacks, more members of all the minorities. What's important is that this is the route to building social and economic wealth; the more people we can get into that kind of mainstream, nation-building activity, the more healthy we will be.
I am seriously concerned about a couple of things. We're going to see more failures. That's sad, but it's just a fact of life. What I'm really worried about, particularly since we've seen pension-fund money flowing into venture capital, is that some mindless do-gooder is going to rush in and say, "Now we need regulation." As soon as people start regulating rather than letting free markets operate, we will swamp all initiative and creativity.
My other concern is the rapid rate at which we're replacing people we need. You can't stop progress. But once we've created all the subsidiary service activities that go with the creation of new businesses, how many people are going to be left over who need retraining because their jobs have become obsolete? I think that's the challenge.