Time for Engineers at the Top?

While it is true that some (few) engineers transition to leadership roles, most engineers lack even the fundamentals of leadership.

All of us daydream of how we could make the world a better place if everything was just done "my" way. Coincidentally, that is the same dream that all dictators have had as well. Having that vision does not preclude the ability to achieve it.

I would like to think that having an engineering background adds value to one's leadership skills and many top CEOs do in fact hold engineering degrees along with advanced business degrees. However, being successful as a leader in a major corporation requires a great deal of other skills that most of us are clueless about.

I feel as engineers we have a unique gift, but at the same time we have a myopic view of the world. We tend to think of how wonderful it would be if we could be king. To better understand that point I would urge the reader to read about Damocles.

As an engineer myself, I think you are likely correct about the myopic world view held by engineers in general. On the other hand, the same can be said about the Finance types who typically run companies today. The focus tends to be purely on finance with little or no attention to long-term health of the company. Five-year plans are just farces today and today's closing stock price trumps all.

Well put AH. I am an engineer in Canada and I would unfortunately have to agree with what you have said.

UFG

I find it interesting that this question should surface now, in the context of the bailouts that are being discussed in Washington DC.

The first such bailout, in my lifetime at least, was the one extended to Chrysler Corporation many years ago when Lee Iaccoca took charge of the company.

Chrysler was on the threshold of financial ruin and bankruptcy.

Unfortunately, their problems weren't caused by the government as has been shown in the current mess. Instead it was a combination of many factors, most of them generated internally.

Lee Iacocca is, first and foremost, an engineer. As such, he is far more pragmatic and Reality based thinker.

On the basis of his track record, the government loaned Chrysler the money. I forget the amount but I believe it was hundreds of millions of dollars.

Chrysler paid back every dime, two years ahead of schedule, and the Fed's did something they never do: they made money on the deal.

All else being equal, which it rarely is, given a choice between a Harvard MBA and an engineer to run a company guess who I'd pick?

Yes AND no!

If You consider engineers are more pragmatic and carefull, and that they would try to build in some overall system protection againest going trugh extremes (like fuses in electric instalations) than surely they would be better than usuall manager types that tend to minimize costs and maximize profits and consider high risc policies normal....

But, since managing company is not usually creative type of work, it is simply not healthy for engineers if they have any creativity in their veins, and they would tend to invest too much in development of new products or reconstruction of factories than is possible for company to bear, if company has any production, and if not, it simply is not engineering field of work.......

There is just one exception to this rule, as System Analysts / Systems Engineers would be able to manage ANY kind of company, but still their role is NOT to manage it but to establish optimall organization structure and hitch free functioning.

Actually, any manager should be first class Ecconomist in first place, at least that much to know results of actions taken by management of company on its functioning, and to know that specialists for system analysis and systems engineering should be consulted before any mayor change in company functioning is introduced, and that it is such specialists that should really propose changes if necesary......

Bigest problem with managers is that they tend to be afraid to employ anybody more clever than them, and if their previous results were just lucky circumstances and not real talents, then they would be allways afraid that someone could take their place :-((

Next problem is whole system of recruiting management in any company >>from inside<<, that results in having people on positions where they dont perform optimally and on job where they are not best they could be! You perhaps wonder how it happens........ Lets say there is shop selling cars (or anything else) and there is one salesman that usually sell three times more than others. Sooner or later, salesman would be considered for promotion as manager of this shop. This could work if former salesman results were not just due to his personall charisma, and he suceed to train his salesmans to produce such outstanding results also. Since shop as whole would now be best shop in whole company, it would stand out and get noticed by top management. Therefore, shop manager and former best salesman get promoted and would now be manager for whole city or county. If person is smart enough to make manuals with description of training system for salespersons and teach it to shop managers, then this would make this person still more sucessfull, otherwise his selling skills would be useless on this new position, and anyway this could be done only once even if former salesperson has done this. Perhaps if such indoctrination of salespersons is applied to all branches of company and bring much more sales and therefore also profits to company owners, former salesperson could even become regionall director or Marketing director, and in this last case selling skills could still be usefull, but sooner or later this person could find he/she is lacking education and skills for newest job......... Baring another miracle, such person could not function optimally on new position, and there would be no further promotions :-( Nobody would think to demote such person back on job performed best, or at least one step back, so we have bad manager that is not doing well enaugh, and if it is bad enough, such person would be fired, or more likely bought by concurent company that would think person is worth salary it get and more..... Anybody naturaly have some experience after being manager for some time, and comming from outside, this person would be in better position to see real problems of new company, and would try to implement solutions proved to work in previous company, so for start some results can appear for new company that would be good........ Only, that person is probably still lacking qualifications and would fail sooner or later, unless, being good salesmann, this person would sucessfully sell himself/herself to still another company......

There are numerous examples of such stories in US and managers are just selling themselfs from company to company, regardless if they made more problems than good to companies they managed :-((

Those who dont sell themself are usually not really fit for position occupied, as managers, which gives overall bad results, no?

But there is still greater problem inherent in system of company shares, whose value seldom reflect true worth of company, and because companies could perish because of speculations and owerall running after greater dividends paid to shareholders. Companies are bought and sold, and more offten than not, richer company could bought smaller contender in same field in order to get rid of competition or to start producing better quality product and so beat other companies in same field, or to supress new, cheaper and better technology untill their factories return investment cost at least. This was case with plasma and LCD screens that were burried over 30 years because CRT monitors factories was newly built and neded 20 years to cover cost and bring profit as planed.......... I know severall other examples of technology that is still burried, and would be ecologicaly much more safe to use, like acumulators from plastic and graphite that use no acids or lead, and have 1KW per cm2 capacity.

Also, some economicaly ilogicall things that are cracking down now could have been prevented, like severall mortgages on same property, which work if person is able to pay them back with interes, but once person is not able to pay anything, all is lost..

Incessant demand for more profit and greater dividends result in cutting down on work force or even in closing whole factories instead of trying to make cheaper products of same quality created such situations where people cannot pay their mortgages, and moreover, made them unable to buy products of factories, which then result with more job terminations and closing of factories, making vicious cycle of destructive forces in society, like snake swallowing its own tail.......

Unfortunately, big company managers obviously dont know what they are doing and that should be changed. If that means engineers would manage companies (or at least factories) better for society in generall, then this should be solution, but where it was tried, old established managers cried >>Technocratism!<< and refused to wield their lucrative jobs........

What is necesary is more educated and socialy aware managers who would avoid shortcuts in profit earning on expense of pšeople in generall........

Usuall tactic of spending more for advertisements if product is not selling should be abandoned and system analyse reintroduced. Surely sales would grow if products are made better and price is lowered, and if that means less milionaries produced per year, then it is better than more homeless people produced at same period. Engineers should refuse to construct products with >>programmed failure<< built in and factories should market their products globaly instead.

One way out would be that companies (and specially factories) are owned by workers, they surely would not cut down on jobs for bigger dividends, even if this would not be popular with richest families that own most of world companies........ Solution to this would be that new owners should pay half of profit to old owners, and since workers would take care of their companies properly, nobody would lose, right?

In fact, solution would be possible if rich people give factories and technology to anybody capable of properly running new factories and producing profit as intended, on condition that factory first pay back all costs of its building to investors and then 25% or even 50% of profit would be royalty that new owner should pay as long as factory produce any profit, because they would get such factory for FREE........

If anybody needs my expertise, I am available, even if not for free :-))

Regards from Zagreb, the capitol of Croatia, Europe!

Marijan Pollak,

IT SA/SE 1st. Class,

Instructor & Team Leader

If you are referring to Corporations then they have been seeing slow deaths, but if you are referring to Big Banks like Lehman, Stanley Morgan, etc. they had closed down due to Sub prime loans which were bad loans but with higher rates of interest. I don't know which financial Wizard generated this idea and sold to their higher management. It is because of these loans which were given against security of houses to every Tom Dick & Harry who did not have credit worthiness.These people failed to pay higher interest rates and subsequently surrendered the property.

Now these assets are lying vacant and no one wants to buy them.So it was joint venture of Builders who built these houses and made money, Sub Prime Agents who brought the clients to buy them, they also made money,only Banks were fooled and o were dumped by all these guys.

I have seen in my 33 years of working experience that whenever a Technocrat is at top of the organisation and due to no financial knowledge, such companies have sunk. May be there were some exceptions. So it is good financial man with team of Technocrats can successfully run the organisation.

True, but the companies involved in the most recent fiasco were run by finance people. They are in an industry where the only "techies" are the folks in their IT departments. In short, not engineers. Banks hire very few engineers.

"I don't know which financial Wizard generated this idea and sold to their higher management."

You may thank Congress and the 1977 Community Reinvestment Act (CRA). While it is arguable that not all of the blame can be laid at the feet of the CRA, it stands to reason that the CRA planted the seeds. 1995 saw a strengthening of that CRA with the idea to increase home ownership by essentially forcing banks to provide more loans to those of low income. After the changes in 1995 sub-prime loans increased 40%.

While I am not going to bash Democrats, as I believed their hearts were in the right place, the CRA probably did more social harm than good. Almost all banks opposed the CRA in 1977 as being a bad economic idea, but it went through anyway.

The idea of the CRA was to mandate that local banks provide low-interest loans to their community. This was essentially a required quota for banks to loan mortgages to indiviuals that would not normally qualify for a loan due to credit history or income deficiencies. These risky loans were known as sub-prime loans. Feddie Mac and Fannie Mae were the two government sponsered/charged agencies through which sub-prime loans were organized.

I feel that the CRA was the catalyst for the sub-prime meltdown. As the years went on, realestate values began to fuel a ticking timebomb. Any rapid rise in the values of housing also means that at some point there will be a correction as momentum carries property values higher than than they are actually worth.

As property values accelerated, the market was saturated with low income people holding high risk sub-prime loans. When the cracks in the damn appeared, default rates escalated and suddenly lending organizations were upside down in assets.

People were betting that any property value correction would not be severe, but that didn't happen. The correction was pretty hard and the burden of the sub-prime loans only added to the problem.

While there are many, many reasons for this mess, I think that past legislation carries the bulk of the blame. This is not just limited to the CRA, but the CRA is a good thing to understand since it provided the foundation for the events to follow.

Since the subject is very complex, there is a lot of finger pointing and misinformation going on in the CYA (cover your @ss) fallout. It has become known as social engineering and I think this will be a good history lesson for the future genrations on just how difficult and precarious social engineering can be.

I'll close with what I think is a relevant quote by Thomas Paine, "That government is best which governs least."

Hi Hero,

Thanks for educating me on the subject.I live thousands of miles away from U.S i.e India.Whatever I have learnt is through net, newspapers, and my relatives who have settled in U.S.What has baffled me that country like U.S having many smart guys armed with MBAs and other degrees can land their country in such a economic mess.

If it is something to do with politicians then "God Save U.S.".

The root cause is almost 100% politicians. The Carter Administration pushed through the 1977 Act and the Clinton Administration strengthened it in 1993 by rewarding lenders who made the high-risk loans and penalizing those who did not. Now, we have the Chairman of the Senate Banking Subcommittee (Senator Chris Dodd of Massachusetts) who is charged with resolving the mess and who has recieved over $120k in campaign funds from executives of Fannie Mae and Freddie Mac.

Can you say "conflict of interest"?

Suresh wrote: "What has baffled me that country like U.S having many smart guys armed with MBAs and other degrees can land their country in such a economic mess."

Degrees mean nothing if not matched by Wisdom. Wisdom doesn't come from reading or attending lectures and parroting what others say. That's merely information. Wisdom comes from showing up for Life. It comes from combining information with first hand experience.

There are smarter more knowledgeable people than I, sociologists and other students of history, that have shown that civilizations evolve and decline over a 200 year cycle.

The start of the decline they point out, is prefaced by the loss of self sufficiency by individuals. As soon as they discover that they can hold out their hand for something and the government will place something in it, then the slide begins.

At the risk of stating the obvious, the anxiety many in this Country are now experiencing is caused by the rudest of awakening: they lack the confidence that comes from being self-reliant. They can't look out for themselves, have discovered that the government can't either, and they are now in a justifiable panic. They simply aren't able to deal with the uncertainty and the anxiety.

Former US Senator Phil Gramm made the mistake of accusing Americans of whining and labeled the situation as 10% financial, 90% psychological and he was pummeled. The little boy said the Emperor is naked and instead of running the tailors out of town, they beat up on the little boy for telling the truth.

Why this may look like a crisis to many. I suggest to you that if approached properly, this may in fact be the greatest opportunity to save this Country since the war of 1812. The incentive for us to live within our means must come from somewhere. Government intervention delays the suffering and when it the disaster finally comes it's many times worse. At some point the government won't be able to prevent the inevitable.

Our fundamental flaw as human beings is our inability to make certain basic distinctions. Government intervention breeds more government intervention because it too reflects our basic inability to make important distinctions. That's why I love engineering so. I can't pretend or fake Reality. It slaps back hard any time I try.

Throwing money at the symptoms won't address the problems that started it and politicians are too busy pointing fingers to get to the truth so they throw money around wildly.

I suspect McCain will loose the election. Not because of lack of skill. Not because of inability to lead and certainly not for lack of commitment or integrity.

I fear he will loose because this Country is now driven by a Entitlement paradigm. We have a population of people who either:

1.> have their hands out for something

2.> politicians who promise everything, exploit that needs of needy constituents to get elected

3.> or worse yet, misguided but benevolent politicians who believe that by taking from those according to their ability and redistributing that amongst others, on the basis of need, will solve society's ills.

4.> those who stand by silently and do nothing.

Socialism is knocking at our door. Federal involvement in the financial system is just more evidence of our ride down the slope. Every world power who has tried that or variations of that theme has failed.

L. J.

Socialism knocking at the door?.. wtf.. the bush family has stolen the future... a trillion dollars. enough money to feed the united states present population for 50 years. you can't be serious.

chrisg288 wrote: "Socialism knocking at the door?.. wtf.. the bush family has stolen the future... a trillion dollars. enough money to feed the united states present population for 50 years. you can't be serious."

If the rate of inflation does to us what it did to pre World War !! Europe, paper money will be worthless and a loaf of bread will cost more money than you ever dreamed of.

Already the value of the dollar has fallen compared to other currencies.

How much evidence to you need.

Me? Serious? No, I write just to keep myself busy!

L.J.

Read your history

Dear Laughing Jaguar,

sorry for any implied insult. yes.. inflation is going up.. its part of the plan.. has been since the inception of the Federal Reserve in 1913.. and has been The problem ever since..

on another note, Europe.. germany.. the 30's.. extreme inflation.. crushing debt payments, then what.. all of a sudden Hitler gets a pile of money (and power) to create the 3 million brownshirts and feed them.. and create a military empire... I predict that if this economic epidemic is sold successfully to the people.. the next step is martial law.. its all part of the plan.. but there is hope yet... if the people will rise up, realize how big the lies are, and how extensive the corruption is, and at the moment, all that hope lies with one man.. but hey, I'm just an observer.. I'm canadian.

"sorry for any implied insult"

No offense taken Chris. If I appear to be angry, it's because I am, but not with you. You just happen to be in the same room.

I am not an economist but my prior exposure to Mr. Greenspan started a curiosity about economics and it's relationship to political systems that has continued for over 40 years.

One of the fundamental tests of any theorem is its ability to predict future behavior. When it does so, successfully, every single time, we elevate it from the domain of theory to that of laws.

Ludwig Von Mises was an engineer who turned statistician I believe (it's been a while) and after extensive research showed the world the good and bad points of various systems. It was a treatise unparalleled in it's ability to predict outcomes in the economic communities of the era.

And, it is still predicting outcomes like the mess we are witnessing today.

And THAT is why I am so disappointed with Alan Greenspan. He was at one point a Libertarian in his thinking and as I said in an earlier post, a "Leave it Alone" Capitalist.

All the mechanisms for trouble were in place. All they needed was the match. Greenspan gave them an endless stream of cheap money. Now go and fill in the blanks.

While some convincing arguments are available to justify regulatory constraints, that same form of government intervention is what made people complacent.

IMO, when the government shows up and tells me "Hi! We are here to help!" is when I do a 180 and run like hell.

L. J.

If I were in charge, I have no doubt...that my company would dive down faster than an F-16 on afterburner.

I only say that because I have very little (i.e. next to nothing), accounting or management training.

Okay, maybe I can do well enough but my point is, engineers just love to hate accountants because they tend to hold back their creativeness and drive to do things perfectly.

My fellow maintenance engineers would like to be able to perform good maintenance on our factory's equipment. Years ago, someone decided that we should limit our stocking of spare parts. Only critical parts (anything that will cause the plant to stop producing) will be stocked. However, even those parts that were stocked had restrictions on how many we could put in our storage. The explanation was that, it is expensive to stock parts that aren't being used. You need to pay insurance and the money spent on the parts is "sleeping" because they aren't being used.

On the one hand, this forced us to look for better methods of maintaining our equipment or to look for equipment that didn't need much maintenance. On the other hand, it also forced us to switch from preventive to reactive maintenance because non-critical spares still took three or four months to arrive after ordering (because of more checks and balances on the purchasing side of the company).

Things have been going downhill since then. Only recently did someone wake up to find that our production was beginning to suffer. Now spares are being stocked (grudgingly).

On the production side, we are forced to run at 100% utilization, again because it makes economical sense. Engineering sense, however, tells us that things can't last this way for very long. Accountants, however, see this as an acceptable risk.

Of course, since I am in the trenches and not seeing the overall battlefield, I am unable to see the logic of such thinking. Is it really better for the company? Why have our protests or reasonings been listened to but not heeded? Is it because they know something I don't or is it because they don't know enough to know better?

Right now, all I know is that me and my maintenance and production colleagues are under pressure to perform. There is no way out of the situation we're in because things have been committed and there is no turning back. The market needs our products and we can't afford to slow down.

I also know that I need to get out and try and make it on my own...soon.

Well, perhaps I could shed some light on Your situation, because I was studying Economy and originaly started as factory worker, so I know all sides of such situations. From point of ecconomy, machines should be used as much as they could without inviting disasters. That means that their speed must be optimall, not nearing technical limits they have, as by running them close to maximum speed for long time we would wear them out sooner and vibrations could cause microfractures in materials that would soon lead to breakdowns.

I was working in factory where boses decided that norms of production are set too low because my coworkers were making 60 to 70% more than norm, while I limited myself to 30% because I was only one who finished school for such work (or similar in most aspects) and we were warned about dangers of running machines at technicall limits of speed.

So boses/managers raised norm by 50%, and then I was underperforming compared to coleagues that again topped norm by 20-30% and I let myself make just 80-90% of norm. My supervisor noticed this and started scolding me, and I explained reasons I stayed at same level, because I did not want machine to crash in my shift. It has taken only two weeks of working at highest speed to break my machine when fellow coworker was using it, and let me tell You, gears were broken, axles snapped and parts were literaly flying out od enclosures with half centimeter thick walls..........:-)) Needles to say, it took 6 months to repair machine and that long production was clean zero. My supervisor fortunately remembered my warning about speed, so norms were returned back and workers were forbidden to top it more than 20% thereafter. Therefore, running machines over optimall speed is contraproductive more offten than not.

But from point of economy, more goods machines produce, less production of one product cost, because machines cost same purchase price that must be depreciated over TIME period by certain percentage. This depreciation is calculated and that much money is deducted from profit and put aside so in time new machines could be bought that would replace old ones. Usually new machines cost more because inflation is raising prices, and because they are usually more productive than old ones or have extra operations that old machines did not have. For that reason both accumulated money and remaining value of machines should be reevaluated at end of every fiscall year to adjust to new prices on market, else there would be no money to buy new machines when necesary....

Acountants would want that machines would be >>spent<< as soon as posible by producing as much as possible. Since lowering production cost make more profit or make products more competitive on market by lesser prices, if machines were working just one shift, introducing second shift would cut fixed cost of machine use by half in production price of products, and three shifts instead of one would make 2/3 cut of same cost.

They stopped preventive maintenance because of time it takes out of production cycle, which is downwright stupid thinking from practicall point of wiew, and if they have so great demand for products, then they should buy new machines and use them all, even build another wing of factory if necesary. Perhaps machines actuall value is near zero and there is enough money accumulated to buy new machines, but if there is no difference in productivity then they should use those machines as long as they can, but build new factory in the meantime and install new machines, as this would double production capacity, and since cost of old machines has dropped to zero, they produce that much cheaper products, so common sense reasoning say they should be kept working as long as posible! Maintenance cost would remain to be same, as well as cost of spare parts inventory. Best way to lessen cost of keeping spare parts inventory is to have as much of SAME type and model machines as applicable, and keep just one set of spare parts, but that depend on spare parts delivery time and probability that more than one breakdown of same spare part would occur, as well as overall availability of such spare parts from factory....... If no spare parts is available, then machines would have to be scrapped after next breakdown, which could be predicted based on statistics of breakdowns if You are keeping evidence over time machines are in use. Such statistics could also help in preparing spare parts on stock in order to shorten repair time..........

But, sometimes new machines are robotic and would produce 50 or more times more than the present quantities with greater precision and quality, while making most of workers redundant...

Management would of course like it better to have still less cost of work in product price, so they usually get rid of workers after factory has been roboticized.

If workers would be owners of factory, then higher production and bigger profit would not affect them adwersely, as they would still have source of income even if they would not NEED to work. But, this is usually not case, and fired workers would face hard time untill they find new job, and if all factories are doing this ( actually they have NO CHOICE but to roboticize factory once concurent companies have done it, because such factory products are far cheaper and of superior quality and they cannot compete on the market ) then chances for finding new job of same kind are practically nonexistent! Such workers are then also unable to pay their mortgages, and have to give their houses for which they were paying money long time to Banks, even if just small value of loan is left to return.......

Banks cannot sell such houses as too many people has lost jobs and nobody can buy this houses, so they are practically worthless. Banks has lost money if they did not insure mortgage loan by insurance company, and even if they did, there are more such cases than insurance companies could cover, so they also perish, and therefore even Banks that have insured credits perish also.......

In this situation government should give back houses to their former owners, (at least those that has paid at least half of mortgage loan) so at least those people would have roof over their head, unless someone has done this all with plan to take land where such houses stand and build skyscrapers there.........

Company shareholders should know that when management is cutting production costs by outlaying workers that there would be that much less customers for their own products, as well as products of other factories, and if there is not demand than less products have to be produced, which ask for still less workers and factories!

Factories cost money even if they dont work, as all should be maintained, so final consequence is that they are closed permanently. When there is no demand, then sales drop and there is need for less shops for selling such products, therefore more jobs are lost, no factories mean no spare parts, ad without spare parts there is no repair, so mechanic and other maintenance ad repair engineers lose their income too, and it goees on like >>Domino Effect<< :-((

That is why I say that management of companies are responsible for this crisis in first place, as they dont see final consequences of their actions...

Automobile industry is where it all started, and they should have changed products that factory s making instead of simply closing them down! If owners did not wanted factories, they could have given them to workers that have worked there and lost their jobs, and surely people would find good use for existing machines, as for instance same machines could be used for products that are in high demand right now, like Windpower Stations for instance. Serial production would make them cheaper and so electricity produced would also be cheaper, no?

So, to come back to theme: Engineers with knowledge of economic laws would still be better choice for runing factories then managers that look only at financiall side of business, but Banks and other strictly financiall companies cannot be run by engineers!

However, it is factories that are important, and if workers would be owners, then they would not vote to throw themself on the street and close factory that is feeding them, dont You think? Solution is really simple and would benefit both present owners and workers, as owners could retain right on some % of profit (even half of it) from factories, and they would only have to worry how to spend money they would be receiving........

I could offer such owners plan of investment that would muliply their money and at same time provide people with work and ownership of factories, but unfortunately so far nobody was listening to me :-(( Perhaps now they will, as I have foreseen situations line present one and I was writting about it too!

Regards from Zagreb, the capitol of Croatia, Europe!

Marijan Pollak,

IT SA/SE 1st. Class,

Instructor and Team Leader

(retired)

Hi Henrik14, just want to comment on some of your points:

...machines should be used as much as they could without inviting disasters. That means that their speed must be optimall, not nearing technical limits they have, as by running them close to maximum speed for long time we would wear them out sooner and vibrations could cause microfractures in materials that would soon lead to breakdowns...

This seems obvious to anyone. In fact, when I spoke with an accountant friend of mine, she agreed with me (surprise!). Unfortunately, when people look at a machine's specifications, they see something like:

nominal rate of production: 120 pies per minute

He's going to think, "Can we push it up some more? Engineers usually put some fat into a machine's design so it should be able to produce more, right?"

...My supervisor fortunately remembered my warning about speed, so norms were returned back and workers were forbidden to top it more than 20% thereafter...

I would say that your supervisor and his superiors are wiser than most. They've learned from their mistakes and know what to avoid. In our case, if an employee breaks a machine, it's because he either didn't know how to use it or he didn't care for his machine enough. Most likely, they say it's because the maintenance crew didn't do a good job.

...lowering production cost make more profit...

This is obvious. Running a machine longer also lowers production cost. That much I do know. But that's not all there is to it, right? Running a machine longer means less maintenance time which causes it to deteriorate faster. Instead of lasting, maybe 10 years, it becomes 5 years or even less.

...then they should buy new machines and use them all, even build another wing of factory if necesary...

Unfortunately, that's not going to happen, we were told.

...Best way to lessen cost of keeping spare parts inventory is to have as much of SAME type and model machines as applicable, and keep just one set of spare parts...

I agree. In fact, I've been standardizing equipment for several years already. However, it only takes one new installation to negate what I've done because the project people will buy whatever equipment they choose and most of the time, it's not the same as what we presently have.

Engineers with knowledge of economic laws would still be better choice for runing factories then managers that look only at financiall side of business

Well, knowledge of economic laws is a necessity but good accounting principles is key. Equally good to have is to have a sense of what is a cost and what is an investment.

Traditionally, maintenance is seen as a cost. All they see is that maintenance costs money with no obvious return. I'm trying to learn to come up with a return-on-investment presentation that will say that, if I get this much increase in my maintenance budget, I will increase production's uptime by so-many-percent and save the company so-many-millions-of-pesos. Up until now, gathering the data for this was time consuming and I never got the knack for it. Today, information is available though formulating a good proposal still takes a lot of time.

I think I'll stop my lamentations for now. Just needed to blow some steam off.

Regards,

Vulcan

Sir Vulcan,

Yes, lot of things seems to be obvious, at least to those that know and understand such things, but I have found out it usually is not quite obvious as it should be.

Mostly, it depend on angle of wiev :-))

Therefore, even if good effects of preventive maintenance should be obvious, for acountants it is just another debit account, just like stock of spare parts, as money would be spent even before need for repair arise.

It should also be obvious that accounting is nothing else but evidence of state of things, represented in money and cannot creatively influence anything. It is management that is making decisions, and management is more offen than not selectively blind, seeing ONLY profit and dividends.

What You should do is to present them with severall >>scenarios<< with results in form of money spent and money lost because of downtime for repairs and waiting for replacements.

So one should be with full stock of spare parts and regular periodic maintenance, but make that last on list, to end on positive note, understand? You and me know that it is BEST scenario for factory because it is obvious, or at least it should BE obvious :((

Therefore first case should be worst one: NO spare parts and NO maintenance, therefore BIG downtime and also big loss of profit. Consult with friend from accounting to find how much is depreciation rate and how much money it cost for every day regardless if machine work or not, That is cost which managers usually dont see! Add to this how much products per day machine produce on average and how much of profit is gained by selling such products, that goes on debit side too (but this is normall and that managers usually know), just as well as wages of workers that would work on machine or connected to handling of materials and products, as those people would have to be paid anyhow......... Then of course there should be expense of ordering and payment for spare part(s) which is on average less per spare parts if ordered beforehand and severall parts together, and this fact management usually also overlook. Since Your wages are same, except that You would most probably work overtime during repair to make downtime as short as possible, and (if they pay You overtime) that is additionall cost, no?

Statistic of breakdows is VERY usefull, because it could predict how offten would some breakdown occur, which You could use in such simulated situations, AND for preventive inventory of spare parts controll. Without maintenance, breaks would at least double or triple, no? With perfect maintenance, breakdowns should be at least halved compared to Your present situation, right? Just watch to not overdo it either in good or bad aspects, write Your honest assesment of situation You describe.

Keep in mind that not only spare parts cost and tie up money that could not be used to produce more money (sorry, there is NO WAY to make this money productive and to earn profit, You could ONLY show that LOSES are much less with good maintenance, that is ALL!) but warehouse space where You keep them in storage also cost money, because it is built first (that is cost also) and depreciated later in use, therefore this cost also have to be presented realistically in Your >>Best<< situation! Dont forget to calculate how much profit would cost of spare parts bring in period when spare parts lie in storage, and be honest about it as it is also fact in ecconomic calculations, but dont worry as this allways is less than other option of long breakdowns and repair time........

The rest is scaling situations in >>scenarios<< from WORST maintenance situation to BEST maintenance situation in at least severall steps, and making calculations according to expenses resulting from such situation.

When it would be all calculated and resulting loss of profit compared, surely anyone with even half brain would understand then that without adequate maintenance and enough spare parts it is just question how big loss would be, and that management always want to avoid.

I am sure You would get requested spare parts and time for preventive maintenance!

Yes, my factory supervisor and higher boses were wise, but till they could have been wiser yet if they have listened to me in first place.......

I heard instead >>What do You know, shut up and get going, work is waiting!<< !

It was only year later that they discovered that I am most inteligent in whole factory of 4000+ workers, and were they looking my school grades, they would see I am excelet ecconomist as well.

That happened when group of Psyhologists come to factory to test IQ of workers, wanting to prove theory that average factory worker (not counting management or engineers) has underaverage IQ, and that this is reason why they ended where they are last of all, not being able to do anything else :-((

But it was allmost true theory, I must say, as workers mostly talked football, cars and about who made sex with whom.....

But, any theory usually has exceptions, as I ended in factory because my family was not rich enough to send me to High School.

I went to school for Graphic workers because it lasted just three Years, not because I would not be able to go to better schools.

My parents were older than average and wanted that I have at least some education that would provide me with dayly bread........

All other schooling I have paid from my own pocket, working in factory and studying in the evenings...

So, maybe conclusion of this theme should be:

It does not matter which profession person at top management of corporation has, as long as it is highly inteligent person which has earned this position by own efforts and measurable results, not by nepotism, connections or inheritance!

Knowledge would help, but even knowledge is useless if one does not have ability to use it, and surely, inteligent person could acquire knowledge, but knowledgeable person cannot acquire inteligence, right?

I remembered coleagues from student days that were able to cram 500+ pages book in three days and memorize each page literaly, but they were unable to use this knowledge, so simple permutation in word order would get them lost in regard to meaning of question, and they also would not remember same book a week after, so this were useless as they were not actors that need but short time memorizing of text they had to say in a movie :-((

Dont You agree?

IQ is of paramount importance for Top Management anywhere!

Regards,

Marijan Pollak, IT SA/SE 1st. Class, Instructor & Team Leader

I'm not quite sure how we went from engineers as managers to the fiscal "crisis" but the thing I would like to remind all of you is that the major fuel for all of this was large amounts of cheap money.

It was Alan Greenspan's decision to lower the prime rates and keep them there, that put the cookies on the table for people to grab. What amazes me is that 45 years ago, when I first met him, he was a Laisse Faire capitalist and was rich with arguments against government intervention.

What happened Alan!

As for the predicted meltdown by the jerks in DC, I'm suspicious of any politician who warns of disaster as he invariably postures himself as the solution.

It's time for term limits. I say give them all one 5 year term in office and then out! And once out, you can not be a lobbyist and you don't get a pension.

I find it downright hypocritical that these same elected people who got us into trouble and criticize golden parachutes, retire from Congress with pensions worth millions.

You don't need a compass or GPS to find Washington DC or most state capitals. All you need is a good nose!

L. J.

Dear sir Jaguar, >>Fiscal crisis<< was (IMHO) reason why question has ben asked wether Engineers would be better for running companies than present Managers that obviously dont know what is good for community as whole, and seek to please greedy shareholders by producing more profit and paying greater dividends :-)

It is wrong to take measures if reasons for drop in selling of products is not investigated properly, and surely firing workers and closing factories is counter productive as people without money would also not buy same products and so overall demand would still more drop down..........

I agree that in principle government should not interfere with free market, but there surely are exceptions allready, because it is forbiden that corporations become monopolists, for instance........ First of all people should learn from history in order to avoid repeating mistakes from the past, and economic system has also history of its own.... After big crash of Wall Street in 1929, even when less than ONE percent of Americans were shareholders, there come big unemployment period, and just because of >>New Deal<< which was basically government provided jobs things become better.... This time it is unemployment that is generating crisis on Wall Street and more likely than not it would crash again, bringing still more unemployment :-((

Government have to intervene, but it is not good to just pour money into few companies instead of analysing root of problem, and actuall problem is unemployment!

If people were working and earning the money, they would also be able to pay their mortgages, so present problem would not appear at all...

Therefore, all this bilions of dolars would be thrown into fire, and it would not really help. Government should have started saving companies sooner and should not have let those Banks and Insurance companies perish.........

As usuall, doing anything without analysing consequences before it is done is mistake, even if intention is good, like in case of low mortgage rates.

We have saying in my country: >>Road to Hell is pawed by other people's good wishes and best intentions!<<....

I can't believe more of you don't have more confidence in your abilities. That is one of the main reasons there aren't more engineers at the top.

The other main reason is engineers like to solve technical problems, not people problems. Leadership requires you to do more work with people problems, which are boring and uninteresting to most technically minded engineers.

Finance problems are easy. If you can solve physics and other engineering calculations, the rest is nothing. It's just understanding the rules of the game.

Engineers have superior abilities to look at a problem in detail and understand all the possible failure scenarios. Engineers ( at least the good ones ) don't make short sighted business decisions to meet some stupid quarterly finacial goal that is meaningless in the long term. If there were more engineers in leadership, I have no doubt the world would be a more efficient, more logical, and more productive place to live. YES, IT IS TIME TO HAVE MORE ENGINEERS AT THE TOP!!!

Engeneers, wont-to-be bosses and back-office scientists!

Why are so many saying ' Oh, I could have done once I had the courrage'???

Beeing a Armed Forces Engineer for some decades, I`ve lived so many opportunities for this way or that way at so many occasions - and military is not encouraging free choice! How much more chances any engineer on the 'free-market' had for that time?

Don't expect to leed the pack taking cover behind the back of the one in front of You! Proud men lead at front, not from rocking-chairs!

Show calculated risk-management, engineers are educated for that, I mean REAL engineers! Be a warrior facing the deadly enemy of challange.

The current financial crisis was not caused by the CRA, subprime loans, or Freddie and Fannie, but by Credit Default Swaps (CDS). Only 6% of subprime loans are in default. However the effect is ten-fold because the CDS, which are like insurance, were not regulated (thank-you Phil Gramm) and therefore did not have enough capital to back them up. Had all financial institutions be required to meet a reasonable capital requirement, just like banks, fewer risky investments would have been made and when they went bad, there would have been enough reserves to keep the institution solvent. This was a classic case of the technical people (who created the CDS) being in love with technology and management seeing a way to easy wealth promoting technology they didn't understand.

There's plenty of blame to go around. The Carter Aministration for the (I think) Fair Credit Act of 1977, the Congress that passed that bill, subsequent Congresses and Presidents for not overturning it, the Clinton Administration for enhancing it in 1993, Congress for passing that, subsequent Congresses for letting that stand, Bush and today's Congress for slowness to act, the financial institutions for getting away with all they were allowed to get away with and the consumers for failing to live within their earning power. Almost everyone got greedy and now, they're getting spanked.

The point is, it is time for everyone to pay a little less attention to the antics of the game of the week and tomorrow's has-been pop stars and pay a lot more attention to our government, economy and the world around us. We have lots of armchair geniuses who can postulate about what should have been done. Too bad most were busy drinking beer and eating potato chips to actually get involved.