Cash Leading to Lack of Operational Efficiencies

Cash can hide the failings of poorly run companies. Since the goal is to make money, everyone is happy as long as the cash is rolling in. It acts as an aphrodisiac. Leaders and investors do not ask if performance could be better.

A prime example is Emdeon, i.e. WebMD. Finance leaders sold Wall Street on the ideals of synergies. Unfortunately, cash blinded everyone and operational efficiencies were never achieved.

In the capitalistic system, competitors improve their positions and ultimately overtake the poorly run company. The downside is the displaced employees of the poorly run company.

The solution is well defined performance measures and cutting underperforming products and services.

Costs beyond Indian Labor

There is a cost that is unvalued in utilizing Indian labor. The direct labor cost is easily determined and compared to other values. On top of this labor cost is time spent in completely defining a project, additional time due to miscommunications, and effort in managing the project from such distant separation.

While it is easy to demonstrate the difference between Chinese labor and American labor cost, other factors need to be valued. For instance, Callaway Golf has kept its manufacturing in the US, so that it is closer to its customer. By doing so, the company can respond more quickly to demand.

Train for the Performance Desired

BMW's and Mercedes are bought more often in the US than Maserati's. It is because Germans create great engineers. We look to Italy for style and not a well engineered engine. In Italy, students are trained to appreciate design and the culture rewards it. In Germany, order and engineering ideals are cultural standards, which are part of the schooling.

If America is to maintain its position, then it needs to design its schooling around the factors that will take it there. For instance, if America intends to be in manufacturing then it needs to train its people to think in terms of the Toyota Production System ideals.