Bob Set in the Class and Paid Attention - One of a Kind

In 1996, I saw Bob Woods for the first time since 1987. He was attending the Annual Shingo Prize Awards in Detroit. Bob was an executive with Johnson Controls. That night in Detroit, Johnson Controls was receiving five Shingo Prizes for five different plants. Bob was very proud and happy for this team.

But as you may have seen on the home page on this web site, there is more than just simple happiness to be enjoyed by such an achievement. You actually improve the business and make the stock price go up. Johnson Controls is primarily an automotive company. They have really embellished the practices, as conveyed by Shigeo Shingo.

I first met Bob in 1987. He was a plant manager for Volkswagen of America in Euless, Texas. I was teaching a course in MRP and JIT at the time. During the class session, Bob asked me where did I get all that "weird manufacturing philosophy from?" I told him about Shigeo Shingo's book. I loaned the book to him for the week, only. I am very protective over that book and all of the other Shingo books.

Bob later went to work for Johnson Controls. He promoted the teachings of Shigeo Shingo in the early 1990's. Several of his plants have won the coveted Shingo Prize. You can see the results of that effort on the home page of this web site.

I saw Bob, momentarily, at the Detroit airport in 1992. He asked me to go to some of his new plants in the U.S. Southeast and help them understand the Shingo Prize. Most of those 1996 Shingo Prize recipients were from the Southeastern U.S. I regrettably told him I was already committed to other projects. I told Bob that he has been studying it now for five years and should have no problems. If the leader understands it, believes in it, then 99% of the battle is already won. And Johnson Control's success is tantamount to that.

In the late 1990's the union walked out of several Johnson Control facilities around the country. The Shingo oriented management at Johnson Controls took control of production and met their customer requirements. Ford Motor was one of those customers. Ford, using its buying power, told Johnson Controls to settle with the union. 

How can such a conversation even take place in the first place? If Ford is a customer of Johnson Controls, the only issue Ford should have with their supplier is "am I getting what I want and when I want it?" 

Whenever a company starts adopting social causes or placating union causes at another company, do not buy that company's stock. It will go down. This is the case with Ford. Corporate Governance should involve only one consistent duty. And that is always do what is the best for the shareholders. 

If a company starts touting social causes, such as let's get along with our unions, or let's help the community, let's do more for our stakeholders, etc., dump that company's stock. It will under-perform and over a period of time, become extinct. The consciousness of every employee, everyday, of any organizations should be focused on just two things: 1) speed and 2) perfection. How can we speed up the supply chain? How can we produce zero defects?

It is unbelievable how many corporate leaders become confused with these sort of issues. By solely focusing on the best interest of the shareholders, all social causes take care of themselves. Don't misunderstand this. When there is a marketing/selling advantage to tout a social cause, then it is okay. It will help increase sales and benefit the shareholder. Stakeholder is an overused term and adds no value to the process of forward-moving management.

Johnson Control's stock price is up 259% and Ford's is down 10% since 1994. Once management screws up their philosophy, the lack of clarity prevents positive forward movement. It is amazing that Mr. Peterson, Ford's CEO, in the 1980's actually employed Shingo as a consultant. Mr. Peterson was interested in pursuing improving the company, but the management leadership that followed made some poor decision.

Lear Automotive is a company very similar to that of Johnson Controls. They participate in the same industry and they have the same customers. And many of their products compete directly with one another. Yet, Johnson Control's stock went up 2.7 times higher than that of Lear. In this case, you can see who practices world class supply chain and who doesn't. The Shingo oriented plants will always generate a higher positive cash flow as a percent of shareholder equity. And consequently, the stock price goes higher.

 

 

1995/2006 James Vick, Inc.

Contact: james@jamesvick.com    Phone: 817-279-3116    5102 Wedgefield, Granbury, Texas 76049