A little over a year ago, Congrss approved the biggest financial rescue in US history.  Some call it the Neo-New Deal; others doom the bailout to failure.  Surely it will take a Herculean effort to turn things around. We all know that default on sub-prime mortgages is driving much of the calamity.  But why are there still so many people defaulting on their mortgages.  Perhaps we should look deeper and address the reasons some people are faced with this predicament.  The root of the problem began long ago.

Flash back to 1992.  I am the sole provider for my four teenagers and myself:  my two sons, Chip and Seth, and my two daughters, Cecily and Coral.  Today is a school day.  Chip is in his first year at DePaul University.  Seth and Cecily go to Prospect High School.  There’s a wrestling meet tonight.  I washed uniforms for the team last night, so now I throw them in the drier and push start.  Cecily greets my “good morning” with the typical-junior-high-scowl.  Coral goes to Elmhust Junior High, she’s in Special Education, a “contained classroom.”  It’s an orchestrated dance in the morning as we boogie in and out of the only shower, and waltz past each other with toiletries in tow to use the powder room mirror.  I’ve got my hair cut Demi-Moore-short-as-in-Ghost, so styling is just a shake of the head.  We all sit down to breakfast together, a ritual I insist upon.  Departures are staggered.  I’m in the car, as the last school bus leaves;  I’ll drop Chip at the train station on my way to work.  Amidst the flurry of activity, my mind turns to work:  Something is up today.

We have our Quarterly Business Review Meeting today.  Three times already this year we’ve had an all-shift, all-hands-on deck meeting with the Vice President of Manufacturing, Joe.  Fast and Cheap Joe; he’s known for his ability to get the job done on a shoestring.  At each of these meeting, I find out some of my colleagues gone.  I look around the room, and chairs that were saved are empty.  It’s like The Rapture.  Those of us who remain, look around for our friends; they are gone.  Right-sized.

Those that remain get a “pep rally.”  Different verses but the same song:  We’re in this together.  We’ve got lofty goals to obtain.  Our objectives are clear.  Those of us that are left have what it takes to get it done.  One time there was even a marching band.  No lie.

The last time I was sure I’d be the one spirited away.  But I remain working in the field, so to speak.  I’m pretty sure it won’t be me today.  I am working on critical projects that are key to the company’s success.  But, who will it be?  We’re down from 105 to 55.  How far from the right size can we possibly be?  Maybe I’m just paranoid and it’s just a quarterly business meeting like the notice on the bulletin board says.

Because the meeting is all-shift, all-hands meeting, we go across the street to the warehouse.  A freshly filled coffee mug warms my hands.  Inez, Ivory, Ken, and I start to walk through the door, single file.  I’m just about to walk past the threshold when I get a tap on my left shoulder.  It’s The Boss, Pat.  He beckons me with his index finger, like a friend with a juicy piece of gossip he wants to share.  As usual, his breath smells like a dog’s that’s been eating crap.  My heart drops to my stomach; I know, without a doubt, I’ve been chosen.

Pat takes me to his office and introduces me to Kathy from The Mentor Company, the outplacement firm.  She’s got on a royal blue suit.  Her silk print blouse has swirls of royal blue that match her suit exactly, and swirls of power-red, too.  She looks so professional.  I have on a plain white uniform.  Kathy explains the re-deployment process.  She’s got the brownest eyes; I can’t even see her irises.  Her eyes look wet.  My sister has eyes like that, big brown cow eyes.  Kathy hands me a pocket folder that contains all the information I need to know about my severance.  She asks me if I have any questions.  The only question I can think of is, Did Mentor hire you because your eyes look so sad?  Or did they teach you how to look like you really care?

Fast forward to 2007, sixteen years later.  I landed on my feet; I’m on the other side of the table now.  No one is right-sizing anymore.  We’re becoming Lean.  I’ve been asked to take the faces out of the picture.  The ratio of Quality Assurance to the rest of the company is too high.  I must cut four Full Time Equivalents (FTE.)  I must find ways to be more efficient.  I know FTEs are real people with real families, mortgages, and car payments.  James just moved his wife and two little girls into their first house.  I know that getting more efficient really means some people will be jobless, and everyone else will have more work to do. 

I calculate a more efficient way of improving the ratio.  I’ll move the people and some of their responsibilities to other departments. That increases their numbers and decreases mine. (Bigger denominator, smaller numerator equals a smaller ratio.  I’m at least as smart as a fifth grader.)   There is more work for some people, but at least no one is sacrificed. I bought some time, but not for long.  Within a year our facility will be shut down:  our technology will be sold, most likely moved off-shore, and everyone in this little subsidiary of a giant conglomerate will be out of a job. 

In September 2009, 159,000 US workers became unemployed, 760,000 people lost their jobs so far this year.  While the merit of biggest rescue of the financial system in US history continues to be hotly discussed, the home foreclosures continue to rise.  One in every 84 homes got a foreclosure notice in the first half of 2009 or 1.7 million foreclosures. Picture every home in the Chicago suburbs empty with a yellow foreclosure sticker on the front window.  Those foreclosures are connected to real people unable to make house payments, many of them without jobs. How did we get to this?

In 1910, Henry Ford took the people, the tools, and the machines needed to make cars and created the first continuous system for manufacturing. What came out the other end of that assembly line was the Model T.  By 1914, Ford made the automobile reasonably priced and paid the men on the assembly line $5.00 a day, an unheard of wage, it was more than double the rate of the rest of industry.  Ford also introduced the 8-hour day, and the 5-day workweek.  As a result, the best mechanics flocked to Detroit. What had been an abysmal turnover rate became so small Ford stopped measuring.  What’s more, Ford employees could afford a car, expanding the market.  Henry Ford considered the people his greatest asset.  He believed that smart managers would do right by their employees because it fostered productivity, which led to profits.  Without fully understanding the concepts of what is now called Lean Manufacturing, and the inherent value of the people, many copied Ford’s techniques, but failed to achieve his success.

Climbing out of the rubble of World War II, the folks at Toyota studied Henry Ford’s strategy.  Toyota capitalized on what was considered the key element of  Ford’s continuous manufacturing system — the people. By engaging employees in Quality Circles, Toyota launched a culture of incremental improvements and developed an ear for the customers’ needs.  Toyota employees are encouraged to introduce efficiencies in the manufacturing systems in order to respond quickly to the customers’ heart’s-desire.

Toyota’s and the Japanese loyalty to employees create a culture of trust.  Handbooks on Lean Manufacturing stress that employees must feel secure, not fearful of losing their job, in order for the system to work.  Unfortunately, like Ford, Toyota copycats’ misapplication of the basic principles led to distortion.

Today, US companies distort Toyota’s system into what is known as the Lean Enterprise Initiative.  Rather than a means of becoming more agile and responsive to customers, Lean is used to reduce head-count, and improve profitability.  Ominous in its application, employees are trained and encouraged to map their work processes, calculate the FTEs required for the job.   From here these very employees are asked to streamline the processes, and out-source where possible, all to become more efficient.  Next, calculated FTEs for the improved process do not justify employing as many people.   In the name of efficiency, the unemployment lines swell.  We are so efficient that we mine granite, ship it to China to be made into headstones, only to be shipped back to the US to mark our graves.

Unemployment in the US now at nearly 10%, that’s 14.9 million people are out of work and looking for a job.  The number of people looking for a job today is equivalent the entire population of New York City, Chicago, and Los Angeles combined.   That number only tells a part of the story.  It does not include people like Irene, who was a well-paid manager at United Airline, and now waits tables part time at a local restaurant. She is no longer unemployed, but she makes minimum wage, with unpredictable hours and no benefits.  The numbers do not include Mike, who closed his fledgling carpentry business.  When home sales slumped, he could not afford the high cost of medical insurance.  He now drives two hours to work as a laborer, just so he can afford the health insurance necessary to help cover the cost of his wife’s expensive prescription medicine.  The numbers do not include those people who exhausted their benefits, are still unemployed, but no longer are included in the count.

Rescuing Wall Street with an infusion of over $800 billion seems like Hercules fighting the mythical Hydra, the many-headed sea creature who spit venom and had poisonous blood.  Hydra grew two heads for each one Hercules managed to sever.  Only with the help of Iolaus, was Hercules able to seal the wounds with fire and to finally stab Hydra with an arrow dipped in poison. It is time for us to address, not just the flailing head of the financial problem, but to address the heart of the matter, our disregard for the human element.  We must recognize people as the valuable resource they are, not as a number on a balance sheet.  Until we do so, throwing money at one aspect of the financial debacle, fails to address the root of the problem.  The monster continues to live, rearing her ugly head again in new yet predictable ways.