Arthur (Art) Mann Gold Rat taught us was how to think differently about how we manufactured with this theory of constraints. And also he came up with this theory of not luck, about cause and effect trees, about how you would think. And that the Japanese taught us the Ishikawa diagrams and for systems, they taught us to use how to do what they call taguchi experiments. And so all these were ways of thinking in the way of analyzing problems in a process industry like ours. The point came with all this in the background and these were the systems that we were using. And meanwhile, I was searching, I always searched for how to organize management systems. You would read Drucker, you can read. I've got a shelf full of God knows how many books and all of which telling you to go 50 different directions. Books on leadership, what leaders did, what they didn't do, how they acted. But none of it was any real help. It was a fragmented use this, use that. This is good, this is a good thing to do. This is how you organize. This is how you do an organization chart. And if nothing ever worked in how to as a system, because as a founding machining operation, we think in systems, in a founder, you can't just ignore one variable because one of 50 would just make would give you a bad part. So we were taught and we were familiar with systems thinking and the fact that you had to have a comprehensive it had to be comprehensive. You couldn't just choose something and say, well, that'll work, because it just wouldn't. So in one of my forays that was out of the Santa Fe Institute, a friend of mine introduced me to chaos theory. And I thought that was rather interesting that you had to take an organization to the kind of the brink of chaos sorted out, which is akin to metallurgy. You get your properties shifted over when you get up to a critical point and the molecules and the particle begin to shift around and you change the properties, which doesn't happen when you're solid. It only happens in this semi excited state when it's a little bit chaotic and they can rearrange themselves. So sitting during one of these lectures out there, the man next to me mumbled something about, well, this is all warmed over Elliot Jakes. And I thought, this is who's Elliot jakes. I asked him and he said, oh, he's a social researcher. I said, well, what do you have to do with him? He said, well, what do you do? He said, Well, I'm a consultant. My name is Mark Van Cleef. And I said, yeah, well, what do you consult? He said, Well, I management consultant. I consult with the largest 100 companies. I said, what do you do? He said, well, they've always got problems. And they call me in, I analyze it and I fix it, and they pay me money. I said, well, are you busy? He said, I'm always busy. I said, what does Jake's have to do? He said, Well, I use his system to analyze the problems and that's what I apply. And I thought to myself, well, I'm going to have to look into this. This sounds really interesting. So I got back and he had given me the name of the book and I read it. And I had at some point, because it's not easy reading, so I began to look at it, read the book and try to understand the principles. And one thing that hit me was on my own and this happens. I think any manager can relate to this. You find things as you run business that work, this works, that works, that works. And when you finally understand Jake's system, you'll find a lot of things that you find work actually fit right into his system. And the problem is, you've only got a third of the animal, you don't have the other two thirds. And what you find is once you have that whole system in place, it's just like for our standpoint, a foundry, where you can't just take the 20 key issue, the fundamentals in his system, and cherry pick them. You've got to put them all. And once you get them all working and in place, it has a dynamic effect on your organization, on the people and the motivation and how you think at work. And it is in fact a very effective and has to be used as a system, which kind of resonated with me. So at some point I said, Well, I need to talk to Elliot. So I called up their Stewart Institute, having bought their stuff, and read it and tried to apply it on my own, like everything, you were only trying to cherry pick it. But I had something like a time frame of management. I wanted my managers to be thinking ahead, and the ones you're most valuable were thinking and planning. And one of my managers said, Art, I want to tell you how bad it is around here. He said, I've got guys who all when you talk to them, they're telling you they're thinking about what happened last year or last week. And the idea of thinking ahead really isn't in their head. It really isn't part of the way they think. So I already had something called The Time Frame of Management, where I wanted people to think out earlier. So when I found this in Jake's work, much more carefully defined and scientifically proven out, I thought, this makes to me at least a lot of sense. So I called him up and he graciously agreed to see me for about 15 minutes. So I drove up to Gloucester and went to his house and he sat down and we started to talk at about ten in the morning. And we weren't finished by 16.

Art Mann  We're a foundry machining operation. We have operations in Pennsylvania, Belleville, Pennsylvania, here in Wrightsville, along with our own pattern shop, ops and machine shop. And we have approximately 500 people. And we're probably the largest fully integrated cast parts producer because we produce all our own tooling, from foundry tooling to machine tooling. So we can make a part very quickly from conception to finished part, sometimes within two or three weeks. And we've been in business since 1906, and we've just celebrated our hundredth anniversary. And the fourth generation of the family has taken over. My oldest son, Arthur, is now president, and the second son that's five years younger is now head of basically vice president of operations. When I first started here back in 1965, after I get out of the Navy, I came back and was actually going to go back to graduate school and study computer science at Carnegie Mellon. But I end up getting fascinated with the whole foundry process. And from that point at that time, there were only about 50 people and there weren't any engineers in the operation. And so I vowed after some time here that the only way to survive long term was to become an industrial based, highly engineered casting producer and to provide a finished part to manufacturers. So we started out years ago to define ourselves as the become a premier producer of finished cast parts, a one stop shop for customers who wanted the ease of buying a cast machine part with single source responsibility a lot less hassle. And so in the pursuit most of the issues you have with castings, because it is process based, you have maybe 40 to 50 variables that have to be controlled to make a good casting. From sandcast, from the sand that you use, to the metal, to the temperature, to the chemistry, to equipment, to the controls. It's a very complex system. We were always constantly fighting defects. There might be 40 defects that can give you bad casting. So the first inkling I had that there was some knowledge out there that really would help was listening to W. Edward stemming on NBC television and his white paper about national paper. And he said, using his techniques, that you would be able to tell if there was a problem, whether it was the machine or the man. And I thought, well, now there's a revelation, because I had no way on my own of ever being able to discern whether a problem we were having was the machine of the man. And so from that, we as a company got into statistical techniques. And I went to one of his seminars, which down to Washington DC. And there were 600 people there. And I saw IBM plant managers walking up to this guy and getting his autograph like he was some kind of a rock star. So I came back home and tried it. He said, well, you need somebody with a master's degree in statistics. And I said, well, in my circle of friends I certainly didn't know anybody like that. So turns out I had a professor friend, Franken and Marshall and asked Stanley and in the political science department, as it turns out, they were full of statisticians. So with Stanley and some other we actually created our own curriculum for statistical analysis and began to train our own people here. And I have to tell you this. One of the things he said after teaching our maintenance crew, he said, you know, these maintenance guys are actually better students than my students at F. M. And I've always felt that it's a good indication that the complex trades of working in plants and mill rights that have to know electrical theory, they have to know mechanical theory. These are highly skilled, very intelligent people, and their jobs make very satisfying careers. Except it's not celebrated like it should be. Anyway, from that point we began to apply techniques and began to understand our processes and we started making rapid improvements and the next big learning experience and we adopted by the way, we adopted Deming's 14 points because Deming saw that statistics weren't enough unless you had a management organization that built trust and drove. He said you have to drive fear out of the organization. That means you have to have an organization that has mutual trust, which is very easy to destroy and very difficult to maintain, but it has to be there. And oddly enough, our first customer from Japan, Honda. In their little motto for their beliefs, they said they believed in mutual trust and cooperation was one of their key values. I'll tell you a little about Honda and I think when I tell the story you'll begin to understand why their cars are so good in making the part. There was an engineer who was in charge of starting up their plant down in Carolinas and Atsumi's Card said he was engineer and he would have a little string tie and he'd come reviewing the parts, reviewing our whole process, asking us and working with us to control every dimension on that print. And he would be here evenings, weekends. And the upshot of it was that we began that as we got into production, we would once in a while get rejects because something was wrong or the magnet wasn't magnetized. And I told my machine shop manager that there's going to be a day when he would be upset when there was one defect. He kind of laughed. I said, you will find that when you adopt this Japanese philosophy that you can make perfect parts. And it was about two years later, after a year and a half of shipping about 200,000 parts without a reject, that one was taken off the supervisor's desk. It was a sample and was packed and the magnet wasn't magnetized. So when they went to start the lawnmower, it wouldn't start and they had to disassemble it. My plant manager almost had a heart attack over it and he was so upset and he admitted that to me that he never thought that they would happen. But it did and he was livid people that they would have let that happen. So they taught us that that kind of quality control of pokeyoking that you can you design the process so that you cannot make any bad part. You continue the story with our association with Japanese customers. The next one we picked up was Toyota and this was a very complex power steering pump which was hydraulic, which required robotic assembly of the cores. It was a difficult part. They had spent years and a lot of experimenting to get this part just right in terms of metallurgy, in terms of quality. And when we initially sat down with our engineers and they had selected us as a vendor, we had a little bit of raging argument over whether or not our process of a Cupolo Melbourne with a large forehard would be robust enough process to have the tight control over the medallurgy that they thought was necessary. And after a day of wrangling about that yes we can. No you can't. They came down the next morning to breakfast and said how about if we buy you the electric furnaces that you need? Well, those furnaces were 210 ton holders and cost about a million bucks back then. And our answer was well, sure. And they said well, we will buy them for you. You can install them and you can use them for other customers. But we want our parts run through those furnaces and make part of the process. And that's what we did. And they would come in and monitor our production to the point where we finally got they insisted we cut 1000 parts in half and inspect the interior and if all thousand parts were perfect, then we would no longer have to inspect them, which we learned how to do. And that's what we did. So now we could make hydraulic parts without having to look. And we were shipping at some point 60,000 units a week. So with the Japanese, you always had a very intelligent, highly experienced engineer that you were working with that they shared what they learned with you. And they only asked that if you develop things that we would also share it with them, which we in fact did. They copied our Gating system after they found out that they used to supply us a pattern saying they had their process proven and they would supply them afterward. One set that they sent us, our scrap rates went up. We said we would like to just do it the way we would do it. And we did. And the scrap rates went down and the engineer said would you share that design with us? Because we think that would be useful. So it was a very symbiotic relationship with trust and if there was a problem, they would come up and they'd say they have the problem analyzed. You would deal with it. We would have a resolution, we would fix it, and off we go again.

Speaker A Well, the real payoff in the back does happen, but it happens in a very in a roundabout way, and that when you have the proper person in place who has the smarts. Now they rapidly gaining the knowledge and skills, and you have them in charge, good things begin to happen. You find the inventory is being lowered, quality is getting better, the workplace is better organized. People know what they're doing. The workers concerns are being addressed because now everybody knows their proper role. They're getting their questions answered, and bam, if the productivity doesn't start to go up. And when that happens, the profits go up, and you're doing things faster, better, cheaper. And it just starts to happen because you have eliminated the friction that causes people to not care, to think, well, management doesn't know what they're doing. And I have evidence of that, because I've had, over the years, about four because we're a non union shop. I've had four union drives over my career. And I remember talking to one of my workers, why do you guys want a union? He said, well, we really don't. We just want to get your attention because things around here aren't as well managed as they could be. And how else do we get your attention? I thought I better take that as a lesson. And he said I said, well, why don't you tell me what these problems are? He said, look, you guys walk around here sometimes wearing a necktie. You're supposed to know these things without us telling you. I thought, well, that's interesting. Well, the fact is, if you had a good relationship, and they would tell you if you asked them right questions, but what they were suffering from was poor supervision, and that was the real issue. So what the Jake system does is forces you to take care of poor supervision and substitute good supervision, supervision that can teach and inspire and forces you to recognize because of the tools that the guy is you've already said bottom half, bottom third. Would you want to work on that person? No. Well, then make the decision. Decision has been made. Do something, then. Before you could hide these things and be hidden within an organization, and you could make excuses for, well, they need to be training. They need something else. But at some point, Jake lets you know that it's time to cut the cord.

Speaker A Just introduce that thing with Jake and Phillips again, I think if you ask how can this can Jake's work be applied to areas other than industry or business? Such when he came to visit and stayed the weekend, we had an afternoon and evening with Vicki Phillips, an assistant superintendent, and she was superintendent of Langster city schools, and I was board president at the time. It's a large 12,000 student inner city school, Lancaster, Pennsylvania. And we had hired her as superintendent because we were looking to reinvent and ramp up the school system of Lancaster and make it actually an excellent school district. And it's inner city, mostly minority, probably 70, 80% minority. I guess that's by definition now majority. And what's interesting is Vicky Phillips at this time, as of today, is head of the Gates foundation, the educational division of the Gates foundation. And she and Elliot and I talked at length about this application, this theory in the public education. And one thing we had discovered in trying to get performance rate is that all the discussion about schools are well, we need more money, or the parents need to be more involved, or the kids ought to get off their butts and appreciate the opportunities they have and on and on, which has nothing to do with the organization. And what we found was one of the things that we put into the school was ISO 9000, the first school district in the world to be certified, ISO 9000, which mandated constant improvement, continuous improvement. And as part of that, we found that the key probably with the correlation of .8 of higher of the success of a school building was the principal, the leadership. And you look at the principal as a level three, and the teachers are the two and the students is a one. Well, then if you have a lousy principal, you will then drive out good teachers. He'll tolerate, he or she will tolerate bad teachers, and the whole thing doesn't work. And we could see by these annual presentations, within five minutes of the presentation that you could see with the teachers there in the room, a public meeting with the principal giving, showing how they were using this $3 million we were given them to run the school, whether or not they were making progress. Three to five minutes into the presentation, just by the person's manner of speaking and the level of complexities they were taught, you could tell the school was going to work or wasn't. And the first round of 20 principals, at least a third, was an embarrassment. You could tell this was not. And we probably over three years, replaced 20 principal. We turned over 20 principals trying to find them. So using this leadership model, if you were going to change so, then the superintendent would have to be at least a level four. And you had Ms. Phillips, who was a level five or six, because we were trying to reform, and now she's in position of six. So she's looking at how do you make significant changes in the whole system? And you ended up with a level five, level six thinker. And we had these conversations with Elliot, and Elliot, in his typical manner, was trying to find the weak part and start an argument about how she was thinking wrong. But besides that and I think he made some points, but the one thing he was interested in is he said, I don't know whether or not there could be a curriculum for elementary schools starting at kindergarten, first and second grade, you could take a young child and bump them up a level. And he said he and his wife Catherine had a curriculum designed to do that. And we agreed that we would actually give him two schools, and we were in that mode of we can try. If it works, we can put them we can't do any harm. We figured that's the first thing, do no harm and see if it would work. As we were tracking these kids through now with testing all the way up through the system, we could do it, and unfortunately, died about a year later, and for various reasons, we moved on. She became state secretary of education, so that project died, which was, I think, unfortunate, because at some point, somebody's gut would like to see some of this work continued, because there would be a and maybe the answer is no. You're born with it, and once you come out, pop out of the womb, you're on an intellectual trajectory, and there's no way to speed it up. But at this point, he didn't know, and certainly I don't know then the next thing is, well, how do you apply this to public not only has an application to public education, and when you look at if, in fact, principals are the key ingredient to a successful school system, well, where are they coming from? Where is the talent pool? Well, they're all ex teachers, and they've all taught for a number of years, and you have to contrast that with the US. Navy, that you don't go in the navy as a seamen for three or four years to get the flavor of what it's like to be in the bowels of a ship or rent gun. Where does your talent pool come from? Well, it comes from seniors in high school. You're picked as a senior in high school with an excellent record, and then you go to four years of college to be trained. But you're trained as an officer. You're trained to think strategically. You're trained to think in a certain way, and not as a sailor. They do have a nisset program where they'll take sailors and move them up, but I don't think that's successful. It's just an outlet. But if we're going to get true leadership and change in public policy for schools or leaders, you would have to create a talent pool from the get go. They would take kids that want to get on that trajectory as they come out of high school, if they want to go into a public to school administration. And it could be a straight liberal arts education, but they should not be forced to become teacher and certified. The rest of it becomes irrelevant in terms of being able to be able to think and manage the system.

Speaker A Senior vice president hired. And what you face in companies is how do you take somebody that's left, right and and whatever but can be disruptive because of temper. And I had no framework to say do I counsel him, do I work with him? Because I really like the guy that were friends and he was four and we could talk about the future. And I think at that point, Jake's I wish I'd known about Jake's because part of this Jake's theory that's very valuable is if you understand his definition of leadership and what it takes to be a leader then you look at all these leadership books for what they are, which is absolute horsemaneur. It's a waste of time they're reading. They ought to pile them up and set them at 451 degrees Fahrenheit and burn. The key is if you have the knowledge and skill and if you have value the role of being a boss and taking responsibility for those who work for you and their performance and if you have the requisite again. Knowledge and skill and mental capability. You can lead. I don't care if you're 4ft, two or 10ft tall or male, female, or you are then qualified to lead that area. You disqualify yourself from that role by having an average personality, which Elliot says there are a thousand of them, all of which are good in the mean, all of which are bad in the extreme. For instance, you can be honest to a fool, you can be dishonest to a fool. So there's a goldilocks medium that's agreed to everything in moderation and that's the case for personality traits. You don't want to have a raging temper, but then you don't want to have no temper. You need be able to get mad and upset but in a reasonable, controlled way that's effective because people have to know when you don't like something. So all of a sudden it becomes very clear as to what the requirements will be for people who are going to manage to be put in charge. And you read these leadership books I just have to shake my head because it's all so much horsepucky what managers do and what they shouldn't do. And you should be more like Jack Welch. Well, Jack Welch manages one way and it means, I mean, that's fine doesn't work for the next guy and it doesn't work and you're not going to get very far emulating. You have to go back to again of the Greeks, which is know yourself and therefore acquire the requisite knowledge and skill for your job and don't be a turkey.

Speaker A In the course of our conversation, I stayed overnight at a friend's house and we went out to dinner and talked again the next day and we began to strike up conversations and correspondence. And then he came down to stay with us in our house for a weekend and we got into a lot of talk because at that point he had just written The Social Power of the CEO. And he was very adamant about the power that people lived and worked in companies most of their lives. That's where you made your living. That's where you had as a CEO huge impact on people's quality of life. He was also way down on what people were being taught in business schools. He thought that they had been taught a culture of hooray for me, hooray for the company, that they were not taught trust inducing behaviors, that they were actually dangerous to the health of the American corporations and that there was a definite lack in curriculum, that they weren't really being taught the principles of management. And when we talked and he also came up with the idea of that was a real sticking point with me is how do you assess somebody's performance and then how do you pay them and what's the basis and what's fair and how do you do it systematically? And like Deming, who when we basically bought into his philosophy, we had all kinds of incentive systems and trust me, I've tried every financial incentive system known in the literature and we've thrown them all out. Because if you have people would like to share, we have profit share. In other words, if the company's doing well, we will share that with them. What Elliot said was, here's a simple way to assess somebody. Remember, there is no system. It all comes down to personal judgment as to the performance of the person and the conditions under which they had to work. And you can never get away from that. So ask this question, and this was what if you ask, well if of all the people that you could get to do this job, are they in the top or bottom half of the group? And I said well they're in the top half and well they're in the top third. Middle third or bottom third? Well, middle third. And he said See how easy that was? He said now you ask the person that you're talking about the same question, 1.9 correlation, they'll give you the same answer. I said really? Yeah, people know. People know. They sell success. They know how good they are. And if, let's say somebody is in the bottom half and the lower third, they know that they're not doing the job and they're wondering when they're going to be found out and therefore they're wondering when the axe is going to fall because they know. They're wondering why you don't know. And the fact is you do know. But you don't have a framework for taking action. So we did this exercise and we listed all the supervisor people and staff people, and my top management team. We went down, took us 40 minutes, and we rated everybody in that list, all 60 of them, and we said, okay, let's get that verified by some supervision and personnel and to see what their direct supervisors, how they would rate with that question, and came back, well, sure enough, there were some anomalies, but generally it was pretty much agreement. So then we looked down the list. We had twelve people that were in the bottom half and the bottom third and middle third. And my question was, why are they here? And everybody looked and said, well, that's a difficult question to answer. That was answered within six months, because within six months, ten of the twelve were gone. Not because they were fired, it's because the supervisors were forced to recognize that they weren't doing the job. And the fact that you told them, the person themselves knows it, it's not a secret to the person. They will be secret relieved. And you said, you know, you're not doing the job, you might be happy you're doing something else. And some of them were removed out of those jobs into other jobs, and then we're a lot happier. But those are the kind of simple insights. And even if you took the system in fragments, you can disregard what I said about using the whole system. The fact is you will find that different ideas within a system have a tremendous effect, so that now you can do more detailed assessments. But under the Jake system, you've had very detailed task assignments and so you now can have a much better way of judging. If you've done the task assignment properly, then you have a much better ability to assess somebody's performance because of being exposed to the idea of levels of management in terms of time frame, the 12345, and the type of thinking that had to go on and assessing people. In that vein, you began to look at people differently, and you began to look at hiring people differently. And over the years we had always seen our way was we had hired three or four young engineers straight out of school and gave them their first work experience, and then maybe two or three, four years, they would go off, which they should do, they need to have more exposure. And we would try to keep and hold on to the ones that we liked and also the ones that were here went on somewhere else. We try to keep in touch with them because at some point you'd like to have them back. And it gave us a good sound way of measuring, of knowing who we wanted. And there are a lot of companies, and this isn't new news, a lot of people say, well, we already know that. You try to look at their track record and academic record and there are different parts and yes, that's all true, but the Jakes puts it into a system that you can understand it and that you can use the framework to make much better judgments about human performance. And the other thing is, when you look at his pay matrix, we then took our chart and how we had people graded, and then we put that against his chart, which I can put it on a spreadsheet. And then we could see who was not paid enough and who was paid too much. And it gave us an idea, well, if it's a disparity, why was it? And sure enough, when we asked that question, the person was either underpaid, we moved them up, and the ones who were overpaid, we began to freeze a little bit. But it helped gave us a framework for putting everything into what we considered this felt fair pay framework. It was a godsend because there was really nothing else out there except local surveys or the job usually pays this or the market pays that. And as it turns out, people know what they're worth. People are recruiting in where they have an idea. So we say, well, what do you think you ought to be paid? Well, okay, well, if it's within the framework, if their number comes way out of the framework, well, then we need to discuss like, oh, you're not worth $160,000 a year, or like maybe 100. What's in your thinking? So it gives you a framework and a reference. And if it's within that range, there should not be very little discussion because if you don't pay people what they think they're worth, then they're going to leave and cuts it's.

Speaker A I think to put this in perspective, if you always ask, well, if I had it to do all over again, what would I change? And the answer is, I would love to have been exposed to this in college courses or graduate school courses or some way when I was 25 that I could have got on board with this. So by the time I was 30, it was really good at it. It would have moved things along at a lot quicker pace. And when you have to learn on your own in an ad hoc world of learning this and learning that, trying to tie your own system together, you waste a tremendous amount of time and basically you end up learning what not to do. And then what to do is the residue. Because if you read all the books, they're telling you to do 500 different things and 20 to all different directions of the compass, and it really isn't to help. Some of you have little anecdotes things that can help. So if you have a chance, no matter what age you are, wherever you are, if you learn this, maybe you'll find that it's not for you, or maybe you don't understand or don't like it. But then at least you will have said, well, if I don't like this, if this doesn't work, I know. Then this works for me. Well then fine. But I think you would find that what you think is going to work won't work in all circumstances. This is a system for all seasons, for prosperous seasons. When the wind at your back, for being a pure sailor, you're in a broad reach and then you all of a sudden the wind shifts. And you've got to know how to organize, you've got to know how to do it right. You've got to be able to know how to pay your people fairly and not get yourself in all kinds of I look at the automobile companies. Go back earlier in our talks, the difference between a Toyota just the story in our dealings with Toyota should be very instructive as to why they're the most valuable and largest automobile company in the world. And American companies who took pride in beating up their suppliers and putting them out of business. Put a little badge in your, put a little badge in your and we got them. We got such a good price, we put them out of business. Isn't that great? And so these are lessons that the Jake system should be something that if you can learn it, the quicker the better. And if I had to go all over again, that's what I wish I'd known about this sooner, because when I talked to this Mark Van Cleef and said, you need to look into this, I thought it was the same kind of AHA that I got when Deming said, you use my methods. They can tell you if it's the machine or the person. And I said, wow, wouldn't that be great if I could do that? How does that work? And the same thing if there's a way, the whole system of management wouldn't be great if I could answer all these burning questions using a theoretical base actually proven in practice. Wouldn't that be nice? And the answer is, it's there. And it's not easy. That's a little bit like reading the Bible. It's all there. Every time you read it, there's something more in it, and you never stop reading it, because this is not look, the man had a medical degree from Johns Hopkins and a PhD in clinical psychology from Harvard. So this wasn't some farmer kind of dreaming it up at night. This was a social researcher. And he told me, he said, in my clinical psychology, you were from Harvard. Once I understood how things really worked was useless.