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Applying W. Edwards Deming to Small Business Management
 
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Recession, Depression and Strong Medicine

 
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Louis Altazan



Joined: 15 May 2007
Posts: 774
Location: Baton Rouge, LA

PostPosted: Thu Dec 04, 2008 5:17 pm    Post subject: Recession, Depression and Strong Medicine Reply with quote

When I was a kid, and had something unpleasant to face, my tendency was to put it off. My father would always wisely council, “The longer you put it off the worse it will be.” I have certainly learned this to be true. It is human nature to put off those things that we don’t wish to face. It is also in the nature of things that neglected, situations get worse.

The same principles tend to work with businesses and governments. There are sound management and governance principles. There is also the way things are often conducted today, which I feel represent neither. Many people, businesses and governments live beyond their means. They may see the situation as normal, but it is anything but.

While many clamor for change, an acceleration of over-indulgence that has brought people to this point does not qualify. A total upheaval of what people accept as normal today may not be a pleasant prospect for many, but may have to occur. Putting off measures necessary for correction may only make things worse.

In my opinion, recession is an attempt of economic principles to return to normalcy. Government intervention (printing more money?) forestalls the inevitable correction. I believe, eventually and inevitably depression makes the corrections. Businesses based on sound principles and people living well within their means, suffer much less correction. This is simply because less correction is necessary to their situation. A sound business, that is flexible, stands to do very well, come what may. The opposite may be said of the inverse.

Having to adopt a new management philosophy and putting in the effort to make it work are not pleasant. Putting it off may be fatal.

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Louis Altazan
Owner/Manager AGCO Automotive Corporation
Baton Rouge, LA
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Fred Reece



Joined: 06 Dec 2008
Posts: 12
Location: Dallas, TX, USA

PostPosted: Sat Dec 06, 2008 8:22 am    Post subject: Reply with quote

You seem to be saying a depression is inevitable. What do you mean by this?

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Fred Reece
Business Owner/Consultant
Dallas, TX, USA
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Louis Altazan



Joined: 15 May 2007
Posts: 774
Location: Baton Rouge, LA

PostPosted: Sat Dec 06, 2008 9:20 am    Post subject: Reply with quote

Fred Reece wrote:
You seem to be saying a depression is inevitable. What do you mean by this?


Hi Fred,

By my definition:

Louis Altazan wrote:
In my opinion, recession is an attempt of economic principles to return to normalcy. Government intervention (printing more money?) forestalls the inevitable correction. I believe, eventually and inevitably depression makes the corrections.


I think it has already happened and the worst symptoms are being masked by massive spending of the Federal government in an attempt to forestall the inevitable. I also believe this is no recent problem. The roots began perhaps as early as the fifties and things were well on their way by the sixties.

I believe a depression is no more than a realization, by a large majority of consumers, that conditions cannot continue as they are. This results in a great deal of fear, followed by a lack of spending resulting in a violent correction of an overly inflated economy. Government spending can, for a while, mask the effect.

Since the only true source of power a government has is its ability to tax the public, there is a limit to what can be done. Short-term patches and gimmicks cannot correct a fundamental long-term problem. The great depression of the twenties, may have been made vastly worse by the same type policies that are being anticipated today.

This is not all doom and gloom. In my opinion, soundly run businesses may find it a tremendous opportunity. People on sound financial footings will suffer far less [if at all] than those who are highly leveraged. There will always be a demand for quality services that can clearly demonstrate high value.

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Louis Altazan
Owner/Manager AGCO Automotive Corporation
Baton Rouge, LA
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Fred Reece



Joined: 06 Dec 2008
Posts: 12
Location: Dallas, TX, USA

PostPosted: Sun Dec 07, 2008 5:58 pm    Post subject: Reply with quote

So do you intend to just close your business?

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Fred Reece
Business Owner/Consultant
Dallas, TX, USA
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Louis Altazan



Joined: 15 May 2007
Posts: 774
Location: Baton Rouge, LA

PostPosted: Sun Dec 07, 2008 8:17 pm    Post subject: Reply with quote

Fred Reece wrote:
So do you intend to just close your business?


Hi Fred,

Quite the contrary, I am quite optimistic of the situation and have been planning for it for quite a few years. While no one can predict the future, I think a reasonable person can observe current trends and predict likely outcomes.

I feel following Deming’s principles, to the best of my ability, has left me in quite a strong business position. I have no debt, business or personal, and have substantial cash reserves. At this time our business is still very good, though an unprecedented number of businesses seem to be feeling the crunch.
  • This makes skilled workers more readily available.
  • It is also working to lower cost.
  • Contractors are clearly negotiating for work and I think cost will continue to come down.
  • Equipment cost too are edging slightly down and I believe will continue to fall.
  • People are less able to buy new cars and more likely to repair their present vehicles.
For those businesses that are prepared, I think great opportunity exist. Thanks Fred, I appreciate your input.

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Louis Altazan
Owner/Manager AGCO Automotive Corporation
Baton Rouge, LA
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Fred Reece



Joined: 06 Dec 2008
Posts: 12
Location: Dallas, TX, USA

PostPosted: Tue Dec 09, 2008 5:09 pm    Post subject: Reply with quote

I notice you don't give any specifics, so let me ask

What is your plan for your mechanic's incentives

What is your plan to institute programs to get customers into your bays

What is your car count compared with two years ago

What size is your shop in sales volume

How do your sales compare to two years ago, five years ago

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Fred Reece
Business Owner/Consultant
Dallas, TX, USA
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Louis Altazan



Joined: 15 May 2007
Posts: 774
Location: Baton Rouge, LA

PostPosted: Tue Dec 09, 2008 8:12 pm    Post subject: Reply with quote

Fred Reece wrote:
I notice you don't give any specifics, so let me ask

What is your plan for your mechanic's incentives

What is your plan to institute programs to get customers into your bays

What is your car count compared with two years ago

What size is your shop in sales volume

How do your sales compare to two years ago, five years ago


Hi Fred,

You can find my specifics posted 737 time and in several articles on this site Laughing I really do not intend to do anything differently, just stick with the philosophy that has worked for me very well up to this point. The one possible change I can envision would be an increase in marketing, if that becomes necessary.

Fred Reece wrote:
What is your plan for your mechanic's incentives


With regard to incentives my plan is to not use them at all. I have found them to be far less effective than what I see as a far more enlightened approach to managing my staff. Here's more: http://outofthecrisis.org/index.php?categoryid=15

Fred Reece wrote:
What is your plan to institute programs to get customers into your bays


At this time I have no problem getting clients into my bays, should that change I would increase marketing and pursue my efforts to demonstrate superior value in my services. Here's more: http://www.agcoauto.com/content/Demonstating_Quality

Fred Reece wrote:
What is your car count compared with two years ago


We process approximately 10% more vehicles compared to two years ago. I normally do not track car count as I feel it is irrelevant. I prefer to track sales per total staff member, and dollars spent marketing to maintain a three-day backlog.

Fred Reece wrote:
What size is your shop in sales volume


Sales for 2008 will close at approximately $2M

Fred Reece wrote:
How do your sales compare to two years ago, five years ago


Up about 35% from two years ago and roughly double the sales of five years ago.

I appreciate your interest Fred and your participation on our forum. Here's more on the philosophy that has worked quite well for me: http://outofthecrisis.org/index.php?categoryid=14

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Louis Altazan
Owner/Manager AGCO Automotive Corporation
Baton Rouge, LA
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Fred Reece



Joined: 06 Dec 2008
Posts: 12
Location: Dallas, TX, USA

PostPosted: Wed Dec 10, 2008 12:39 pm    Post subject: Reply with quote

With regard to incentives my plan is to not use them at all. I have found them to be far less effective than what I see as a far more enlightened approach to managing my staff.

----------------------------------------------------------------------------------

So how can you motivate your mechanics without using incentives? A mechanic will only do 60% without incentives.

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Fred Reece
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Louis Altazan



Joined: 15 May 2007
Posts: 774
Location: Baton Rouge, LA

PostPosted: Wed Dec 10, 2008 7:51 pm    Post subject: Reply with quote

Fred Reece wrote:
With regard to incentives my plan is to not use them at all. I have found them to be far less effective than what I see as a far more enlightened approach to managing my staff.

----------------------------------------------------------------------------------

So how can you motivate your mechanics without using incentives? A mechanic will only do 60% without incentives.


Hi Fred,

60% of what? I don't try to motivate my people because they are already motivated, as most great people are when doing what they like. Instead I concentrate on hiring people that will love the work, removing the obsticals to doing a great job and then paying them the most the company can afford.

My company has seven total employees. Two office staff and five technicians. Seven people produce $2M annual sales and have a heck of a lot of fun doing it. That seems pretty motivated to me; no incentives required. Laughing

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Louis Altazan
Owner/Manager AGCO Automotive Corporation
Baton Rouge, LA
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MattFMN



Joined: 15 May 2007
Posts: 146
Location: Garden City, KS

PostPosted: Mon Dec 15, 2008 6:35 pm    Post subject: Reply with quote

I feel the motivation Louis speaks of is two-fold. First, they love what they are doing. For the most part, if it was feasible, we'd fix vehicles for nothing...simply because it brings us joy, peace, etc.

The second part is knowing the business and it's owner/manager is paying as much as possible and also knowing that as the business improves so shall I and my co-workers. That kind of knowledge is very comforting and also motivation in itself. I know that every year I'm getting a permanent pay raise because I and my co-workers are working hard and working together to improve the business and it is reinforced time and time again with permanent pay raises, not a weekly bonus that I may or may not have much input in when it comes to effecting the outcome. That type of reward also encourages long-term type of decisions and actions versus a short-term action that may get my bonus up, but will hurt me and the company over the long haul.

I don't know that Louis' shop works in this manner or not, but I like the idea of having pay levels. This has to be in a shop where you have apprentices and starting techs working with/under seasoned and experienced techs. I feel it is a good and strong motivator for a young or inexperienced tech seeing that a loyal and dedicated tech "above" them is making a very fine living and knowing that with some hard work they too can attain that.

Thanks for the responses, Fred. Later, Matt.

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Matt Fanslow
ASE CMAT/L1
Crag-Technologies, Inc
www.wavehook.com
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Tom Ham



Joined: 04 Sep 2007
Posts: 47
Location: Grand Rapids, MI, USA

PostPosted: Sat Dec 20, 2008 11:29 am    Post subject: Reply with quote

Fred Reece wrote:
You seem to be saying a depression is inevitable. What do you mean by this?


Fred:

For me, it means that the numbers just don't work...no matter how you play with them. The wheels are coming off and nothing can keep them on. Notice how well $8 trillion plus in government funding has worked so far?

My belief at this point is that they know what is coming and the current strategies are intended to slow the collapse in order to make it easier to manage.

For shops which are prepared, it means less competition in the not too distant future. Isn't that what we've all wanted for so many years?

Wink

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Tom Ham
AutomotiveManagementNetwork.com - Hams Management Systems
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Fred Reece



Joined: 06 Dec 2008
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Location: Dallas, TX, USA

PostPosted: Thu Jan 01, 2009 10:33 am    Post subject: Reply with quote

I don't see why people would work hard if they don't make any more for doing it. Why do you think incentives are wrong?

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Fred Reece
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Louis Altazan



Joined: 15 May 2007
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Location: Baton Rouge, LA

PostPosted: Thu Jan 01, 2009 11:33 am    Post subject: Reply with quote

Hi Fred,

Fred Reece wrote:
I don't see why people would work hard if they don't make any more for doing it. Why do you think incentives are wrong?


Please let me answer the second part first. I do not see incentives as necessarily wrong. I see trying to use them as a substitute for proper management as wrong. Incentives I see as problematic and far less effective than other available methods.

My contention is people tend to work hard for things they believe in and enjoy doing, as long as compensation is not an issue. This means compensation must be adequate in the first place. Adequate may be somewhat relative, but as a minimum, I feel pay must:
  1. Allow a normal person to meet their financial needs, enjoy their lives and provide a measure of security. (e.g., A hungry man may think less about the quality of his work).

  2. Be seen as fair, just and inline with company profits and the salaries of others in the company. (e.g., A salaried worker may not work as hard after learning the CEO makes $60M a year and that the company needs to cut back because they are not making money).

  3. * Be inline or above market price for their skills. (e.g., An engineer making $60K a year, while his peers make $120K is not as likely to be dedicated to the company, nor give his all).

My experience is, once normal people earn enough to meet their needs, enjoy their lives and feel secure, they are free to seek enjoyment in their work. Until this point, I feel they concentrate far more on having those needs met. Other factors include:
  • Selecting people that have not had all intrinsic motivation crushed out of them from previous work experience.
  • Constant demonstration by management that they can be trusted to act in the best interest of all.
  • A viable enterprise, that produces a product and/or service that workers believe in and can be proud to be associated with.

Thanks Fred, I appreciation your interest.

* (This may be another very involved topic. I believe wages have been associated with success for so long in our culture, that an inversion may now exist in the psyche of our workers. Workers paid less than others, no matter the level, may de-motivated by a feeling of lack of success. Please let me know if you would like to discuss this further.)

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Louis Altazan
Owner/Manager AGCO Automotive Corporation
Baton Rouge, LA
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Eric J.



Joined: 15 May 2007
Posts: 30
Location: Bluefield, WV

PostPosted: Sun Jan 11, 2009 12:26 pm    Post subject: Reply with quote

Louis Altazan wrote:
* (This may be another very involved topic. I believe wages have been associated with success for so long in our culture, that an inversion may now exist in the psyche of our workers. Workers paid less than others, no matter the level, may de-motivated by a feeling of lack of success. Please let me know if you would like to discuss this further.)


Louis, what do you mean by this
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Louis Altazan



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Location: Baton Rouge, LA

PostPosted: Sun Jan 11, 2009 3:40 pm    Post subject: Reply with quote

Eric J. wrote:
Louis Altazan wrote:
* (This may be another very involved topic. I believe wages have been associated with success for so long in our culture, that an inversion may now exist in the psyche of our workers. Workers paid less than others, no matter the level, may de-motivated by a feeling of lack of success. Please let me know if you would like to discuss this further.)


Louis, what do you mean by this


Hi Eric,

Many people measure their success not only by the amount they make, but the amount they make relative to others. In a recent study, a majority of people said they would rather make $70K a year with all of their friends making $50K than to make $75K with all of their friend making $100K.

This may seem illogical, but the human mind is basically a “comparator.” It tends to compare a situation to others to determine how good or bad things are. From this respect, the amount a person earns may have an effect on their natural motivation, beyond the dollar amount. Pay is a hygiene item. It does not tend to motivate, but a lack of pay does tend to de-motivate. The effect may also be relative, particularly if a person sees pay as synonymous with success.

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Louis Altazan
Owner/Manager AGCO Automotive Corporation
Baton Rouge, LA
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