In his song "The Gambler," Kenny Rogers sang,
"If you're gonna play the game, boy, you gotta learn to play it right. You've got to know when to hold 'em, know when to fold 'em, know when to walk away, know when to run."
and,
"Now every gambler knows the secret to survivin' is knowin' what to throw away and knowin' what to keep."
Too often, I think, managers in declining industries act as if they don't know what to throw away and what to keep.
I have spent 28 years in what has become a declining industry (pulp and paper manufacture in North America). Over that time, I have observed, made, or been consulted on decisions to close at least three manufacturing plants. In every case, it seemed we all knew the right decision as much as several years before that decision was finally made. In the meantime, each plant steadily lost money and ate up management time.
When it is clear to those closest to the business that a plant should be closed, why does it take so long to make the decision? I think there are a few possibilities:
- We are often worried about the people who will lose their jobs - and rightly so. In the pulp and paper industry, we also worry about the community, as many of these plants are the major employer in a small, isolated community.
- Wishful thinking can play a part. This often takes the form of statements like, "Just give it three more months and we should see things turn around." We forget that a hope is not a plan.
- The founding facility of a company can be particularly difficult to close. We see it as the mother-ship - where it all began - and view closure as cutting the heart out of the company.
- Sometimes the decision maker worked in the plant early on, and feels a strong emotional attachment to the plant.
- Often the costs of closure raise a barrier.
But these decisions need to be made, and made sooner rather than later. A facility that is losing money drains cash that could be used elsewhere. More importantly, it drains management resources away from more profitable operations that could use the help to greater effect. Management effort spent on a lost cause is management effort with zero return. And if we kept track of the time we spent dealing with a lost-cause plant, I think we would be surprised - I suspect it is often far more time than we think it is. Delayed decisions also wear away at employee engagement and health. The longer folks wait for the other shoe to drop, the less healthy and motivated they are (at least in my experience).
The solution is to insist on Evidence-Based Management. In this case, that means credible and clear analysis of the plans for a facility, and the likely financial results of those plans in the real external environment. Confront the facts, known and unknown, and challenge assumptions. See my June 12 post for a bit more on confronting reality.
[Note: I couldn't find any good data to support or refute my opinion that facility closure decisions take too long. This article is based solely on my personal experience and opinions.]
