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About Don's cat (20 May 08)

 

How right you are!

We managers simply do not appreciate the side of business that you speak about, for the most part.

Approximately 22 years ago, my division mgr related to his reports (the div mgt team)that our gross margins were eroding and simultaneously our overhead costs as a % of sales were increasing; our net margins were getting a double squeeze. As a mill mgr, I was totally familiar with cost reductions related to cost of goods sold, but overhead costs reduction was a different issue because any significant reduction would come as a "headcount" (Man, do I hate that term!) reduction. My mill mgt team set a goal to reduce mill overhead by 25% in 5 years in real dollars. It would take an 18-20% "headcount" reduction to make that happen. We had determined that that number of folks would retire in 5 years, so our challenge was really easy; just figure how we were going to operate and continue improving with 18-20% fewer folks around to do the work in the overhead areas. Our goals were applauded by div mgt and included in our 5-yr plans. When they were presented, corp also applauded our zeal and rewarded us by adjusting our target to a 25% reduction in a 3-yr timeframe! They did, however, provide a pretty rich early retirement incentive package to entice folks to retire during the 3-yr period. We had already developed the end organization, again the issues were timing and selling the program as a good thing for the company, those retiring, and those sticking around. Cutting to the chase, after a tremendous amount of communications, training, eyes-wide-open-objective setting, the goal was accomplished.

Simultaneously the mill set 3 consecutive annual production records. I can only recall 3 irate employees coming to my office for a personalmeeting with me; their gripe was they couldn't understand why we couldn't find a way to replace them so they could retire early also. My team and I were pleased with the path we took and the end product.

Now the hook; about 4 months from the end of our 3-year process, my new boss put forward to me that he had committed to corp that we would accomplish another "headcount" reduction starting immediately and that the target was another 20% reduction within 2 years. The early-out incentive packages may or may not continue throughout the period, so we needed to hurry along. My team simply felt as if we had been slapped in the face with a arbitrary and top/down objective without any opportunity to participate in its development; our jobs became implementation only; for that we were totally accountable.

I left that company before this initiative really got moving, but the company was "merged" and everything changed nearly overnight. But from what my friends who stuck it out and stayed tell me, they simply do not have the trust and confidence in their futures that they did 22 years ago.

Sadly, too many "bosses" feel that they are hired to "boss" rather than lead.

Next job was in Detroit. Long story short; that mill should have been closed at least 30 years earlier; the deed happened on my watch. The CEO of the company set a standard of behavior, fairness, openness, and concern for all of us who lost our jobs that resulted in the employees, though sad, walking away with their heads up. I think we all looked back at that CEO's leadership and realized that his style, though often harsh, was always instructive and done for our betterment. It's a shame that we learned that pretty-much after the fact.

Then to Houston. The mill was struggling for a lot of reasons but it had a future. The mgt team there simply could not convince the owner that several fundamental issues had to be resolved to keep the mill viable. While we were working on these issues, apparently he was restructuring debt so that if the end came, his equity would be protected as much as possible. Well Hurricanes Katrina and Rita helped drive up natural gas price to a point that the plant could not be profitable, forcing a report to our secured creditors (the bank and two of the owner's other companies) that our earning potential had been materially impacted. The bank called our notes, forcing us into default of our notes. Our secured creditors took ownership of all assets and, after shutting down the plant, began a hasty liquidation of raw material and finished products and ultimately the plant entirely. In the end, the bank and the secondary creditors (the owner's other companies) were made whole on their notes, employees were denied any severance pay and WARN Act pay, and unsecured creditors received less than $0.15 on the dollar of their outstanding invoices.

I've described 4 mgt scenarios in my career; two of them bring me a sense of pride and accomplishment while the other two bring me a sense of shame in being a part of a pretty ruthless mgt situation. Like your opinion of your cat's vet, I am very suspicious and questioning of mgt's true agenda now and also pretty intolerant of situations where I see mgt making decisions that place the security of the rest of the organization in jeopardy.

In the public's eye, mgt has taken a "hit", largely because of the actions of more than a few who really needed to be hit and hit very hard.

I'm really sorry about your cat. But think of the years of quality life that it enjoyed at your hand and the times it brightened your day just by being there.

Ed Turner
Houston, Texas, USA


About "Get Off the Grid..." (1 Jul 08)

Your article on energy self sufficiency for pulp and paper mills I thought to be very good with many sensible points. But here are two constructive criticisms:

a) all the Kraft pulpmills and some of the integrated mills already consume enough biomass to be energy self sufficient using commercially available technology. No more biomass is needed, in most cases. As far as I know, no “world scale” Kraft pulpmill mill built in the last 5 years requires any energy from the grid and most are large exporters of electricity, sufficient to run an associated integrated paper machine operation. What is needed is (heavy) investment in new recovery boilers and evaporators, as well as in energy reduction measures in the pulpmills and paper machines. But this investment has other advantages to the owners and is needed anyway if they are to stay in the P&P business long term. I think you should talk about that rather than simply suggesting mills burn more wood while continuing to use their existing biomass inefficiently. Apart from the fact that as engineers we ought to be doing better with what we have, it is an obvious criticism that would be levelled against our industry by environmentalists and others should the mills go the way you seem to suggest. The inadvertent consumption of lesser hooded owls or critically endangered bark beetles might increase!

b) You talk lobbying and subsidy. Simple business subsidy is not the way ahead for our industry, as you yourself frequently remind us. Anything that needs subsidy to stay solvent should not be in business and soon won’t be in business anyway [Jim Thompson, albeit paraphrased!]. Remember too that you write to a wider audience than your US colleagues. Your proposed subsidy for the xyz corporation down the road in Virginia may in principle put some of us in the rest of the world out of business.

Having said that, I agree with you that unfair and unsustainable subsidies-obtained-by-lobbying are not the same as government action to ensure a level playing field, or to ensure social outcomes that a market cannot provide - such things can look like subsidy, but may well be a quite legitimate transfer of costs to users or exploiters that would otherwise be borne by the public or other sectors. As an example in our part of the world, and probably yours, the public heavily subsidises the road transport industry, and for us that industry is one of the worst and least efficient energy consumers and greenhouse gas producers.

Keep up the good work.

John Reid
Kinleith, New Zealand

***

As always, great article, thanks.

You may know that “old man” Wallenberg (sp) of Longview Fibre was wheeling power from his Longview, WA mill to a power company in southern California as far back as the mid or early 80s. I suspect they still do.

Al Palmer
somewhere in Asia

###

Have a comment? Send your email to jthompson@taii.com or donm51@aol.com. Unless you tell us otherwise, we will assume we can use your name if we publish your letter.


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