"Okay, okay," I say. "I was just asking to be sure."
"So you need a relative measurement, too," Lou continues. "You need something like return on investment... ROI, some comparison of the money made relative to the money invested."
"All right, but with those two, we ought to be able to tell how well the company is doing overall, shouldn't we?" I ask.
Lou nearly nods, then he gets a faraway look.
"Well..." he says.
I think about it too.
"You know," he says, "it is possible for a company to show net profit and a good ROI and still go bankrupt."
"You mean if it runs out of cash," I say.
"Exactly," he says. "Bad cash flow is what kills most of the businesses that go under."
"So you have to count cash flow as a third measurement?"
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He nods.
"Yeah, but suppose you've got enough cash coming in every month to meet expenses for a year," I tell him. "If you've got enough of it, then cash flow doesn't matter."
"But if you don't, nothing else matters," says Lou. "It's a measure of survivaclass="underline" stay above the line and you're okay; go below and you're dead."
We look each other in the eye.
"It's happening to us, isn't it?" Lou asks.
I nod.
Lou looks away. He's quiet.
Then he says, "I knew it was coming. Just a matter of time."
He pauses. He looks back to me.
"What about us?" he asks. "Did Peach say anything?"
"They're thinking about closing us down."
"Will there be a consolidation?" he asks.
What he's really asking is whether he'll have a job.
"I honestly don't know, Lou," I tell him. "I imagine some people might be transferred to other plants or other divisions, but we didn't get into those kinds of specifics."
Lou takes a cigarette out of the pack in his shirt pocket. I watch him stamp the end of it repeatedly on the arm of his chair.
"Two lousy years to go before retirement," he mutters.
"Hey, Lou," I say, trying to lift him out of despair, "the worst it would probably mean for you would be an early retirement."
"Dammit!" he says. "I don't want an early retirement!"
We're both quiet for some time. Lou lights his cigarette. We sit there.
Finally I say, "Look, I haven't given up yet."
"Al, if Peach says we're finished-"
"He didn't say that. We've still got time."
"How much?" he asks.
"Three months," I say.
He all but laughs. "Forget it, Al. We'll never make it."
"I said I'm not giving up. Okay?"
For a minute, he doesn't say anything. I sit there knowing I'm not sure if I'm telling him the truth. All I've been able to do so far is figure out that we have to make the plant make money. Fine, Rogo, now how do we do it? I hear Lou blow a heavy breath of smoke.
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With resignation in his voice, he says, "Okay, Al. I'll give you all the help I can. But..."
He leaves the sentence unfinished, waves his hand in the air.
"I'm going to need that help, Lou," I tell him. "And the first thing I need from you is to keep all this to yourself for the time being. If the word gets out, we won't be able to get anyone to lift a finger around here."
"Okay, but you know this won't stay a secret for long," he says.
I know he's right.
"So how do you plan on saving this place?" Lou asks.
"The first thing I'm trying to do is get a clear picture of what we have to do to stay in business," I say.
"Oh, so that's what all this stuff with the measurements is about," he says. "Listen, Al, don't waste your time with all that. The system is the system. You want to know what's wrong? I'll tell you what the problem is."
And he does. For about an hour. Most of it I've heard before, it's the kind of thing everybody's heard: It's all the union's fault; if everybody would just work harder; nobody gives a damn about quality; look at foreign labor-we can't compete on costs alone; and so on, and so on. He even tells me what sorts of self- flagellation we should administer in order to chasten our- selves. Mostly Lou is blowing off steam. That's why I let him talk.
But I sit there wondering. Lou actually is a bright guy. We're all fairly bright; UniCo has lots of bright, well-educated people on the payroll. And I sit here listening to Lou pronounce his opin- ions, which all sound good as they roll off his tongue, and I won- der why it is that we're slipping minute by minute toward obliv- ion, if we're really so smart.
Sometime after the sun has set, Lou decides to go home. I stay. After Lou has gone, I sit there at my desk with a pad of paper in front of me. On the paper, I write down the three mea- surements which Lou and I agreed are central to knowing if the company is making money: net profit, ROI and cash flow.
I try to figure out if there is one of those three measurements which can be favored at the expense of the other two and allow me to pursue the goal. From experience, I happen to know there are a lot of games the people at the top can play. They can make
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the organization deliver a bigger net profit this year at the ex- pense of net profit in years to come (don't fund any RD, for instance; that kind of thing). They can make a bunch of no-risk decisions and have any one of those measurements look great while the others stink. Aside from that, the ratios between the three might have to vary according to the needs of the business.
But then I sit back.
If I were J. Bart Granby III sitting high atop my company's corporate tower, and if my control over the company were se- cure, I wouldn't want to play any of those games. I wouldn't want to see one measurement increase while the other two were ig- nored. I would want to see increases in net profit and return on investment and cash flow-all three of them. And I would want to see all three of them increase all the time.
Man, think of it. We'd really be making money if we could have all of the measurements go up simultaneously and forever.
So this is the goaclass="underline"
To make money by increasing net profit, while simultane- ously increasing return on investment, and simultaneously in- creasing cash flow.
I write that down in front of me.
I feel like I'm on a roll now. The pieces seem to be fitting together. I have found one clear-cut goal. I've worked out three related measurements to evaluate progress toward the goal. And I have come to the conclusion that simultaneous increases in all three measurements are what we ought to be trying to achieve. Not bad for a day's work. I think Jonah would be proud of me.
Now then, I ask myself, how do I build a direct connection between the three measurements and what goes on in my plant? If I can find some logical relationship between our daily opera- tions and the overall performance of the company then I'll have a basis for knowing if something is productive or non-productive... moving toward the goal or away from it.
I go to the window and stare into the blackness.
Half an hour later, it is as dark in my mind as it is outside the window.
Running through my head are ideas about profit margins and capital investments and direct labor content, and it's all very conventional. It's the same basic line of thinking everyone has been following for a hundred years. If I follow it, I'll come to the