The Complexity Of Management, And The IAM

Today’s comments in the Economist, written by Schumpeter, were very interesting. Starting with the complexity of political systems, illustrated by the Austro-Hungarian Empire, and ending with self-organizing systems, the author effectively describes how difficult it is to manage organizations in this modern environment.

Several comments stood out to me. “Businesspeople are confronted by more of everything than ever before: this year’s Global Electronic Forum in Shanghai featured 22,000 new products.” This illustrates the need for faster decision processes, and a greater level of risk. It also illustrates the new reality. Complexity is no longer abnormal, it is the norm, and change theorists call this a white-water environment.

Management of complexity then is the new reality; therefore, the old norms are no longer valid, which is a lesson the International Association of Machinists (IAM) has missed, and as a result will probably drive thousands of good paying jobs from Washington State. Bruce Ramsey, editorialist for the Seattle-Times, discussed this reality in today’s paper.

The IAM rank and file has thought in the past and currently that the Boeing Company bluffs in its contract negotiations. The only problem with this is Boeing doesn’t bluff. Four years ago the company asked the IAM for concessions concerning strikes. The company wanted at ten-year respite from strikes, or they would build a second assembly line for the 787. The IAM said no, and the next thing you know they built another assembly line in South Carolina. No bluffing there. There are many other examples of how this occurs, including the current negotiations over the new airplane, 777X.

Ramsey describes the current decision-process, “The yes-voices were resigned and quiet, the no forces prideful and shrill. The no side accused Boeing of having big profits and Chief Executive Officer Jim McNerney of having obese pay and benefits. They accused Murray and Inslee of wanting to look good for voters by keeping Boeing in Washington.” Murray is one of our Senators, and Inslee is our governor. Instead of rationally thinking this through the rank and file were behaving emotionally.

The IAM is known as the “Fighting Machinists,” a moniker from years gone by, one that is antiquated and not necessary anymore. The machinists are paid anywhere from $33 to $43 per hour, depending on their job, and their benefits are stellar. They are also the last union in Boeing that still gets a traditional pension. And their pay is protected from inflation with a Cost-Of-Living-Adjustment (COLA).

To remind you of the current situation, Boeing recently approached the IAM with a new eight-year contract proposal that would ensure keeping the 777X in Washington State. The so-called Fighting Machinists said no, because they were fighting for future employees, a noble cause.

I agree with Ramsey when he says that the intent of the IAM is good, but a huge miscalculation. “The company said it will choose a site within three months.” I also agree with Ramsey when he stated that Boeing has billions of dollars in sunk cost in Washington State, which hopefully will weigh heavily in Everett’s favor. However, the Boeing Company does not bluff, and it has a long-term plan.

I do not believe that Boeing wants to move it’s manufacturing from the State of Washington. To do so will be extremely expensive. However, I also know that Boeing management recognizes the complexity of managing in this global age, and is looking for ways to maintain its narrow profit margin. Successful organizations are those that can find simplicity within complexity. This is what Boeing is trying to do, reduce the variation in the process of providing a very expensive product to a narrowly defined group of customers.

I hope the IAM hasn’t missed the boat, but I am afraid they have. As such, their miscalculation will cause thousands to miss out in a future Boeing job that pays a wonderful wage, with many excellent benefits.

And that is my thought for the day!

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