Manufacturing Systems Foundations of World-Class Practice (1992) / Chapter Skim
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The Interface Between Manufacturing Executives and Wall Street Visitors--Why Security Analysts Ask Some of the Questions That They Do
The Interface Between Manufacturing Executives and Wall Street Visitors--Why Security Analysts Ask Some of the Questions That They Do
Pages 137-148
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From page 137... ...
Such investors will remain stockholders in the companies they choose until they see a fundamental change in the characteristics of the particular company. No accurate statistics are available as to the value of the ratio of total outstanding shares owned by either group versus the other.
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From page 138... ...
However, from the standpoint of the number of transactions occurring in any given period, the short-range goals of the first group imply that those buyers will initiate many times more transactions than the long-range holders. Therefore, it is only logical that those who represent the large number of brokerage houses that earn most of their income from commissions on completed transactions, together with the many other investment management firms receiving counseling fees for advising or managing funds desiring this type of management, result in the majority of Wall Street type visitors to industrial corporations asking questions that are quite short-range oriented.
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From page 139... ...
I would suggest that those tempted by what looks like a logical means of increasing wealth look around and see the number of people who have amassed real wealth in this way compared to those who have done it by finding unusual companies and sticking with them for a long period of years and until such time as a fundamental change in the character of the particular company may occur. Appraising the manufacturing competence of an industrial company is a significant factor in judging not only the important contribution that the manufacturing arm can give to the total success of the company but also an excellent way of judging the competence of top management itself.
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From page 140... ...
Furthermore, if small teams of people have confidence in the overall fairness of their company and are permitted to set their own goals and, even more important, have confidence that they will be personally awarded a fair share of the savings to the company that netter productivity brings to the earning statement, production will rise to levels far higher than it would seem reasonable to attain by any yardstick set from above. The climate for this type of cooperation cannot be achieved by the manufacturing executives alone although they may play a very significant role in accentuating a favorable atmosphere created by higher authority.
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From page 141... ...
Human pride and the NIH factor are so deep within most individuals that it takes a truly superior overall management and an equally superior manufacturing staff to open up the advantages which a really well-run company can attain by getting genuine cooperation between all phases of a company's activities. If a financial visitor asks some questions pertaining to these matters in too direct a fashion he may receive a pleasing answer rather than a factual one.
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From page 142... ...
However his need of obtaining such answers can well explain why some manufacturing executives who are in the very midst of seeing these things happening are asked indirect questions the reasons for which they may not fully understand. Following the old Chinese proverb that "a picture is worth a thousand words," the final part of this paper consists of questions of a type which financial people interested in the truly long-range prospects of a manufacturing company might well ask a V.P.
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From page 143... ...
When he finds that on talking of this subject his visitor's eyes glaze over and the visitor endeavors to change the subject to what the investment relations officer considers will be next quarter sales in one of the company's more glamorous lines, it provides a strong clue that his visitor's interest is purely short-ranged and speculative. Consequently, he tends to get rid of the visitor as quickly as diplomacy will permit.
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From page 144... ...
COMMENTS: This is deliberately devised as a "trick" question so as not to get an answer that may be colored somewhat by what the person being questioned thinks the security analyst may want to hear. In recent years it has been proved conclusively that the old idea of having quality inspectors examine products either part-way through or at the end of the line is an extremely inefficient one.
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From page 145... ...
COMMENTS: The answer to this question can have a double benefit for the security analyst. From it he may learn of an unusually attractive potential investment about which he had previously been totally unaware.
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From page 146... ...
8. QUESTION: What have been your results over the last three years in reducing cycle time (total elapsed time from when the raw materials or components are delivered at the receiving dock to the time the product is ready for immediate shipment to the customer)
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From page 147... ...
Similarly, it should be ascertained whether meritorious results of individual small units are rewarded financially through some type of previously devised "profit sharing" plan, not rewarded at all, or an in between course is followed such as a company sponsored party for particularly successful units. A basic concept here that should be examined carefully is whether management believes that the majority of manufacturing personnel has sufficient confidence in overall management so that when a new and significantly different technique is proposed, all levels of manufacturing employees tend to follow enthusiastically, or whether there is a strong tendency toward foot-dragging and continuing doing things as they have previously been done.
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From page 148... ...
Through vendors or other sources are you learning what competitors may be doing along these lines? Is top management aware of the competitive significance of these matters and are they giving recognition and rewards to those producing tangible benefits in these ways?
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