Mad Management: Quality and productivity - or privatisation and waste?

20 April 2012.....        B wing at HMP Leeds
20 April 2012..... B wing at HMP Leeds

In 1979 the fourth largest and one of the best known USA global companies, International Harvester, hired a new CEO, Archie McCardell.

At the time the turnover was $8.4 billion. By 1982 they had debts of $4.8 billion and finally lost even their name. How was this monumental failure achieved? By cost-cutting, forcing bad work practices and trying to break the local autoworkers union; mostly at the advice of the CEO’s consultants!

In summary, what killed International Harvester was Archie’s cost-cutting, profit-taking and aggressive attitude towards staff and suppliers

McCardell was fired in 1982, one of the most despised executives in the USA, but he still had his millions while tens of thousands of workers lost their jobs. Industrial towns, like Rocky Island, Illinois, went into recession, but Archie walked away a rich man. The interesting thing is that Archie McCardell had form. His previous job was CEO of Xerox, where, benefiting from the spurious profit-levels provided by their earlier innovative technology, he neglected the rate of return on capital deployed and other basics. He left Xerox in serious trouble in 1979. His successor, David Kearns rescued Xerox at the 11th hour by instituting a quality improvement programme that focused on the customer, not the numbers.

In summary, what killed International Harvester was Archie’s cost-cutting, profit-taking and aggressive attitude towards staff and suppliers. What saved Xerox was Kearn’s focus on customer care - understanding their needs - and adopting the RIGHT FIRST TIME (RFT) policy. RFT prevents the great waste that occurs through rework, and also, unsurprisingly, delights customers. In the eighties, for example, Toyota could produce a perfect new car in the time it took Mercedes to correct the defects in one of theirs off the line.

One would think, therefore, that our politicians would follow the Kearn’s management model at Xerox? But no, they chose Archie McCardell’s. A prime example is Chris Grayling, the cabinet minister at the Ministry of Justice, followed closely by Jeremy Hunt. He, like Archie, has history. Taking the worst aspects of top-down, cost-cutting corporates he set about ‘reforming’ the MoJ in 2012. He instituted, for example, unfair court charges - which, Michael Gove, his successor, scrapped; selling prison training to Saudi Arabia - which Gove also scrapped, along with stopping books for prisoners; cutting legal aid to prisoners - which the Court of Appeal ruled unlawful; charging fees for workers taking their bosses to industrial tribunals - which the Court of Appeal also scrapped. Archie McCardell would have been impressed with his imperiousness, and David Kearns horrified at the sheer waste.

This is not about politics. It is about the huge economic implications. Just refunding the tribunal fees amounted to nearly £30 million, without factoring in the administration costs. Add all the other ‘rework’ of failed policies and the tens of millions pile up. To cap it all Chris goes ahead with the privatisation of the Probation Service, against all the warnings from the police, the prison service, his civil servants and the Howard League. Because, when you’re drenched in neo-liberalism, you just KNOW that the private sector practices are better than public services.

David Kearns put Xerox quickly back on its feet by improving quality, i.e. RFT and continuous improvement. Clearly then, this had to be where the probation service was failing. On the contrary, in 2011, the probation service won the British Quality Foundation’s (BQF) Gold Medal for Excellence.

The probation service model worked! The same award that had gone to Ricoh, Siemens and TNT Express, all global successes, was awarded to this public sector organisation, which the CEO of the BQF described as ‘a shining example of excellence’.

Clearly, after this accolade, Probation’s management model would be circulated throughout the public sector as best practice.

But, no, our Chris, who knows better, privatised it in 2014, disbursing £800 million of public money to the private sector.

As I commented in my last article over Hunt’s attempt to privatise NHS Professionals, dogma trumps evidence. But maybe it has turned out an economic success? Well, within two years the Tory chair of the Justice Select Committee, Bob Neil, said the privatised service ‘risks heading for a car crash’, with 21 private community rehabilitation companies reporting they were making a loss on almost all their seven-year contracts worth £3.7 billion.This a real lose/lose: in fact a lose/lose/lose because by October 2016 the Chief Inspector of Probation had “identified multiple failures”with one in three short-term offenders being released with nowhere to live.

Chris must have a lot of rework to do. Actually, no. Like Archie McCardell at Xerox, he moved on in 2015 to Transport, leaving an unimpressed Michael Gove to pick up the pieces.

Finally, there is a typically despairing British phase, ‘You’ve got to laugh’ (otherwise you would cry), and this is where I am at with this government over the sheer WASTE of taxpayers’ money and people’s lives.

Between Chris Grayling and Jeremy Hunt alone we, the taxpayer are picking up a tab running into tens of billions, with a human cost that is as bad and more tragic. These two have been in charge of the fates of the most vulnerable people in our society, and they have treated them and their staff shockingly. Consequently our communities all suffer, and the nation cannot have a successful business environment in a failing society.

Has Grayling, like McCardle, finally been banished to the wilderness? No, he has been rewarded with Transport and has scrapped the Midland Mainline electrification, fundamental to economic growth in the North.

Thank you, Chris Grayling, for nothing.