Daniel Pink on Motivation l The Effect on Product Cost.

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I am a retired product engineer for a major corporation with whom you are familiar. You have touched my product. I have patents. Woo hoo. As a young engineer I worked with engineers I called those old flat top guys, amazing engineers of the fifties and sixties era who calculated with a slide rule, drew their designs on paper and had no calculator or computer. They knew their stuff.
As a young engineer I worked for a chief engineer who knew my job. We worked with autonomy and very few meetings. Job appraisals were short and sweet. I saw the work force shift to the model used today. The chief engineer was replaced by three levels of managers none of whom had ever done my job.
The job turned into meetings with the Lead Engineers, Project Managers, and Directors. The individuals rewarded were often those who performed the rudimentary, non creative tasks well. Job appraisals turned into a nightmare of meetings and objectives and ratings. They called it the Performance Management System.
What was the difference in motivation?. For my Chief Engineer I would have walked over hot coals. He knew my job, had done it, could teach and keep me out of trouble, left it to me.
Now my product is built in China.
The product was sent to China because the overhead became too high and caused the product cost to be too high to compete. I was there when we costed the product and it is the product cost that sends the product overseas.
The products went to China, not because of politics, or labor costs, but in large part because the extra layers of American management ends up in the cost of the product. Our product cost $100 to manufacture. That included only $10 in labor. Mexican labor alone would not mean a move. The “burden” or overhead was $30 to build it here. Let’s add that up:

Manufacturing Labor……$10

The cost of that overhead includes our pay for performance philosophy. It also includes healthcare folks. The American built product has healthcare in the cost. Products are outsourced because of the extra layers of management and because of healthcare and benefit costs that end up in the product cost.

Our cost was $100 and the Chinese placed a product on the shelf in the store for $80 retail….It costs us $100 to make it and they were selling it for $80….

We need to take the burden of healthcare and fat management out of the product cost and the products can come home. The old flat top guys had it right. Daniel Pink is correct and the our business model rewards waste in creativity and that waste ends up in the cost of the product and the product ends up being built elsewhere. The CEO bonus is in the cost of the product but, as Daniel points out, that bonus means lower performance when creative solutions are needed.

the ol’ engineer david michael jackson