Relocating to Georgia is Best Move for Caterpillar

What happens when you manufacture products that the locals can’t afford to buy?  You move to Georgia. 

The announcement last Friday by Caterpillar to move to Georgia will create 1,400 jobs according to Caterpillar representatives and invest $200 million to build small tractors and excavators. Another 2,800 jobs will be created around the country as a result of the new plant.

Officials with Caterpillar say the area's close proximity to the Port of Savannah was a key element in the decision to build the plant in Georgia.

"Forty percent of everything made here will be exported. So there are great American products built by Georgia workers and exported around the world," said Caterpillar CEO Doug Oberhelman and reported by Fox News.

Georgia's Governor Nathan Deal called the plans to build the plant in the state a "great day for Georgia."  You bet it is, and the story is bigger than just jobs in Georgia.  We can learn much from a case study in business from a company like Caterpillar who faces the typical struggles of jobs creation, product life cycle management, demand fluctuations and the pressure of competing in the “right” economic environment.  After all, a lot has changed since this company was founded in 1883. 

Fast forward to 2012 and blink and you will miss the 129 years of growth, subsistence, struggle and creative compromise that a true entrepreneurial organization will shoulder to stay in business.  As did many manufacturing companies, Caterpillar found survival in the downturn of the 1980’s by two methods.  First they moved facilities overseas to take advantage of the stronger US dollar in foreign countries, and second it increased automation efficiencies which mean that it needed fewer workers to do the job.

 In the early 1990s Caterpillar looked to the east and south for its future growth. The company strongly supported both the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT), concluding that the elimination of trade barriers could add sales.  Sales growth in Mexico and outside North America led to ventures in Japan, Russia, China and Vietnam.  Ongoing UAW contract battles led Caterpillar to shift manufacturing to right to work states and foreign countries. 

The cycle of purchase power is now coming full circle it seems.  With the continuing economic downturn, companies are realizing that if they manufacture overseas, then the people here at home who are unemployed because they lost their job to an overseas initiative, can’t afford to buy the product.

Several government initiatives may be needed to make the “purchase power” part of this picture whole though.  Yes we need tax reform.  Yes we need a pro-business environment.  But what we really need is an educated worker to do the job. 

As we have written here before, the manufacturing worker today is very different than that of 50 years ago.  Often in a white coat and not just a hard hat, these workers need strong high school educations where graduation is expected.  Caterpillar is not new to this dance and the company expects an educated worker.

In 1968, Caterpillar was early to enlist in a government-sponsored program to hire and train people considered to be unemployable. This program was directed to persons who had been out of work for extended periods. The hirees would work half of the day at entry-level positions and spend the other half of the day learning job skills for better-paying jobs.  According to Fox News, Georgia was among a number of states competing for the new plant. Ground breaking is expected to take place in 2012. Production is slated to begin late in 2013. Officials say the state granted about $45 million in incentives to close the deal. 

Companies like Caterpillar are looking for logistics, workforce, speed and efficiency.  North Carolina was a hot contender for the Caterpillar deal according to Jim Bradshaw, the Executive Director of the Brunswick County Economic Development Commission, but they lost due to logistics.  A 50 foot channel is needed for their shipping needs, and the current 42 feet channel at the Port of Wilmington is not adequate.  Our own Mobile Bay can have a depth of 75 feet, but on average is 12 feet, according to the World Atlas. 

Alabama was a contender for Caterpillar in 2010 as reported by Al.com, but we still had some work to do at that time to attract business.  Work continues, and as late as last Thursday, the House of Representatives passed a key job-growth bill known as House Bill 159.  House members passed a constitutional amendment that allows voters to give the Governor and the Alabama Development Office the authority to offer incentives like those used on the Mercedes project to recruit new industry to Alabama and prevent existing industry from leaving the state.  According to Representative Barry Mask and reported by Stephen Crews in DothanFirst, “We're trying to give our state and local economic developers more tools to help grow existing businesses and land new industry, both of which result in more jobs for Alabamians." Mask continued, "I was pleased to work with colleagues from both parties to make this bill better so that voters can be confident in the plan we put before them."  Opposition came from the Alabama Education Association and the Alabama Democratic Party. 

Crews also reported that Speaker Hubbard said, "It's hard to believe anyone would be against bi-partisan efforts to boost job growth".  "When the economy grows, our education budget grows, and we have more funds to put toward schools. More jobs and more money for education means everybody wins. Most importantly, the people win over the special interests."

This constitutional amendment and enabling legislation will now move to the Senate.  A list of Alabama State Incentives for Business may be found at businessfacilities.com.  Let’s just get it done. 

Talkin' Bout an Evolution

Forgive me John Lennon and the Beatles, but just a little play on the title wording. Brian Brim is the coauthor of Strengths Based Selling, and I found a few of his thoughts in the Gallup Management Journal this week that you may find helpful too. His ideas, and those of David Liebnau, Executive Coach with Gallup, offer some insight as we evaluate change opportunities and growth here in the North Jefferson area. I was encouraged and reminded that real change takes time and persistence. In their words, we should be more patient. More will be accomplished through slight shifts than massive immediate changes.
According to Brim and Liebnau, everyone has their special way of doing things that is comfortable, your own special groove. Stepping out of your way of doing things and into another can feel a bit like putting on someone else’s shoes. Not too comfortable and certainly not that efficient. The challenge it seems is to appreciate the difference between actions and practices. Now stay with me here.
According to the writers, actions are the behaviors that you do with little thought. The actions a leader usually takes are determined by the "groove" he or she has developed over time. But how can you grow as a leader if you're forever contained in this same groove? You can't, and that is where practices come in. Practices are interventions that enable you to establish new ways of thinking, feeling, and behaving. They are essential to expand and develop your identity. To grow as a leader, you must slowly and steadily expand the groove. Adopting new practices which are slight shifts from what you already do enables you to access a different level of possible actions and create new opportunities. It is evolution, not revolution.
You don’t get out of your rhythm of what works, you just expand it.
This type of change is called slight-shift practice. It may be fairly easy too. But that's the point: When leaders are asked to do something they have the confidence to do and they see immediate success, they gain confidence from the positive feedback. Confidence and success drive them to repeat it. That's how sustainable development and wider grooves are created, and that's how great results happen. It is like a slow lazy stream that with time and persistence can become the Grand Canyon.
What small changes can you make this week that will lead you to a sea change of possibility? How about pushing back from your desk and talking with your team more about their ideas for improvement? How about dealing with problems immediately, instead of putting them off? How about delegating more to allow someone else to grow in a skill? Can you accept the challenge to just get things done without regard to whom gets the credit?
Now think about this idea in the context of our communities and growth. Think about it in the context of economic and professional development for yourself and the company that you support. Each entity be a company or a community has its own opportunity for development, and each has its own groove for certain. But what would happen if the groove or rhythm started to widen, just a little?
Will our opportunities expand if we take a few actions to partner more, to trust more, and to be more transparent? Once these first easier steps are taken, then and only then will you be able to really talk about creative change, innovation, and thoughtful risk taking.

Pick your Ally to Change the Change: BCA, US Chamber, NAM

            Change.  Not just a buzzword during the Presidential elections, but a word that rose to a frenzied mantra.  Now that the smoke is clearing from our  recent mid-term elections, we are beginning to get the clear picture that something really has changed in the collective conscience of the country, and it may not be what some in Washington had hoped for or envisioned.  It would seem that previous to the 2008 elections, it was enough to ask the civic minded person to engage and vote.  Now that is just not enough.  Gone are the days of passive involvement, and trust in leadership whether it would be corporate leadership (with a now 20% approval rating) or political leadership (with a now 11% approval.)  Enter the Watchdog.  Welcome the Self-Advocate.  All Hail the civic minded, highly engaged voter who not only shows up on Election Day, but is highly informed and ready to get involved.  

I want to share this thought with you on the heels of my participation in the recent Committee Days for the Business Council of Alabama (BCA).  Committee days are key to driving the Pro-Business Agenda that BCA supports for our state.  In their commitment to our legislative process, BCA looks to the business volunteer leadership who has led BCA for over a quarter of a century with vision, courage, integrity and commitment.  This weeks Committee days were filled with heavy hitter leadership participation from all business sectors for Alabama.  If your company supports BCA, your organization has taken a serious step toward not only civic engagement, but having personal ownership in driving the drivers of legislation and leadership. 

            Two key speakers supported the Committee days this week, and their messages were on target with the mission of BCA.  In attendance to support this event were Jay Timmons, Executive Vice President of the National Manufacturers Association (NAM) and Katie Hays, Executive Director of Congressional and Public Affairs for the US Chamber of Commerce. 

Timmons spoke to the need for “clearing the bureaucratic brush”.  According to Timmons, American companies want to compete and win in the aggressive war of competition, and do not need to be encumbered by taxes and legislation that is a functional anvil on the backs of manufacturing.  The United States is second now to Japan, but soon to be the highest in corporate tax rate with a cost to do business in the US at 17% higher than other countries.  NAM supports better policies to create jobs and bring us out of the recession, and it advocates for the Free Market System.  Timmons expressed concern that voters are less and less educated on benefits of a free market.  “We will not survive as a service economy alone, and a manufacturing economy born in innovation, advancement and competition is crucial to building tangible wealth and strength for us,” said Timmons.

Hayes gave an election recap with recognition that there is certainly a lot of new blood in office with 13 new senators and 30 new governors.  “The role of the new governors is clearly significant as they work to interpret for the state what is happening at the national level and as well they should,” said Hayes.  As we exit this week from our Lame Duck Session with only one more session this year, there is a lot to accomplish in a very short period of time.  According to Hayes and the US Chamber of Commerce, President Obama must signal openness to compromise.  If the 2001/2003 Bush tax cuts expire, we will experience one of the largest tax hikes in America’s history.  $3.8 Trillion will be placed in the government’s hands only 45 days from now unless action is taken.   There is a lot of legislation in limbo in addition to the expiring tax cuts.  Other business tax provisions that are a priority for businesses are card check legislation, climate change legislation, transportation funding (SAFETEA-LU) reauthorization, discussion of the Debt Commission's budget report suggestions, immigration legislation (the DREAM Act), cyber security bill, trade legislation, and Medicare insurance legislation. 

The list is daunting, but chins up; Washington is listening now and now is our time to change the change.  We are the small-business bloc which is code for the “hardworking voter” or the “everyman.”  It is rare to find a small business person that does not complain about competition against the Big Box Company so here is your word of caution.  Politics is now truly big business.  More money from outside groups has been spent on the 2010 midterms than was spent in 2004, which was a presidential election year.  Don’t think about this as money spent buying votes, but think instead of the broadcasters, publications, campaign ads, event companies, restaurants, and the political consultants that help to bring it all together.  It may continue to be a tough fight for the small business bloc to compete with big politics in this type of financial arena, so square up with some good allies.  BCA may be that great lineman to your business big or small when it comes to the pro-business grid iron.

Skunk works Smells Like Money

Now that we are through our elections,  it would be wise to take a pause and think for a moment about what trying times and the birth of true innovation can look like.  After all, our circumstances are not new.  We need to take a creative pause as well as deep breath and prepare to take a little risk and make some hard decisions about how we view innovation and creative change.  I learned of a term that is new to me, but for many of you reading today, perhaps it is not new to you.  Recall from the early 1940’s a strategy called Skunk works or skunkworks.  

            A skunkworks project is one typically developed by a small and loosely organized group of people who research and develop a project primarily for the sake of radical innovation.  Skunk works was born within the minds of the leadership of the Lockheed Aircraft Corporation in 1943 as they were tasked by the United States Government to build a jet fighter to counter a rapidly growing German jet threat.  In one month, based on the request, Clarence L. “Kelly” Johnson and his team of engineers at Lockheed are reputed to have developed a proposal, received a go-ahead with funding, and began development.  A formal contract for approval from the “powers that be” did not arrive until four months of project work had already been completed.  This type of Skunk Work strategy came to be known as the way to move forward with innovation quickly with only a handshake and rolling up your sleeves.  No contracts.  No official submittal process.  No slow meandering “take your time while we analyze this” complacency.  Skunkworks operates with a high degree of autonomy and unhampered by bureaucracy. 

Kelly is credited with operating the Skunk works effectively and efficiently albeit in an unconventional manner certainly.  He broke the rules, challenged the bureaucratic system and unleashed innovation.  End result:  Progress.  Skunk Works then is a small group of people who work on a project in an unconventional way.  The group's purpose is to develop something quickly with minimal management constraints.  Skunk Works are often used to initially roll out a product or service that thereafter will be developed according to usual business processes.

Although people have speculated that the name Skunkworks was inspired by the poor hygiene habits of overworked employees; it was really taken from the moonshine factory in the cartoon series "L'il Abner.”  Lockheed Martin has trademarked the name Skunk Works but they also refer to this type of project by the more formal name "Advanced Development Program" (ADP).  Kelly’s rule for innovation at Lockheed helped turn the face of a corporation answering the call of their country.  Perhaps it can help you innovate as you face the demands of your own business and customers.  Lockheed developed 14 basic rules for running an effective skunkwork.  I have modified them here to fit my general business needs.  Perhaps they will help you too as you innovate and create your own skunkwork for your organization.

1. The Skunk Works manager must be delegated practically complete control
2. Develop strong but small offices
3. The number of people having any connection with the project must be restricted in an almost vicious manner.  Use a small number of good people (10% to 25% compared to the so-called normal systems
4. Keep it simple for greater flexibility
5. Keep the paperwork way down, but do document the important things
6. Check your costs monthly to stay on top of expenses, commitments and what is needed to finish the project
7. Delegate to your project leader and give them greater than normal responsibility.   
8. Inspection and follow up are key, but do not duplicate effort
9. The leader must be delegated the authority to test his final product.  He can and must test it in the initial stages as well.
10. The specifications for the project must be decided immediately.
11. Funding a program must be timely so that the leader doesn't have to keep running to the bank to get support
12. There must be mutual trust between the project organization and the project leader with very close cooperation and liaison on a day-to-day basis.  This cuts down misunderstanding and correspondence to an absolute minimum.
13. Access by outsiders to the project and its personnel must be strictly controlled by appropriate security measures.
14. Reward based on performance and nothing else

Does Your Reputation Create A Competitive Advantage?

If I ask you to list elements of your organization that make it competitive you would probably list your product, your sales team, your education, your leadership strategy, maybe your pipeline of products, or your longevity in the marketplace. What about your reputation though? The idea of reputation as a competitive advantage is a fairly new market consideration that has been born in the times of market frustration with governmental and corporate mistrust. We have discussed here previously that marketers are waking up to the awareness that trust is a perishable asset. Distrust of corporations is at an all time high, and that is not good news. “Trust is what drives profit margin and share price,” says Larry Light, consultant veteran with McDonald’s. It is what consumers are looking for, and share with each other.

Typically companies would be categorized into one of several types such as banking, pharmaceuticals, retail, fast food or medical. The goal is to carve yourself out from the category in which you find yourself. It is important to not be one of the masses as a large, faceless entity, but rather to be a distinct company with your own creative presence, personality and REPUTATION. The primary way to keep your organization from moving toward being perceived as a commodity where your market is based only on price is to succeed in building a positive reputation. A positive reputation will allow you to sustain premium pricing. A strong value proposition that includes a good reputation for quality and innovation will allow a company to charge and price goods accordingly.

How do you do this? Transparency in executive pay as well as company performance and responsibility is a good beginning. A strategic effort toward creating a more socially responsible face is key as well. Customers are watching and they are looking for a more altruistic and ethical corporate face. In fact, there is an evolving reputation-monitoring science. Companies appraise a reputation not only on specific values such as trust, esteem, admiration and good feeling but also how the company engages its stakeholders. Yes the products and services are key, but they are evaluated not just in quality but also on innovation, workplace governance, sense of citizenship, and leadership.

. According to BusinessWeek (July 2007), “Sure it looks great to tell the world about your innovative culture or that you are the greenest company, but does this really move the needle with your target customers and investors?” How does reputation effect the bottom-line? While this is early science, a few general connections have been found. The Reputation Institute (Singapore, December 2004) has found that a 5% positive change in reputation translates into a 3-5% change in market capitalization. Indeed, according to the Edelman Trust Barometer in 2006 quality, customer service and strong financial performance drove trust. After the financial meltdown that we have been through it is little surprise that financial performance dropped to number ten on the trust list. The top drivers for corporate trust in 2010 are transparency, honest practices, and high quality products.

Whether you are an AIG or a Ford, a local grocery store, or a neighborhood salon, take a look at the loyalty factor of your employees. Employee loyalty is the only way to insure the health of your reputation. We can not assume that employees are grateful for dodging the last downsizing bullet. With corporate loyalty down, it is not surprising that customer trust is down too. Sylvia Ann Hewlett writes in the Harvard Business Online to “Go Pro Bono to Rescue Morale.” Corporate involvement in philanthropy can help polish your brand and hold on to top talent. As we have written here previously in the Top Ten Ways to have Great Customer Service, you need to partner with your customer in something bigger than just your sales model. Pick a project with your employees and customers in a philanthropic endeavor as a tool to recreate that positive energy that may be dwindling. There are many advocacy groups with direct impact on your bottom-line. Now is the time to roll up your shirt sleeves, jump in with your team and customers and help out.