The discussion of Bain Capital provides an interesting backdrop to the first topic for this course. Bain Capital (2012) began in 1984 as the investment arm of management consulting firm Bain & Company. In 1984, I completed my MBA studies at Rutgers University’s Graduate School of Management and joined a management consulting firm to help that firm, not Bain, transition from their traditional expertise of scientific management and productivity improvement to process and quality improvement based on the principles of Deming, Juran, and numerous disciples. Consulting firms and their clients interested in improving operational and financial performance had one primary tool in their toolkit, productivity improvement leading to staff layoffs of, typically, 20-30%.
It seems easy to complain about companies buying companies or parts of companies and then reducing costs, often through labor reductions, in order to realize a profit on their investments. Investment firms have an obligation to their investors to produce a positive return on their investments. For many of the firms that Bain and others purchased, the alternative was closure; companies like Bain may not have been able to save every job but some organizations were able to survive as the result of significant changes in operations. In some cases, however, the seller to the investment firm made out much better than the investment firm or the purchased company’s employees.
Productivity improvement from the 1950s through at least the middle of the 1980s had scientific management based on the work of Taylor, the Gilbreths, Emerson, and Henry Ford, among others. Work measurement and work management were common. Colleagues of mine from my early years of consulting would tell of consulting firms that would, as crude as it sounds, essentially take a list of people and simply mark every fifth one for termination. The consulting world still includes firms who offer little other than work measurement-based productivity improvement and resulting staff reductions. I knew the techniques, but my clients seemed to only need me to use them to optimize the use of staff without staff reductions.
Scientific management principles applied to manufacturing firms initially, most likely because manufacturing was the basis of the economy in the United States and Western Europe for much of the 1900s. I was director of operations for a productivity consulting firm that worked primarily for government and service organizations. We helped then-growing telecommunications companies determine how best to staff and organize hardware installation teams and customer service organizations. We helped government entities figure out how to handle rapidly-increasing work volumes without expanding staff, since tax revenues were not keeping pace with demand for services.
In the 27 years since I began my consulting career, automation has changed most work processes. The automation of processes relies significantly on the principles and practices of scientific management. Improvement of operational and financial performance, of efficiency and effectiveness and quality, and the reduction of waste in its many forms continue to keep the attention of managers and to be central to the conversation about improving business and government performance. It is easy to forget that scientific management is at the root, even today, of how organizations get better, including enhancing the value of shareholder equity.
Today’s tools often seem more sophisticated than those my colleagues and I had available in the 1980s. However, a goal of investors continues to be a positive return on investment. Managers and executives, among their many and conflicting objectives, have an obligation to shareholders to improve performance and assure investors that investment in certain companies and industries is good and not utter folly.
Bain Capital (2012). About Bain Capital. Retrieved from http://www.baincapital.com/AboutBainCapital/Default.aspx