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Sunday, December 02, 2007

Let us now praise infamous men.

Lee Iacocca showed American businessmen what had to be done.

No he is not infamous, but I am not praising him. I am praising Pillip Caldwell, the guy who replace Iacocca as President of Ford. Later he bacame the first non Ford to be CEO of Ford. He is not widely infamous I admit, but he was hated by very many people in Detroit (edited to delete insulting comment referring to the recently deceased).

Basically his main business decision was to lay off 30,000 employees of Ford headquarters in around 1979. The logic was that they weren't doing anything useful. To increase shareholder value, Caldwell disrupted the lives of almost 30,000 families (almost becasue in some both mom and dad lost jobs). He was universally hated (of course) by his remaining fellow employees. He made a lot of money from his ruthlessness (not as much as a 21st century CEO but lots). Then he retired.

Some time later, I read about the wonders worked by the wonderful Donald Peterson who replace Caldwell at Ford. Hailed a "Most Valuable Person" of 1988 by USA Today and "CEO of the Year" by Chief Executive magazine in 1989, Petersen transformed Ford with his inclusive, team-oriented management style.

My sense is that Peterson got credit for the reduction in cost achieved by the ruthless Caldwell. Peterson was praised because he was successful without being evil. I think he benefited from the cruel deeds of Caldwell.

Peterson's Wikipedia entry explains his genius

"Mr. Petersen was famously known for instructing the Ford design staff to design vehicles they would be proud to buy and park in their own driveways. This change in philosophy came about after he was answered in the negative as he inquired of a Ford designer whether he was proud of the design he was working on. This watershed event culminated in the groundbreaking and wildly successful design of the Ford Taurus and Mercury Sable twins which pulled Ford out of its financial doldrums of the early 1980's and provided the motivation and profit which carried Ford for the next decade."

Caldwell's Wikipedia page explains who was boss at the time

"As Chairman of the Board and CEO Caldwell approved and oversaw the development and launch of the Ford Taurus (and its corporate sister the Mercury Sable) which were introduced to the media days before his retirement, thus allowing him to take public credit for the Taurus program, which became one of the biggest successes in automobile business history."

The public may have given the credit to the genuinely nice Peterson. However, it is clear that US CEOs really thought that the credit was due to downsizing by Caldwell as the decade from 85 on was characterized by ruthless downsizing not "inclusive, team-oriented management style." Of course sociologically inclined economists like Les Thurow, discovered the importance of teams and said they were the secret to the incredible success of Japan Inc at just about exactly the time that Japan Inc tanked and USA Darwinian Dystopia replaced it as the mature economy with a productivity miracle.

Now that the dirty deed is done, I think US business can stop being ruthless for a few decades (until Parkinson's law of bureacracies public and private makes another round of slashing necessary). My former student, Tilman Ehrbeck, the German born Mckinsey partner said that was why he wanted to work in the USA not Germany as he had arrived after downsizing at a time when it was possible to be both an honest consultant and a nice guy (he is very honest and very nice). I call that the Peterson principle of management.

I do really think that Caldwell is a rotten person, and I am glad to say that he is not even properly infamous. When I googled Caldwell AND Ford, I got the Caldwell Ford dealership. I even want to think that downsizing was welfare reducing in expected discounted happiness. But now that the suffering is over, we can ungratefully forget who gave the US its productivity miracle.

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