Why refrigeration is key to successful management

We need more engineers.

Not just in IT, bridge design, and electronics. We need them everywhere decisions are being made.

I’m not limiting engineers to those who know the niceties of load and stress computations, CPU design, gear ratios and such. No, to me, an engineer is anyone who understands you can’t cool down the kitchen by leaving the refrigerator door open.

Many business executives aren’t engineers, but they should be. Here’s what I mean:

• Cooling off the kitchen is a metaphor for across-the-board cost-cutting.
• The hot air blowing out of the back of the refrigerator is parallel to the impact of the all-too-common across-the-board cost-cutting that impairs the business more than it saves anything.

Any engineer knows all refrigerators do is pump heat out of an enclosed space and into a larger space. Leave the door open and the larger space and enclosed space become one and the same: The cooled air just mixes with the heat being pumped into the same space – even with perfect efficiency the net effect is zilch.

This describes most cost-cutting exercises pretty well, and especially cuts to the IT budget, because when costs are already too high, less automation probably won’t help. More might not help either, depending on what exactly is causing costs to be too high. But unless what’s being cut out of the IT budget are stupid ideas that shouldn’t have been approved in the first place, forcing employees to operate either manually or with obsolete technology just isn’t going to increase efficiency.

Which gets to the heart of why we need more engineers: Engineers generally think in terms of fixing problems rather than symptoms. So should business decision-makers.

So if a business is in trouble … if costs are too high … decision-makers need to first ask themselves some basic questions, like, are costs really too high? Or is revenue too low? Or is risk what’s too high, it isn’t being managed well, and as a result expensive problems that could have been prevented haven’t been?

Too many business executives act as if “our costs aren’t in line with our revenues” is a proper root cause analysis when profits are unsatisfactory. An engineer would insist on knowing how the business is supposed to work; then on identifying which of its moving parts aren’t moving as they should; and then on fixing the parts that are broken.

So if the problem is actually revenue, an engineer would determine whether the root cause is uncompetitive products, customer disservice, unappealing marketing and advertising, or a sales force that isn’t very good at selling. And fix it.

If the problem really is excessive cost, an engineer would figure out whether the root cause is cumbersome and inefficient processes, obsolete tools and technology that force employees into cumbersome and inefficient processes, poorly trained and unmotivated employees, or something else. And then the engineer would fix the actual problem.

Understand, this might sound simple. Conceptually, it is simple.

But it’s nothing like simple, because underneath it is the need for a clear understanding of how the business works … of the buttons and levers company management can push and pull that lead customers to buy products and services in acceptable volumes and margins.

This isn’t always complicated, but it can be complicated enough to tempt decision-makers to cut out a step or two. For example, one day in the distant past, the executives leading a not-entirely mythical automobile manufacturer discovered they could bump up the company’s profits by financing the purchase of their cars instead of leaving that business to the local banks.

Then they discovered they could sell more cars by discounting them, making up the slack by making more loans. And then they “discovered” the company was really in the financing business, and cars became just a means to an end.

Which led to its executives no longer caring whether their cars were desirable products. Instead it designed and built cars some people were willing to buy if they were cheap enough.

Which led to round after round of pointless cost-cutting, because cost wasn’t the company’s problem.

What was? It had forgotten how its business worked: With no cars to sell that people wanted to buy it ground to a halt, even though its profits no longer came from car sales.

The company’s execs outsmarted themselves.

It’s why we need engineers.

So maybe you should add an interview question for managerial candidates: “If you open the refrigerator door, how much will it cool off your kitchen?”