Corporate culture reviews

My Emerson culture review brought some suggestions of bias. Some suggested that I should have discussed the negative personnel impact of Emerson divestitures, like Intellution to GE-Fanuc. Yes, perhaps I should have done that, to keep the perception of balanced reporting.

The problem with reviews of large companies is that it is difficult to connect with people at the upper levels to discuss corporate culture. The "revolving door" often makes culture a moot point - ethos is something that takes time to penetrate absorb. I usually get shunted down to some low-level "communications" flunkies who flood me with press-releases and tell me nothing worth anything.

But, I'm happy to report that several top-level managers have indeed shown interest and are working with me on their "culture review". They recognize that this is indeed a fruitful exercise. Writing a summary of your own corporate ethos brings key points into sharp focus - for yourself as a manager, for your people, your company, your customers and the world at large. The world recognizes that good, consistent financial performance come from good people.

So, we have some worthwhile "Culture Reviews" brewing. And, if your big-chiefs haven't contacted me yet, clip out this eNews item and email it to them. As our list of the automation majors fills up, we'll start to ask for the key top-level honchos - by name.

Stay tuned.....

Rockwell Automation doing well under Keith Nosbusch

With the departure of Don Davies, who'd perhaps been there too long, Keith Nosbusch jumped firmly into the saddle as Chairman and CEO. Keith, still a relatively young 53, is a lanky (6-foot-2) electrical engineer and former co-captain of the University of Wisconsin football team. He was in charge of the Controls Division before becoming CEO last year.

Rockwell Automation went through a long string of debilitating reductions and re-structuring over the past couple of years, and now seems to have emerged from that turmoil. Now, under Keith Nosbusch, the company seems to be doing well. With their stock at $60, this gives the company a market-cap of $11 billion, which makes them almost impossible to acquire - unless someone wants them really badly.

The possible high-bidding acquirers could only be Siemens or Schneider, who'd both be stopped by anti-trust. In my opinion, Emerson is not interested, and GE is unlikely. And I'm not sure what happened when Sandy Cutler was fishing around for Eaton about a year ago.

I compliment CEO Keith Nosbusch and Rockwell Automation on the progress. I admit that I was wrong about the company being acquired.

Schneider acquires Canadian Power Measurement Ltd.

PML has 342 employees and had sales of $57 million in 2004. The company offers metering devices, software and services to optimize energy needs. Their customers are utilities, large electricity consumers, and resellers such as ABB and Siemens. Operations are worldwide, but most offices are located in the US, and 58% of revenues come from North America.

PML has achieved strong, sustained revenue growth over the past 10 years, with consistently high operating margins and strong cash conversion. Subject to regulatory approvals, Schneider Electric will acquire 100% of PML shares and the transaction should be completed in 2Q 2005.

PML was owned by a consortium led by GFI Energy Ventures, including Oaktree Capital Management which owned 49% and RIT Capital Partners 30%. So, clearly the company was sold to the highest bidder. We have heard that Eaton and others were potential suitors, but were aced by Schneider - the final price was reported to be around $200M, for a company with just $57M in sales - a whopping 3X revenues price! Only GE and Siemens have paid those kinds of multiples - now Schneider is in the ring!

Schneider faces a challenge integrating PML into their product basket, and doesn't really have a solution for the short term.

Must-read book: The Bottomless Well - Slate summary

That powerhouse webzine, "The Slate", had this follow-on posting on the same subject by Huber & Mills (Feb. 1, 2005). Indeed, it's an excellent synopsis of large sections of the book. I worked on this summary to help stimulate further discussion on this important topic. I hope it gives you more powerful reasons to buy a copy of the book and read it.

Oil is not the dominant fuel of our modern economy; it supplies about 40% of the raw energy we use, and is used mainly automobiles and transportation. Coal, uranium, gas, and hydroelectric power supply the other 60%. And by far the most important use of this not-oil fuel is to produce electricity to power almost everything else.

Electricity - not oil - defines the fast-expanding center of the energy economy today. About 60% percent of US GDP now comes from industries and services that run on electricity. All the fastest growth sectors of the US economy, like info-tech and telecom, depend totally on electricity. More than 85% of the growth in US energy demand over the past 25 years has been met by electricity. And electrification is accelerating. Almost everywhere, electrically powered equipment is steadily displacing equipment powered by other forms of energy because electrical equipment is far more precise and ultimately cheaper.

Even more significantly, the automobile is now being transformed into a sort of giant electrical appliance. Hybrid cars propelled by onboard, gasoline-fired electrical generators are coming. Not just for their fuel efficiency, but because the new electrical drive trains offer much better performance, lower cost, and less weight. Five to 10 years from now, lots of people will be driving a giant electrical appliance - the hybrid electric car.

The electrical car can't run more than a few miles with its onboard batteries - that's why it will still have a gasoline engine. But the battery pack will provide bursts of power for acceleration. The vast majority of trips are under 5 miles. Cars spend most of their day parked. And the grid - fired by efficient power plants burning much cheaper fuels - can recharge a hybrid car's battery for far less than the cost of power generated by the car's gasoline-fired generator. As more people begin to use electric cars, people will begin topping off their batteries from the grid. Within a decade, we will be shifting more and more of a typical driver's most fuel-hungry miles from the gas tank to the grid, very little of which uses oil.

The upshot: We are far less sensitive to the cost of raw fuel than we used to be. Fuel costs represent less than 20% of the typical cost of driving. And we hardly think about raw-fuel costs with virtually all the tools and equipment, because it is insignificant when related to the tasks accomplished.

We are witnessing the economic twilight of fuel. America burns enough fuel to release 100 quadrillion BTUs of raw thermal energy every year. That's a gargantuan amount, and it keeps rising geometrically. Yet year by year, the cost of all those quads grows less and less important in our modern economy. The quality and cost of the engineering hardware matters far more.

Indeed, perhaps because all our worrying about energy, we have proved fantastically clever at developing sources. For two centuries of industrial history the technologies we have used to find, extract, or capture energy from our environment have certainly improved much faster than the horizon of supply has receded.

Why are we losing manufacturing jobs?

Farming used to employ some 35% in the US at the start of the past century, and now employs less than 2%. And where did those farmers go? To other jobs, in other "fields". There was no illusion of outsourcing to confuse the situation. But, still people keep harping on the loss of manufacturing jobs, protecting American jobs, and cheap offshore labor - as if complaints will cause a shift of priorities.

Here is an extract from an excellent paper written by the Federal Reserve Bank of Cleveland. It's available on the web as a pdf file - download it, and read it - at least a couple of times. Some good numbers and graphs make key points worth remembering.

Rapid technological progress in manufacturing has led to higher wages and rising standards of living for over two centuries. But in the last 50 years, it has also reduced the need for manufacturing labor. The primary source of American prosperity is no longer manufacturing. The US economy is increasingly service-oriented. Innovations in high-tech sectors and other professional services are the most important sources of future prosperity.

The US has the highest long-term underlying rate of economic growth in the world. A conservative estimate is that the standard of living of the average American doubles every 30 years. But an economy undergoing rapid technological progress is one in which some sectors are booming and others are declining. For example, water transport was a primary source of prosperity for Ohio for several generations after the opening of the Erie Canal. The advent of a national network of railroads at the end of the nineteenth century signaled the end of a way of life for many whose livelihood depended upon inland water transportation. But there can be no doubt that knitting together a national market - first by rail and then by road - gave a tremendous boost to the economic growth that the US enjoyed in the last century.

We are now at a similar crossroads in economic history. Manufacturing - the transformation of tangible substances into more refined commodities - is no longer a primary source of prosperity. The percentage of people employed in manufacturing in the United States has declined steadily since the 1960s, from 25% then to less than 12.5% today. And the US is not the only country to have experienced a relative decline in manufacturing employment; the same trend has been part of the economic history of almost every advanced economy in the last two generations.

The declining need for workers in a sector that has traditionally provided good jobs has naturally generated concern. Blame for the decline is most often placed on "globalization" in general, or the outsourcing of jobs to other countries in particular. Some see the shifting of jobs from one state to another and conclude that variation in economic policies (for example, taxes) is the problem. Deal with these issues, people imagine, and we will be able to preserve manufacturing jobs.

But factors such as globalization and state policies account for only the tiniest portion of the change. A clue to the true source of the shift in manufacturing employment is the fact that all developed countries are witnessing the same trend. What that trend tells us is that the primary cause of the decline in manufacturing employment in advanced economies is the inexorable march of technological progress.

eFeedback

1. First and foremost thing we can do to compete is recognizing we (all Americans) are in the fight; a fight for our very livelihood and that of many generations to come.
2. China and for that matter India, is not the enemy. I think it was Pogo who said, "We have met the enemy ... and it is us!".
3. "Made in American" means someone is employed in the USA, who is also purchasing goods and services that are "Made in America". What goes around, comes around.
4. When we off-shore technology and manufacturing, we are also giving away our intellectual property -- our know how, for short-term profits under the guise of "competitiveness". The apple on the tree in the Garden of Eden looks so delicious, what could one little bite hurt?
5. Innovate. With a burning passion. Remember the national sentiment when the Russians launch Sputnik? The US was stunned; we were caught flat-footed on the Race to Space. What did we do? -- We mobilized resources like no time that I can remember and with a burning passion and relentless discipline, overtook the Russian space program. The results of which gave us the Gemini, Mercury, Apollo, and Space shuttle programs. Think of the technologies and knowledge and industries that grew from these. On a sidebar, I had a college professor who designed the fuel cells that went to the moon. That was over 30 years ago and yet fuel cell technology still hasn't noticeably influenced my life.
6. Lastly, as least for this soap box moment, we need to pick our battles, like the Race to Space, and not relent - ever. We pick a few national interest endeavors/technologies with wide ranging implications and dominate the supply chain from back to front.

"I have long advocated that we science and engineering professionals are dangerously absent from all levels of policy and decision and have allowed lawyers and professional politicos to take over everything by default. Among other ills, this has become a direct threat to our jobs and our professions.

"I'm about to take my own advice and enter local politics by going for a seat on our school board. This follows a homeowners association meeting last night in which I pointed out that getting into the system is the only way to keep it under control, specifically to control the tax rates and what is done with the money. I received long applause and many people approached me and said I should run.

"I'm now considering it seriously for the first time. It means among other things, holding up and defending my views which are in the public record, be it local press or your e-forum, where you have kindly hosted me many times.

"If I do get into the School board I'll certainly resign from the local precinct which came with the job of election judge which I valued - my honor has been the guarantee of spotless elections in my precinct since 1998."

"The one really big problem with advances in solar power is still that it is only available when the sun is shining. So home units for solar power are still going to have limited popularity even with a big breakthrough in Photo-Voltaic generation, until there is also a big breakthrough in battery storage. Filling your basement with lead-acid storage cells kind of defeats the whole "clean energy" thing. The batteries and the solar panels do not have unlimited life.

"There is a lot more challenge here than just the generation part of the equation, before we see any real penetration of solar power for home use."