I had the chance this week to listen to Bob Lutz, former Chairman of GM, at an Endeca-sponsored manufacturing-focused event in Chicago. Following an insightful and often humorous diatribe about the past and present of the automobile industry -- and lessons learned from his time at GM and before -- I asked Mr. Lutz about his views on what it will take to get manufacturing back on track in the US. His response was insightful, but I'll also focus the rest of this column on his view of management education and getting the right minds into the business of actually producing things (versus selling or trading exotic financial derivatives and other acts that contribute nothing to the industrial base).
According to Mr. Lutz, business training grounds like Harvard Business School are failing us. They churn out people who can read cases, work in teams and micromanage cost (not to mention financial transactions), but they're failing to instill a passion for products, not to mention teaching what it actually takes to engineer and build them. Now, this is not entirely a fair criticism. Many people go to business school so they can go into finance or strategic consulting rather than with a plan to head into manufacturing. But perhaps that's partly the problem.
Lutz suggests that because we've created such an anti-manufacturing climate in this country based on regulatory controls that are worse than Europe (e.g., US car companies need to import the highest quality alloy wheels from China and Europe because we're not allowed to spray a certain coating on them here because of EPA rules) as well as the unfair currency advantage China and other Asian countries have had over us in the past decades, that we've discouraged an environment that brings the best minds into careers based on actually making products (rather than financing them or selling consulting, marketing or sales ad-ons around them). He also blames the unions (which I personally don't think is the most important culprit) for historically high production costs and a broader slowdown of the sector.
To capture many of the elements of what Lutz suggests, the key for a manufacturing rebound -- not to mention getting the right minds into manufacturing in the first place -- will be reducing legislation (e.g., regulatory) that puts the US at a production disadvantage, driving to a currency policy that puts us on a level playing field with China and other countries and nurturing the creativity and innovation that led the US to become an industrial superpower before our slide away from production. Strong engineering and R&D talent, not to mention business passion, will be a must.
How do we keep score? I'd proffer in a decade, that one measure will be that if the graduating classes from the top business schools are more interested in heading into roles where they work for companies that actually produce things, then we'll be on the right track.