I can’t stop thinking about Mag Instrument and American Apparel, two American companies that are successful players in markets – portable lighting and cut-and-sew apparel – that are dominated by companies that manufacture in low-wage countries.
With 800 and 3,000 employees respectively, these are not tiny companies. But their leaders exhibit little interest in the practices that we have come to associate with growth, like delegation and “empowerment” at low levels of the organization. In fact, they fall into the class of leaders known as benevolent despots. Tony Maglica (Mag Instruments) and Dov Charney (American Apparel) are all-powerful kings… but by and large they’re good to their subjects. Both have made sure that their factories are cool in the hot Southern California summers. Both subsidize the company cafeteria. And so on. But, unlike the leaders of Tom Peters’ “excellent companies,” they certainly don’t go out of their way to create space for small teams to work on creative ideas that will eventually bubble up to the top.
The question in my mind has been, How can such large operations work smoothly when the significant decisions and innovations depend on a single individual? One of the answers is that both men have strong Number Two’s . Another is that their companies are not chaotic systems. There are indeed procedures in place for handling the day-to-day business processes.
A consultant who had worked in enterprise-scale companies had a third idea. These companies aren’t really big enough to need the practices that make giant companies excellent. They can find other, more idiosyncratic paths to excellence. It’s part of the luxury (and flexibility) of being small.
Another luxury of being small is the ability to keep every aspect of the business in America. Mag Instruments and American Apparel have proved it’s possible. But I’m beginning to realize that when a company gets to a certain size, 100 percent Made-in-America may no longer be possible, just as fully autocratic management is no longer possible.
The reason is, as I’ve said many times, that capitol flows to the area of maximum return on investment, just as water flows to the lowest point. In a very large corporation that “water” creates so much pressure that management has no choice. If it makes sense to manufacture in China, Mexico, Hong Kong or wherever, the decision will be made to do so.
The corollary to that thought is that if Senators McCain and Obama are serious about finding ways to stop the flow of jobs out of the U.S., they have to find ways to help small business, not all business.