disturbed. "You worked so hard and now you want to give the
credit to somebody else?"
"Julie, I'm serious. Jonah is the one who gave me all the
answers, I was just the instrument. As much as I would like to
think otherwise, that's the plain, bare truth."
"No, it's far from the truth."
I turn nervously in my chair, "But . . ."
"Alex, stop this nonsense," Julie says in a firm voice. "Artifi-cial modesty doesn't suit you." She raises her hand to prevent me
from answering and firmly continues, "Nobody handed you solu-
tions on a silver platter. Tell me, Mr. Rogo, how many nights did
you sweat until you succeeded in finding the answers?"
"Quite a few," I admit with a smile.
"You see!" Julie tries to close the subject.
"No, I don't see," I laugh. "I'm very well aware that Jonah didn't simply give me the answers. As a matter of fact, during
those long nights, (and days), considerable time was spent cursing
him for just that. But, come on, Julie, the fact that he elected to
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present them in the form of very pointed questions doesn't
change a thing."
Rather than continuing, Julie calls the waiter and starts to
order. She's right. This line of discussion will just ruin a pleasant
evening.
It's not until I'm busy with my delicious veal parmesan that
my thoughts start to crystallize. What was the nature of the an-
swers, the solutions, that Jonah caused us to develop? They all
had one thing in common. They all made common sense, and at
the same time, they flew directly in the face of everything I'd ever
learned. Would we have had the courage to try to implement
them if it weren't for the fact that we'd had to sweat to construct
them? Most probably not. If it weren't for the conviction that we
gained in the struggle—for the ownership that we developed in
the process—I don't think we'd actually have had the guts to put
our solutions into practice.
Still deep in thought, I raise my eyes from the plate and
examine Julie's face. It's as if she was waiting for me all this time.
"How come you didn't think of it yourselves?" I hear her
asking. "To me your answers look like plain, common sense. Why
couldn't you do it without Jonah's guiding questions?"
"Good question, very good question. Frankly, I doubt I
know the answer."
"Alex, don't tell me you haven't thought about it."
"Yes, I have," I admit. "All of us, back in the plant, had the same question. The solutions look trivial, but the fact is that for
years we've done the exact opposite. Moreover, the other plants
still insist on sticking to the old, devastating ways. Probably Mark
Twain was right saying that 'common sense is not common at all'
or something similar."
"That's not an answer to my question." She doesn't let me off
the hook.
"Just bear with me," I plead. "I really don't know. I'm not sure that I even know the meaning of'common sense'. What do
you think we mean when we refer to something as 'common
sense'?"
"It's unfair to answer a question with a question." She re-
fuses my apparent attempt to turn the table.
"Why not?" I try again.
She doesn't allow her lips to move.
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"Okay," I give up. "The best that I have come up with so far is to recognize that we refer to something as common sense only
if it is in line with our own intuition."
She nods her head in approval.
"Which only helps to intensify your question," I continue. "It only means that when we recognize something as common sense,
it must be that, at least intuitively, we knew it all along. Why is
there so often the need for an external trigger to help us realize
something that we already knew intuitively?"
"That was my question!"
"Yes, darling, I know. Probably these intuitive conclusions
are masked by something else, something that's not common
sense."
"What could that be?"
"Probably common practice."
"Makes sense," she smiles and turns to finish her dinner.
"I must admit," I say after a while, "that Jonah's way of leading to the answers through asking questions, his 'Socratic ap-
proach,' is very effective at peeling away the layers—the thick
layers—of common practice. I tried to explain the answers to
others, who needed them as badly as we did, but got nowhere. As
a matter of fact, if it hadn't been for Ethan Frost's appreciation
of our improvements to the bottom line, my approach might have
led to some very undesirable results.
"You know," I continue, "it's amazing how deeply ingrained
those things are that we've been told and practiced, but never
spent the time to think about on our own. 'Don't give the an-
swers, just ask the questions!' I'll have to practice that."
Julie doesn't look too enthused.
"What's the matter?" I ask.
"Nothing," she says.
' 'Don't give the answers,' definitely makes sense," I try to
convince her. "Spelling out the answers when you are trying to
convince someone who blindly follows the common practice is
totally ineffective. Actually there are only two possibilities, either
you are not understood, or you are understood."
"You don't say?"
"In the first case, no real harm has been done, people are
just going to ignore you. The second case might be much worse,
people might understand you. They'll take your message as
something worse than criticism."
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"What is worse than criticism?" she asks innocently .
"Constructive criticism." I smile gloomily, remembering the
harsh responses of Hilton Smyth and that Cravitz fellow. "You
have a point, but it's below the belt. People will never forgive you
for that."
"Alex, you don't have to convince me that when I want to
persuade somebody—especially my husband—that giving an-
swers is not the way. I'm simply not convinced that only asking
questions is much better."
I think about it. She is right. Whenever I tried just to ask
questions it was interpreted as patronizing, or even worse, that I
was simply negative.
"It looks like one should think twice before charging the tall
windmills of common practice." I conclude gloomily.
Julie busies herself with the delicious cheesecake our waiter
is placing in front of us. I do the same.
When the coffee's served I gather enough stamina to con-
tinue the conversation. "Julie, is it really so bad? I don't recall
giving you a lot of grief."
"Are you kidding? Not only are you stubborn like a Southern
mule, you had to go and pass on these genes to your kids. I bet
you gave Jonah a hard time as well."
I think about
it for a short while. "No Julie, with Jonah
somehow it was different. You see, whenever I'm talking with
Jonah, I have the distinct feeling that not only is he ready with his
questions, he's also ready with my questions. It must be that the
Socratic method is much more than just asking questions. One
thing I can tell you, improvising with this method is hazardous,
believe me, I've tried. It's like throwing a sharpened boomer-
ang."
Then it dawns on me. Here's the answer. This is the tech-
nique that I should ask Jonah to teach me: how to persuade other
people, how to peel away the layers of common practice, how to
overcome the resistance to change.
I tell Julie about my last telephone conversation with Jonah.
"That's very interesting," she says at last. "You definitely need to learn how to manage your life better. But sweetheart,"
she laughs, "be careful, remember what happened to Socrates.
He was forced to drink poison."
"I don't intend to give Jonah any poison," I say, still very
excited. "Julie, let me tell you, whenever Jonah and I talked
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about my troubles at the plant, I always felt he anticipated my
response. It actually bothered me for quite some time."
"Why?"
"When did he have the time to learn so much? I'm not talk-
ing about theories, I'm talking about his intimate understanding
of how the wheels are really turning in a plant. As far as I know,
he never worked one day of his life in industry. He's a physicist. I
can't believe that a scientist, sitting in his ivory tower, can know so
much about the detailed realities of the shop floor. Something
doesn't match.
"Alex, if that's the case, it seems that you should ask Jonah to
teach you something more than just the Socratic method."
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33
Lou is my first and most important target. If I'm unable to
persuade him to join me, I'm basically lost. It's not going to be
easy. He's very close to retirement and I know to what extent he's
involved in his community. I take a deep breath and walk into his
office. "Hey Lou, is it a good time?"
"Good as any. How can I help you?"
Perfect opening, but somehow I don't have the guts to go
straight to the point. "I was just wondering about your forecast
for the next two months," I say. "Do you see any problem in us
reaching and maintaining the fifteen percent net profit? Not that
it's crucial any more," I hurriedly add, "but I'd hate giving
Hilton Smyth even the slightest opening to hiss, 'I told you so.' '
"You can sleep tight. According to my calculations we'll easily
cross the twenty percent net profit for the next two months."
"What!" I can hardly believe my ears. "Lou, what's the mat-
ter with you? Since when do you believe marketing's chronically
optimistic outlook?"
"Alex, a lot has happened to me recently, but believing mar-
keting is not one of them. Actually, my forecast is based on a
slight decline in incoming orders."
"So how did you pull this rabbit out of your hat?"
"Have a seat, it'll take me some time to explain. I have some-
thing important to tell you," he says.
It's clear that I'm going to hear about another devious ac-
counting trick. "All right, let's hear it."
I make myself comfortable while Lou shuffles papers. After
two minutes I lose my patience, "Well, Lou?"
"Alex, we blamed the distorted way in which product costs
are calculated for giving the appearance that our net profit was
only twelve point eight percent, rather than over seventeen per-
cent as we believed was the case. I know that you were furious
about it, but what I've found out is that there's an even bigger
accounting distortion. It's tied to the way that we evaluate inven-
tory, but it's hard for me to explain. Maybe I'll try to do it
through the balance sheet."
He pauses again. This time I wait patiently.
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"Maybe I should start with a question," he says . "Do you agree that inventory is a liability?"
"Of course, everybody knows that . And even if we didn't
know it, the last few months have shown to what extent inventory
is a liability. Do you think we could have pulled off this fast re-
sponse to orders if the floor had been as jammed up as before?
And haven't you noticed that quality has improved, and overtime
has gone down—not to mention that we hardly ever have to ex-
pedite today!"
"Yeah," he says, still looking at his papers. "Inventory is definitely a liability, but under what heading are we forced to report
it on the balance sheet?"
"Holy cow, Lou!" I jump to my feet. "I knew that the finan-
cial measurements were remote from reality, but to that extent—
to report liabilities under the heading of assets? I never realized
the full implications . . . Tell me, what are the bottom line
ramifications?"
"Bigger than you think, Alex. I've checked and rechecked it,
but the numbers do talk. You see, we're evaluating inventory ac-
cording to the cost to produce the goods. These costs include not
only the money we pay for the raw materials, but also the value
added in production.
"You know what we have done in the last few months. Dono-
van has worked only on things that we have orders for. Stacey has
released material accordingly. We've drained about fifty percent
of the work in process from the plant, and about twenty-five per-
cent from finished goods. We've saved a lot by not purchasing
new materials to replace this excess inventory, and the cash fig-
ures show it clearly. But on our books, the assets represented by
inventory went down, since they were only partially compensated
for by the cash we didn't have to pay out. In this period, when we
were reducing inventory, all the difference between the product
cost and the material cost of the reduced inventory showed up as
a net loss."
I swallow hard. "Lou, you're telling me that we were penal-
ized for doing the right thing? That reducing the excess inven-
tory was interpreted by our books as a loss?"
"Yes," he replies, still looking at his papers.
"Well tell me, what was the impact—in numbers?"
"Our actual net profit was well over twenty percent in each
of the last three months," he says flatly.
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I stare at him. I can't believe my ears.
"But look at the good side," he says sheepishly, "now that the inventory has stabilized at a new, low level, this effect won't disturb us any longer."
"Thank you very much," I say sarcastically and turn to leave.
Wh
en I reach the door I turn around and ask him, "When
did you discover this phenomena? When did you find out that we
were turning much more profit than the targeted fifteen per-
cent?"
"A week ago."
"So why didn't you tell me? I could have used these facts
very effectively in the plant review."
"No Alex, you couldn't have used them at all, it just would
have confused your story. You see, everyone evaluates inventory
this way, it's even required by the tax authorities. You didn't
stand a chance. But I did discuss it at length with Ethan Frost;
he understood it perfectly."
"So that's what happened, you fox. Now I understand why
Ethan became so supportive," I say, sitting back down.
When we've finished grinning at each other, Lou says in a
quiet voice, "Alex, I have another issue."
"Another bomb?"
"You might call it that, but it's sort of a personal matter.
Ethan told me that he's going with Bill Peach to the group. I
know that you will need a good divisional controller, someone
who has experience in the more diverse subjects that are dealt
with at the division level. I'm just one year from retirement; ev-
erything that I know is old-fashioned. So ..."
Here it comes, I say to myself. I must stop him before he
states that he doesn't want to come with me. Once he says it, it'll
be much harder to change his mind.
"Lou, wait," I interrupt him. "Look at the work that we've
done in the last few months. Don't you think . . ."
"That's exactly what I was about to bring up," he interrupts
me in turn. "Look at it from my point of view. All my life I've
gathered numbers and compiled reports. I've seen myself as
somebody who has to supply the data, as an impartial, objective
observer. But the last few months have shown me to what extent
I was wrong. I wasn't an objective observer; I was following, al-
most blindly, some erroneous procedures without understanding
the far-reaching, devastating ramifications.
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"I've given it a lot of thought lately. We need financial mea-
surements for sure—but we don't need them for their own sake.
We need them for two different reasons. One is control; knowing
to what extent a company is achieving its goal of making money.
The other reason is probably even more important; measure-
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