Not long ago, I attended a meeting of the local APICS chapter at which managers from a manufacturer of dental equipment described the process they used to obtain outstanding cost savings by  implementing  “lean manufacturing” techniques.

Shortly thereafter, during a visit to my dentist–who had recently purchased new equipment from that company–I discovered that there was a major flaw in their new dental chair– absolutely no ability to adjust part of the chair for people of varying heights–a rather major oversight, the hygienist observed.

So….implementing “lean” techniques may have reduced production cost, but it failed to meet the needs of the customer.

Clearly, my dentist purchased the piece of equipment anyway, but, surely, the next time, he will be more careful to check to see that basic necessary features are in place.  In the meantime, he may tell his colleagues who may be contemplating equipment purchases about the design defect…

So..”lean” is not a panacea.  There is still no substitute for common sense.

Recently, I visited a potential client.  The company was at Death’s Door.  Their bank had not required any financial statements from them since September 30, 2008.  Their bank had not suggested they get any outside assistance–even now.

Over and over again, I am seeing companies whose lenders have waited entirely too long to get timely financial statements from their customers and to take action to help the companies.  Given the economy today, 3-6 months is entirely too long to wait to see how a company is doing.

In the case of the company above, I declined the engagement because these people were going to commit bank fraud because they saw no other way out.

There are some companies that can be saved–even with declining sales–but they need help at the earliest possible moment.

Thursday and Friday, I attended the Women’s Private Equity Summit (300 women and one very brave man).  The conference covered the same kinds of topics that any current private equity summit would cover.  Panelists talked about the impacts of uncertainty and where opportunities lie, even in the current environment.

Two comments struck me as being noteworthy:

One panel moderator asked, “How important is diversity in private equity recruiting?”  Although most people immediately thought about race, gender, and  “ethnic” diversity,  one very insightful audience member pointed out that for the same reasons that  private equity firms reduce their financial risk by diversifying their financial portfolios,  such firms (or for that matter, businesses, in general) could further reduce their risk by ensuring that their teams include a diversity of skill sets and perspectives–regardless of race, gender, or ethnicity–so that multiple views would be more likely to be considered.

On a slightly different topic, another observer pointed out that women have been conspicuously absent in the leadership of the well-known failed and failing business enterprises that have led to the current economic crisis.

A friend sent me an interesting—if depressing—presentation  about the  economy (past, present, and future) that was made by Alchemy Partners to a turnaround group in England.  To view the presentation, please click here.

It seems like every minute a new book with the “latest” business “secrets” hits the market.  In reality, however, running a business profitably and well boils down to taking care of the basics; i.e., having a well-conceived plan, having a capable leader, and implementing a carefully crafted management control system.  It is astounding to me that so many companies lack these basics—not just family-owned, but also publicly and private equity-owned (You know some of their names.)

Much of the information in this blog may sometimes sound like nothing more than common sense, but common sense and an attention to the basics are too often missing-in-action.

An example from my personal experience: In 2007, a private equity firm interviewed me for a turnaround project.  The company had been losing money for three years; there was no business plan; the president was clearly not qualified; and there was no effective management control system in place.  After I mentioned that the company needed these basics, the managing director said, “We know that.” (As in, “do you think we are idiots?”)  So…if they knew all of that, then where had they been, and what had they been doing for the past three years?  And these were people with MBA’s from prestigious institutions, who, presumably, have a fiduciary duty to their investors and definitely know better.

Find a way to step back from your business, to take a cold, hard look at where you are and what your real prospects are…Are you making money or losing money?