285 replies to this topic

[gruntguru]

Hence my question of why why do people accept more personal risk than they will accept from organisations like train, plane or Oil/auto companies

For a start - Joe Average doesn't have a correct perception of the risk he is taking by following at 0.5 sec. When he is shown the risk (eg takes a defensive driving course) he will often change his habit. (Consequently becoming one of those unfortunates with a 2 sec gap in front, which is constantly being filled by lane-changeing motorists.)

[McGuire]

My point is that the driver is behaving differently for his personal risk versus what he/she expects of public risk ( tranis/planes/oil drilling etc.)

Of course the cost of BP prevention is less than the damage but the cost to the driver of avoiding his risk is a 10 millimeter movement of his foot off the gas pedal and since that could save his own life the driver is making a much, much poorer cost/benefit decision than a train company or BP.

Hence my question of why why do people accept more personal risk than they will accept from organisations like train, plane or Oil/auto companies

Well, that's not really true, is it? This catastrophe can't be compared to a typical auto accident. That would be nuts and let's not lose our minds here. For starters, 11 people were killed in the rig explosion and fire. Next, something like 7 million barrels of crude oil (current conservative estimate) have been spewed into the Gulf of Mexico.

So needless to say, I can't consider this a useful or relevant line of reasoning. The intent seems to be spread blame around for all the potential ills in the world, instead of focusing on the major disaster already in progress. Again, this rhetorical tactic is well known in the corporate world as the "Otter defense," though I suppose you would call it keeping things in perspective. Ok, let's provide some perspective. If it this catastrophe were a traffic accident, it would be the equivalent of >33,000 tanker trucks overturning. That's one hell of a traffic accident.

[McGuire]

I think this has big implications for future economic progess because if people keep demanding a public safety standard above their personal std. then nobody in business or gov't will ever take a risk and so nothing new can be tried be it offshore drilling or nuclear power or even making things. I well remember an engineer colleague coming back fom China and telling how cheap sheet metal stampings were. he also said how the operators had no machine guards or safety wristcuffs. When he asked the factory boss about this the answer was "we tell them not to put their hands in the press" Such disregard would never be accepted in the USA or UK but he citizens of those countries are more than happy to take the benefit of cheap Chinese products whci are cheap in part because of less safety etc. rules.

You do not benefit economically when you purchase a product manufactured on said presses. There is no economic benefit. Sensible safety practices are not a cost. That's an old lie. They increase productivity and reduce labor, material, and manufacturing costs. This is not a slogan or textbook boilerplate but the literal truth and easy to establish:

We have a press worth maybe $50k to $100k that does some thousands of pieces per year. Minimal safety equipment (fence, cuffs or bipole switch) adds perhaps $50 to the machine cost. So in terms of manufacturing and unit cost, the investment is so small as to defy measurement in the P&L statement. However, the savings is immediate, tangible, and significant. When a worker loses a finger or hand, how many pieces are scrapped? How much does it cost to train a replacement? How many man-hours of productivity are lost while the department comes back up to speed? Clearly, the safety gear has ROI'd in the first accident prevented.

"Safety costs consumers" is one of the old lies of business & industry -- repeated endlessly without a whole lot of thought. We could ask ourselves which shop is more productive and profitable: the clean, brightly lit one, or the dark, dirty one? The dark, dirty shop does not reduce costs. That is only a rationalization on the part of its lazy, intransigent manager.

[Canuck]

Agree with McGuire here. As a former machine shop manager, I can attest to the true cost of poor quality. In our business, the end user is ultimately on a drilling rig be it land or sea based. The cost of our tool failing on the rig is enormous as the tool is downhole and if failed or stuck, the rig - at many thousands of dollars an hour, is no longer doing what it's supposed to do.

Stepping back a few stages: most parts we make require more than one operation (some turning, some milling). Some of them required as many as 6 in-house operations. Each operation requires setup time in addition to run time - setup time is independent of the number of parts being made of course. As standard process, the moment you have a first article from stage 1 complete, it goes to the next stage while the remaining parts are completed at stage 1 and so on. If a machinist drops the ball and makes a non-conforming part at stage 1, we're out the material and the cycle time. If however there's a defect created at stage 5, we have a much more expensive problem. We have 5 stages to set up, 5 cycle times to run and if we're really unlucky, 5 running setups to tear down and rebuild as we interupt the next part
in the line. Failure at late stage can be very expensive. It is in my best interest to ensure our policies and practices are
eliminate opportunities for failure.

[Greg Locock]

"Safety costs consumers" is one of the old lies of business & industry -- repeated endlessly without a whole lot of thought. We could ask ourselves which shop is more productive and profitable: the clean, brightly lit one, or the dark, dirty one? The dark, dirty shop does not reduce costs. That is only a rationalization on the part of its lazy, intransigent manager.

Plus an obstructive workforce, in the past. I am very pleased to work in a manufacturing envirnonment where the injury board used to display 'accidents this year', now we report out on 'near misses' because there are so few real accidents that the stats became meaningless. We are actually encouraged to file near misses. On the downside this attitude means that at the proving ground it means anybody can stop any test for what feels like any reason. Which can be frustrating when you are up against the weather, so we are developing a library of boilerplate test procedures, so we know that if we are testing over 180 and are expecting a tire debead, we have to add extra time to put the roll cage in, and so on.

[Ian G]

Plus an obstructive workforce,

Just as an aside,in the 1970's a section of an Oil Refinery in Sydney had attendance and injury boards put in place and the Union officials in some sort of ego/power play organised it into a display of noughts & crosses,any worker that didn't do whatever was necessary(being away sick or feigning injury) on the particular day was ostracised and "sent to Coventry". Despite pleas from management Union officials refused to co-operate and it ended in the plant being closed,despite being offered alternate employment in the Co. it never eventuated resulting in all concened loosing their jobs.

It was reported in Oz yesterday that so far the cleanup has cost BP US$2B(not counting share price) and they haven't even scratched the surface yet,i can't see how the Co. can survive in the long term in their current state.

Edited by Ian G, 07 July 2010 - 05:27.

[gruntguru]

On the downside this attitude means that at the proving ground it means anybody can stop any test for what feels like any reason.

A sensible version of this policy would have avoided the BP blowout. . . . and Chernobyl and . . . . . .

[Greg Locock]

A sensible version of this policy would have avoided the BP blowout. . . . and Chernobyl and . . . . . .

Good point. I don't think we've heard the last over how a BP engineer could override the safety concerns of the rig operator. Incidentally a Victorian company has just been fined $280 000 because a worker removed a safety guard to clean a printing press while it was in operation and had 3 fingers chopped off. OTOH a company was forced to reemploy a worker they sacked for ignoring safety procedures (although we are not told whether the warnings given followed due process, reading between the lines I suspect they couldn't prove that they had followed procedures). http://www.smartcomp...-prospects.html

Edited by Greg Locock, 07 July 2010 - 05:41.

[johnny yuma]

Would it not be true that most of work safety improvements we take for granted were brought about by previous generations of workers,and their unions if they were allowed to form one,campaigning for said safety. Then once the first adopter of a safety measure survives financially,he's sure gonna make sure his competitors get forced to adopt them too = Enlightened self interest !

Interesting a COMMUNIST country (China) has so little commitment to the workers !! Sure the exchange rate means you get cheap goods,or a cheap holiday or whatever....but safety is just one of a myriad of reasons their stuff is cheap (to us).Regime needs more land to help local overlord expand factory---easy, just resume more peasant lands,etc. Environmental impact...whats that ? Bit like drilling in the Gulf-just do it,it's
easier to ask for forgiveness than permission.

Consider John Fogerty's song;
Don't look now,someone's done your starving
don't look now,someone's done your praying too.
Who'll take the coal from the mines
who'll put his back to the plow
who'll take that seed,and grow it to a tree
Don't look now,it ain't You or Me.

Edited by johnny yuma, 07 July 2010 - 06:21.

[Lee Nicolle]

As a matter of interest all the doom and gloom about this accident and the oil spills.
During both Gulf wars the Gulf has uncontrolled oil spills both from Allied actions and Iraqui vandalism. Also during both World Wars and particularly WW2 the amount of shipping destroyed carrying oil was huge, dozens of tankers were sunk on both sides of the conflict. Plus the fuel oil from the hundreds of ships that were sunk. The majority of this off of Britain and Europe in general Which makes the Exxon Valdez small potatoes in comparison and brings this curent spill into some sort of perspective.
So what has the long term damage caused by all this destruction, and who has footed the bill for all the clean up required.

[meb58]

Nuclear bomb tests and the kind of pollution associated with war that you point out have without doubt contributed to the degredation of our ecosystems. I guess we cut freedom some slack, but not entrepreneurialship...very interesting psychology...

[McGuire]

Good point. I don't think we've heard the last over how a BP engineer could override the safety concerns of the rig operator.

Indeed. Organizationally, this type of contractor/subcontractor arrangement is chaos in a box. It not only allows process to be subverted from Above to Below; it then allows Above to pass the buck to Below for the resulting screwup. Who's in charge here? We are. Who's responsible for any mistakes? The other guys.

In one rumor currently circulating (link below, end of piece) BP has purportedly collected info showing that the subcontractors are to blame for the well blowout, not BP. After the relief well is in and the bottom kill is achieved, BP then plans to release the info, thus exonerating itself. Chambering another round and taking direct aim at their own feet once again... You can see that for this company, the stupidity is totally institutionalized. They couldn't fix it if they wanted to. This is who they are.

http://www.thedailyb...eastoriginalsL5


Here is another sterling illustration of the self-blindering, which is utterly top-down, permeating the organization. The willful stupidity is a bit hard to listen to at times, but rather amusing if you can keep a sense of humor about it.

http://www.npr.org/t...oryId=128361612

[mariner]

I found this rolling stone articel quite interesting, it pulls no punches on BP or the MMS

http://www.rollingst...?RS_show_page=7

[Nathan]

Anybody want to guess what the true financial impact to all those Gulf residents actually is? I suspect 20 billion to be a lot on the light side.

At the same time look at the economic impact these people have had from the offshore oil industry over the years. I'm not suggesting leaving them high and try by any means, but at the same time they have accepted this risk while billions flowed into their governments coffers saving them taxes and increasing their quality of life.

Hence my question of why why do people accept more personal risk than they will accept from organisations like train, plane or Oil/auto companies

Because it is their personal choice and thus is far more infallible.

Edited by Nathan, 08 July 2010 - 16:44.

[mariner]

Nathan , I like your reply about personal infallibity, I think there may be a lot of truth in it.

BTW I find this NYT report

http://www.nytimes.c...09spill.html?hp

strange in that the US government wants a better cap put on faster than BP had planned "The two operations were to have begun a week ago and take place in sequence. The administration now wants BP to move forward with both at the same time to take advantage of a period of seven or eight days of predicted calm weather".

On the other hand " A top BP executive told The Wall Street Journal and NBC on Wednesday that under the most favorable conditions, the well could be killed by July 27, although he cautioned that the weather or technical problems could push that back. The original completion date was mid-August.

A senior administration official dismissed the new date as probably overly optimistic. “It needs to be done in a safe and responsible manner,” the official said, discussing the matter with reporters on condition of anonymity because the official is not designated by the government to speak about the spill. “We don’t think that’s a reasonable expectation of a date.”


So is the government now running the technical activities at the well head?

[McGuire]

At the same time look at the economic impact these people have had from the offshore oil industry over the years. I'm not suggesting leaving them high and try by any means, but at the same time they have accepted this risk while billions flowed into their governments coffers saving them taxes and increasing their quality of life.

They never accepted this risk. It's painfully obvious that the potential hazards of this well were misrepresented to a criminal degree.

Have a look at what you are saying. If this well blowout is an ordinary risk of oil exploration, simply to be expected by the people of the Gulf, so is a similar blowout next month, and the month after that. Obviously, that's insane. The residents of the Gulf hold a reasonable expectation that such disasters will be avoided, starting with the use of proper drilling procedures.

And then we have the people of Florida. That state made a strategic decision decades ago to focus on tourism and has accepted virtually no oil drilling, and as a result, no economic benefits. Unfortunately, this catastrophe doesn't obey state boundaries. The oil washes up on Florida's beaches just as it does everywhere else.

Your argument might be totally illogical but it is a familiar one. For example, we've all heard this: If you use gasoline in your car, you are equally to blame with BP. We're all to blame and no one is to blame. Once again, the Otter defense. I call bullshit. If you are going to drill an oil well, drill it right. Or don't drill it. When I buy BP gasoline, I am not paying them to pump some portion of the crude oil into the Gulf of Mexico. That's nonsense.

Corporations have been promoting the Otter defense (we're all in this together, we are you, so let's hold hands as we skip over the laureled hill) so long and so well that people regard it as natural law. It's not. In any rational world there is no excuse or justification for this disaster -- it was a screwup, pure and simple.

[McGuire]

There is an irony in all the compensation costs which is that it may create more employment in the affected region than will be lost over the same period. That doesn't excuse anybody from responsibilty but the employment created in a mass clean-up which is very labour intensive could well outweigh the lost jobs. Also one hopes that the shrimp fishermen etc get full compensation for the loss of business profit and can sell their boats time for ocean clear up thereby offsetting the fishing loss in the short term whilst that compensation is paid out.. So there may be a net benefit to the regions in the sense that the clean up work will probably be done by people at bottom of the labour market chain who will get an income that was probably denied them before due to lack of skills/capital etc.

Doesn't make the beaches look prettier in any way but from a pure economics versus environmental viewpoint I suspect that the net employment impact may turn out, strangely , to be positive although clearly it will look different in Florida than Alabama. To put it in simple numbers if half the initial agreed compensation fund of $20B goes in labor costs over 5 years that is $2B per year. At say $30K per year for unskilled labour that is 65,000 extra jobs for 5 years.

No irony there except in the transparent attempt to rationalize a major catastrophe. Not even BP is stupid enough to make that argument. It has no economic basis whatsoever and is morally repugnant to boot.

And just as an interesting aside, it draws an utterly false distinction between "economic" and "environmental" factors. A major portion of the Gulf's economy is totally dependent on the environment.

[gruntguru]

I remember many years ago, there was a lot of pressure to allow drilling off the coast of Queensland, Australia. This was resisted by the government of the day and eventually the Great Barrier Reef was declared a marine park. What a good decision that is proving to be!

Edited by gruntguru, 10 July 2010 - 04:50.

[johnny yuma]

I remember many years ago, there was a lot of pressure to allow drilling off the coast of Queensland, Australia. This was resisted by the government of the day and eventually the Great Barrier Reef was declared a marine park. What a good decision that is proving to be!

My daughter recently went to Belize in the Gulf,staying on a little coral island,snorkelling etc ,by all accounts as nice as our Great Barrier Reef,hope its not covered in Crude.
It would seem better karma if gas guzzling USA bore the brunt of the spill ,if somebody has to.

Edited by johnny yuma, 11 July 2010 - 07:14.

[Milt]

My daughter recently went to Belize in the Gulf,staying on a little coral island,snorkelling etc ,by all accounts as nice as our Great Barrier Reef,hope its not covered in Crude.
It would seem better karma if gas guzzling USA bore the brunt of the spill ,if somebody has to.

So, you must be from Brazil, where most cars run on home-grown, renewable, Ethanol?

Otherwise, climb down off that pure white high horse you think you are riding on.

[Greg Locock]

So, you must be from Brazil, where most cars run on home-grown, renewable, Ethanol?

Otherwise, climb down off that pure white high horse you think you are riding on.

Um, no in Oz we burn more solid dead dinosaurs than dino juice. And we burn a lot of both. Luckily we don't kid ourselves that ethanol is a clever solution, merely a political one.

[meb58]

Tantamount to me being responsible for a chemical spill in a field somewhere because I eat a lot of Wheaties...

My daughter recently went to Belize in the Gulf,staying on a little coral island,snorkelling etc ,by all accounts as nice as our Great Barrier Reef,hope its not covered in Crude.
It would seem better karma if gas guzzling USA bore the brunt of the spill ,if somebody has to.

[OfficeLinebacker]

My daughter recently went to Belize in the Gulf,

Which Gulf would that be?

[dosco]

I sincerely don't know how that reasoning could be any more faulty. It couldn't be more blatantly obvious that the cost to BP for this disaster is astronomically greater than taking the steps to prevent it from happening in the first place.

Now we know why you're not a corporate CEO - you have some common sense.

The majority of the CEO-wannabees that I've interacted with don't think in terms of opportunity cost, to that person "opportunity cost" is merely vapor. Not real. Intangible.

Of course, in reality it is only intangible until something bad happens.

[dosco]

Agree with McGuire here. As a former machine shop manager, I can attest to the true cost of poor quality. In our business, the end user is ultimately on a drilling rig be it land or sea based. The cost of our tool failing on the rig is enormous as the tool is downhole and if failed or stuck, the rig - at many thousands of dollars an hour, is no longer doing what it's supposed to do.

Stepping back a few stages: most parts we make require more than one operation (some turning, some milling). Some of them required as many as 6 in-house operations. Each operation requires setup time in addition to run time - setup time is independent of the number of parts being made of course. As standard process, the moment you have a first article from stage 1 complete, it goes to the next stage while the remaining parts are completed at stage 1 and so on. If a machinist drops the ball and makes a non-conforming part at stage 1, we're out the material and the cycle time. If however there's a defect created at stage 5, we have a much more expensive problem. We have 5 stages to set up, 5 cycle times to run and if we're really unlucky, 5 running setups to tear down and rebuild as we interupt the next part
in the line. Failure at late stage can be very expensive. It is in my best interest to ensure our policies and practices are
eliminate opportunities for failure.

You must be one of the few with common sense ... I imagine learned the hard way.

Out of curiousity, did your upper management demand that all your machining centers be operating 24/7 to ensure they were "making money?"

[Canuck]

Luckily no. The machine utilization facts and figures stayed with me and we'd poke around and see if we could find ways to streamline the cycles further. We were aware of our "Herbies" for any given part and operated on a "pull" schedule.

When I first started at that particular shop, I was a machinist running a 9-axis lathe and the shop had ZERO inventory or process controls. I'd be running a first-article part after 6 or 8 hours of setting up and the foreman would come barging in demanding that I tear down the setup for some emergency that required 50 pieces. A day later and 4 or 5 parts into the emergency run of 50, he'd repeat his performance only demanding that I re-do the previous setup and run those parts. I was reasonably quick at setting that machine up by the time he got fired Fortunately I had an enlightened (and open-minded manager) combined with <giant faceless corporation>'s rather focused attention on LEAN methodologies.

[Nathan]

Your argument might be totally illogical but it is a familiar one.

I'm far from logical.

[mariner]

Running machines 24/7 is often not the most productive way as I learned from my boss long ago when we started benchmarking Japan.

He went to a Japanese factory and saw it full of the most modern machining gear. He was then very surprised to be told they did not work shifts, only extended day work. He was amazed and asked why they did not run 24/7 to amortise all that investment. " Have you been inside a Japanese home" was the answer!. They explained that the lack of space in (then ) Japanese homes meant that the living and sleeping quarters were the same so have one person on night shift whilst the rest were day workers was not viable. The reason for all the equipment was to minimise throughput time and thus reduce work in progreess and waste. They were smart enough to add the two together as all use cash.

I aso remember on my first visit to Japan to be amazed to see the office staff ( some quite senior) sweep up and clean their desks before going home each night. In that particular company you cleaned your own mess however big you were. Given the smoking rate in a Japanese office at that time cleaning up around your desk took some time!

[Greg Locock]

I aso remember on my first visit to Japan to be amazed to see the office staff ( some quite senior) sweep up and clean their desks before going home each night. In that particular company you cleaned your own mess however big you were. Given the smoking rate in a Japanese office at that time cleaning up around your desk took some time!

On the other hand we got rid of tea ladies, who were probably paid minimum wage, and brought tea and chcocolate and cakes and so on to our desk, and the money for the latter went back to the company.

In the name of efficiency we got rid of tealadies. However, Victorians being victorians we insisted that proper coffee be supplied. So we now have the ludicrous position where the coffe stand has a queue of 5-10 engineers, at $60 per hour (or $300 ph charge out) each standing in line for coffee. Our mechanics ($35 ph) run the vending machines, and the profit from that goes into the beer fund for the end of year party.

Efficiency. I laugh.

[mariner]

Greg, the coffee stand is your companies number 1 profit centre thanks to all the engineers spending their wages on over priced coffee ( I suspect)!

[Greg Locock]

Greg, the coffee stand is your companies number 1 profit centre thanks to all the engineers spending their wages on over priced coffee ( I suspect)!

How does paying me $5 to stand in line for a $3.40 coffee make sense?

[mariner]

Well, you pay $3.40 for the coffee, of which materials cost is probably $0.40 so the profit contribution is $3.00 so while you are waiting in line you are only costing them $2!

Less of course the cost of the guy serving the coffee but he/she will be much cheaper than you.

Actually the advent of "posh coffee" a la Starbucks has allowed many big companies to cover a lot of the fixed costs of company resturants by allowing the catering vendors to retain the drinks profits and just charge direct food cost on the actual meals ( which is a typical formula at least in the UK). A wonderful moral arguement is used by HR to justify this " if they want to buy coffee it is not a necessity so we can make a big profit on that so as to cover part of the food subsidy we give to the workers"

Don't take too much of this too seriously, I just look at these sorts of things fro a living.

[McGuire]

Head count is the current obsession. Reductions can be made to look like cost savings and increased productivity even when they are not.

Edited by McGuire, 26 July 2010 - 01:09.

[mariner]

There are so many euphemisms around headcount control it is both sad and amazing.

One company I worked for descibed lay offs as " negative hiring" but the one that always made me actually angry was "letting go" of staff, hey they are being fired they never asked to go.

But my favourite headcount story was long ago from an Englishman who had worked for ITT one of the pioneers of financial controls along with Ford etc. He had to send a weekly financial report and was busy so he told his secretary to multiply all the numbers by 2.40 ( being the sterling/USD rate at the time). Later that day one VERY angry finance guy is on the phone from the New York head office and he realises that the secretary multiplied all the Uk headcount by 2.40 as well hence the head office panic.

So he thinks for a moment then says " Ah yes one englishman is worth 2.4 Americans" - needless to say he left ITT soon afterwards

[dosco]

Interesting blog post I stumbled across today.

[Ian G]

Interesting blog post I stumbled across today.

Interesting read,frightening aspect of it all is the blog is carefully worded,at the end of the day its all about profits,share price and executive salaries/bonus's,everthing else has to fall in line to achieve this,thats why another global financial meltdown is probaly close than we think.
I read a great article a few years ago(will post if i can find it again) titled "no more free road maps" and dealt with the rise and influence of the multinational Oil Co.'s post Kuwait/Iraq invasions,very scary stuff similar to your link where Governments and their regulations are effectively sidelined in respect to the Oil industry.