Mattel, the toy folks, are in a heap of trouble. Sales are down, especially Barbie doll sales, Wall Street is hovering over them like so many vultures, their new product pipeline is a wreck, and they need to raise prices because the costs of making all their stuff in China is on the rise.
So what are they going to do about it? “New chief executive, Christopher Sinclair, pledged a ‘rapid redo’ of the company culture to develop more creative toys and sell them better, after Mattel posted its sixth straight quarter of sales declines.” Will they succeed? Not a snowball’s chance in the netherworld.
Let’s look at the situation from a lean perspective, shall we?
“The company’s business side works physically apart from the creative team. A 14-story high rise in El Segundo, Calif., houses accountants, lawyers, researchers and supply-chain executives.” Fourteen floors of pure, unadulterated non-value adding waste. That is staggering even among the Wall Street grovelers to whom waste is their stock in trade.
Their actions in the past to stop the flow of blood: “As the company’s collective imagination was being stymied, cost controls emerged as a top priority.” Their new plan: Bring in Bain Consulting, a one trick pony adviser to the biggies (and that one trick is layoffs) whose – Surprise! Surprise! – contribution is to “help further slim down the company two people familiar with the matter said. Additionally, it is planning to wring out another $250 million to $300 million in costs.” … via layoffs, of course.
Another point to consider: “Mattel needs to raise prices to defray rising costs, namely for labor in major toy manufacturing countries like China and Indonesia.”
And finally, the fact that Mattel leadership came from Kraft – another bureaucratic behemoth clone that only knows cheap labor, massive IT and brand management. Value is not part of the Kraft equation and is clearly not part of the Mattel equation either.
The Mattel plan to “redo” the company culture stands no hope whatsoever because the folks at Mattel don’t understand that culture is a product of management processes. It is not some independent entity to be manipulated, configured and shaped into some wonderful way of doing things that will somehow trump accounting, metrics and organizational silos.
There is no way the culture of Mattel will change unless and until the underlying drivers of their wretched decision making are addressed – and those drivers can be found entirely in that 14 story shrine to waste is emptied out, torn down and the folks currently residing in reassigned to either something of value … or the unemployment line.
How can they not see that outsourcing manufacturing to the third world and relegating product design to a converted airplane hangar – booting all of the value adding folks to the curbs, while constructing a Taj Mahal for accountants borders on the insane?
There can be no strong culture in a company that cannot see the utter absurdity of the situation. Rest assured that every problem Mattel has is rooted in that building. The people in it are not going to suddenly relinquish power, or see the light and realize that they are the problem.
These guys had an adjusted operating loss of $14.6 million, and adjusted loss per share of $0.08 … and declared a dividend. How can you possibly explain keeping 14 floors of administrative nonsense in place, needing to cut costs, lay people off and raise prices, but pay stockholders as anything other than a complete inability to understand where and how value for customers and from where the lifeblood of the company flows?
The culture of Mattel is rotten all right. That part they nailed right on the head. But who do they think drives the fact that “decisions on everything from marketing to product features dragged on through multiple sessions—often with no final decision being made. Employees would spend weeks putting together elaborate “decks,” or Power Point presentations, that could run to 100 slides or more, detailing the minutiae of every upcoming product for a brand and every facet of a marketing campaign?” Not likely it is anyone who designs and makes toys – people who create value for kids. It is most certainly the accountants, lawyers and assorted paper pushers in the ivory tower.
And those paper pushers are there and fully empowered by a senior management that thinks paying dividends and raising prices to cover the cost of manufacturing makes sense, when the cost of bureaucracy at Mattel is in the billions.
The culture at Mattel – and everywhere else – is directly proportionate to the number of accountants, brand specialists and lawyers a company has, and the amount of influence they have over decision making. At Mattel, it is patently obvious that they have a building full of them calling the shots and there is nothing the boys from Kraft or Bain – all accountants, lawyers and brand specialists themselves - are going to do to change that culture.
Culture can’t fix stupid.