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Yes, sometimes you need capital. However, capital is not the solution to all problems.

I have visited many shut mills full of fine and usable capital equipment. Some of it had cost a great deal of money not so long before I arrived.

Funny story from nearly two decades ago... I was called by an investment fund in a major eastern city. They had made an investment in a MRF (Municipal Recycling Facility) which, at the time they called me, was shut down. It had only been built a couple of years before the call to me. Ironically, it could even be seen from the investment firm's offices high in a skyscraper, as it was only about six blocks away.

They were wringing their hands. If I remember correctly, they had invested US$15 million in the construction of this facility. It was near lunch time, and I told them I would go take a look at it while they went to lunch. We would get together after lunch to discuss my findings.

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I took a look and came back to their offices. Their first question to me was, "Well, do you think the whole fifteen million dollars was invested in it?" They were worried about some sort of fraud during the construction.

"Yes, indeed," was my reply.

The investment fund managers broke out in big smiles.

"But that is not the right question," was my next statement.

"Huh?"

"You should have asked me what I thought it is worth now."

"OK, what do you think it is worth now?"

"I think you might be able to get two or three million dollars for the equipment when you scrap it, and then you'll need to spend another couple of million remediating the site. I don't know for sure on that last part; you'll need some environmental experts to tell you what to do."

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What they had just experienced was a severe management failure at the highest levels.

Unfortunately, management failures happen at all levels. Further, we often think we can solve them by buying something. Sometimes, as an alternative to spending money, we think we need to fire someone, or perhaps promote someone.

Often the first thing we should do is simplify what we are doing and see if that is a solution. Things become complicated over time. We pile forms on top of forms, procedures on top of procedures and we just end up going around in circles.

Start where old Jim always tells you to start: the "spinnin' the invoice printer" test. If an activity is going on that does not have some link, no matter how faint, to "spinnin' the invoice printer" stop it and kill it dead. When you have exhaustively eliminated the wasted effort that goes into accomplishing nothing, then you can talk about needing capital.

Care to relate some management failures? You can do so in our quiz this week. Please take it here.

For safety this week, because it is so important, we distill safety issues to simple statements and procedures. We should learn to apply the efficiency of safety management to everything else we do.

Be safe and we will talk next week.

You can own your Nip Impressions Library by ordering "Raising EBITDA ... the lessons of Nip Impressions."