Professor Harry Sminia, head of Department of Strategy & Organisation at the University of Strathclyde asks does management matter?
Anyone remember NBL? The North British Locomotive Company in Glasgow. Once this was the largest steam locomotive manufacturer in the world. They went into voluntary liquidation in 1962, as they failed to receive any new orders. With hindsight, it appears pretty obvious that this had to happen. A firm with an outdated product and an outdated technology has to fail, hasn’t it? Why did they not move with the times? Is this the inevitable fate of any firm, no matter how big and successful?
The NBL story is particularly tragic because they were aware of what was going on. They knew about diesel and electric engines. They knew that US railroads were being dieselized and steam being largely abolished: electric traction and diesel technology was superior to steam. In 1947, NBL had assessed the situation. They estimated that steam still had a future, but up to a point, and that they had to adapt and change and develop capability in diesel and electric traction.
At the time, they reckoned that which traction technology would be superior depended on the situation. NBL produced mainly for export to the Commonwealth where railway lines covered vast distances and electrification would be prohibitively expensive. Diesel on the other hand relies on the availability of oil: a good option for the US but not necessarily elsewhere in the world. Coal was the economical alternative for many railway companies and cheap labour mitigated the issue of having to employ more people to run steam engines compared to diesel engines. The costs of electrification and the lack of domestic oil reserves applied to the UK as well. NBL expected that there still was plenty of appetite for their steam engines for the time being.
Nevertheless, NBL wanted to make the transition. They actually produced a line of diesel shunters but sourced the diesel prime mover from elsewhere. Mainline locomotives require a more sophisticated transmission system than the mechanical one in a low-power shunter. US manufacturers worked with the diesel electric principle: they linked the diesel engine in the locomotive up with a generator that powered electric motors that in turn provided the traction. In Germany an alternative technology had been developed on the basis of a hydraulic transmission by which the power of the diesel prime mover was transferred to the axles. NBL opted for the German system and signed a license agreement with Voith. Not having the ability to design diesel engines themselves, they also went into a license agreement with M.A.N. All the technological ingredients were in place to start with the transition to diesel.
But things happened: many countries in the Commonwealth developed an appetite for and were granted independence. This urge for independence also meant that they wanted to become economically and technologically self-determining, turning away from the UK. The traditional export markets for NBL steam engines dried up quicker than anticipated. Fortunately, with the nationalization of the railways of Great Britain, an appetite for modernization developed and steam was to be replaced by diesel much sooner than originally thought. As part of this modernisation drive, NBL was one of a number of British locomotive manufacturers that received orders for small batches of mainline diesel locomotives, to be trialled and tested before the big orders would be issued. NBL locomotives were mostly of the diesel-hydraulic design, while the competitors went for the diesel-electric principle.
They were a disaster! All of the newly delivered diesel engines by every manufacturer had teething problems yet the NBL engines were perceived as being the worst. NBL did secure follow up orders but eventually the British Transport Commission who were then running the nationalised railways had enough and stopped using NBL. As it appeared, NBL could not make the transition. Transforming from a steam locomotive manufacturer into a diesel locomotive manufacturer was one step too far. A detailed analysis of the demise of NBL reveals that there were many factors that conspired to generate this outcome. It is too easy to blame this on the stupidity of NBL management, although there were instances where they failed to understand what was going on. It is too easy to blame this on shop floor operations or the lack of skills of the NBL workforce, but there were instances were a steam mind-set or a failure to properly re-design work practices contributed to the low build quality of NBL engines. It is too easy to blame it on the technology and being the diesel-hydraulic exception in a diesel-electric world. In the end, it is a concurrence of events that made NBL fail.
Such concurrences of events happen all the time and on occasion they can lead to the failure of once proud and successful companies. Is there something that can be done to prevent this from happening? In the end, nothing is certain and no guarantees can be given. However, what seems to make a difference is the extent to which firms and their management are aware of the concurrence of events in which they are all caught up. And suggestions are that this depends on how a firm and their managers practice their management.
Firms that manage by way of formal planning procedures, emphasizing performance indicators and control mechanisms are at risk of losing track of what is going on. Granted, these give a sense of control but plans and performance indictors can become an end in themselves. There is irony here, as these management tools are meant to do the opposite. Yet there are also many occasions that a lack of organisation and not thinking things through before you act creates havoc. Firms that foster initiative and focus on nurturing and developing people tend to be much more aware of what is happening and also tend to be better equipped for realising change and dealing with adversity. Some managers are rather wary of putting so much trust in people, as they might go off in directions that you do not want or they take advantage of their freedoms at the expense of the firm. So how you do your management matters! Yet there is no easy answer.
This is where SIOM comes in. We do not promise easy answers and we do not profess that we know everything and have easy solutions available. SIOM is the Strathclyde Institute for Operations Management. It brings together the leading experts in Operations Management and Advanced Manufacturing from Strathclyde’s Business School and Faculty of Engineering. We have leading expertise in operations, information management, supply chains, strategy, risk, ambiguity, innovation, forecasting and change management. We want to work with you, large firms, SMEs, start-ups, on your problems and challenges, to enhance our understanding but moreover to help you help yourself.
 Fleming, A. I. M., McKinstry, S., & Wallace, K. (2000). The decline and fall of the North British Locomotive Company, 1940-62: Mismanagement or institutional failure? Business History, 42(4), 67-90.