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The Lean Post / Articles / The Story of an Error

The Story of an Error

Executive Leadership

The Story of an Error

By Orest (Orry) Fiume

July 13, 2017

As a followup to his popular article from earlier this summer about lean profit-sharing plans, Orry Fiume delves deeper. He shares a booklet that McKesson & Robbins Inc. once used to educate its employees on practices that hurt profits (and by extension, the sharing plans that distribute said profits). Read more.

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It’s been said that there are no new ideas in the world, just the recycling of old ones. I don’t know if that’s universally true, but it certainly is in some cases. 

In 1916, the founder of The Wiremold Company, D. Hayes Murphy, decided that the right way to run a business was to share the profits of that business with both the Financial Capital (himself) and the Human Capital (the workers). He acted on this belief by creating a “Profit Sharing Dividend Plan.” Although he experimented with various formulas in the early years, ultimately he settled on one that put 15 percent of profit before taxes into the Profit Sharing Pool and that money was shared with the employees every quarter, in cash, pro-rata based on straight time wages. A more complete discussion of the plan, and profit sharing in general is contained in my recent Lean Post article entitled “Want to Respect Your People? Share The Profits!” 

In order to educate the company’s employees about the things that hurt profits, and thus hurt profit sharing, Mr. Murphy would write a letter for each Profit Sharing Distribution and hold an “all hands” meeting to discuss it. In addition, at one point he distributed a little booklet that was published in 1919 by McKesson & Robbins, Inc. entitled “The Story of an Error.” Although written almost 100 years ago, it is as relevant today as it was then. A copy of the booklet is attached here. Enjoy.

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Written by:

Orest (Orry) Fiume

About Orest (Orry) Fiume

Orry was Vice President of Finance and Administration and a Director of The Wiremold Company, West Hartford, CT, which gained international recognition as a leader in lean business management in Lean Thinking by James P. Womack and Daniel T. Jones.

Orry led Wiremold’s conversion to lean accounting in 1991 and developed alternate management accounting systems that supported the company’s entire lean business efforts. Orry has studied lean production in both the U.S. and Japan and has been a guest speaker at conferences around the world. He has taught workshops on management accounting in a lean business and given workshops on lean leadership to senior executives.

Orry is the co-author of the 2004 Shingo Prize-winning book Real Numbers: Management Accounting in a Lean Organization. Most recently, he is a co-author of The Lean Strategy. He was also inducted as a Life Member of the Shingo Prize Academy.

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