The Blog this week is about a pattern of mistakes that I have seen made by Americans and American Companies opening production facilities in Mexico. Once again, I should say that there have been many success stories with the Maquiladoras as they are called in Mexico. Many have been in business for years and have done very well for their owners. I say this because I want to accentuate the positive before giving a "heads up" to mistakes that I have seen these guys make over and over again. These mistakes doom the project to failure, in some cases before even any work gets done.
It starts with the boss realizing that going to China is just too expensive and the turn around time too long, to be practical. So it's Mexico. He comes down and instead of asking an American already established to recommend someone who can accomplish the paper work, he takes the recommendation of someone he meets in a bar or a waiter in a restaurant. And this facilitator has never done anything like this before. He learns at the expense of his new customer. Immediately everything seems to be getting done backwards. For instance, a lease is signed and paid for before the environmental permit is issued. "What if they don't issue the permit. Did we lease a building we can't use?" The whole paperwork process is like that, a maze of starting at 10 and working back to zero instead of the other way around. But everything does get done eventually.
Then it dawns on them that they're are going to have to choose someone to run the Plant. Here is the mistake. They choose their Warehouseman who's name is Juan because he's been a great employee and he's Mexican and he is always talking about retiring to Mexico anyway. He is also an English speaker. However, no one has ever heard him speak Spanish. Well, they promote him and he moves to Mexico and starts hiring people. He starts by hiring many of his extended relatives he has all over Mexico. This creates two classes of employees right from the get-go. Problems swell when the third or fourth payroll is sent and no work has been done. They get rid of Juan and they have to fire most of the people that he hired. And these former employees quickly file labor demands that have to be individually handled as separate cases by expensive lawyers. Then they make the same mistake over again by hiring another Mexican American to fix the whole mess because he speaks English and talks a good game. Let's call him Juan II. But nobody watches him either. He puts fictitious people on the payroll and pockets their wages. And, of course, variations of the same problems happen all over again. Honestly, I have known three companies that have done variations of this same episode and went back to the US with a lot less capital that they came with, only to forever complain about how difficult Mexico is to do business. Mexico graduates many business majors every year that are very capable of dealing with the system. And many of them speak English very well and are very computer literate. This is where you go to find management talent. And remember, the legal systems in other countries, especially in Latin America, are not designed to bail the UN-informed out of bad choices like the legal system in United States is designed to do.
It starts with the boss realizing that going to China is just too expensive and the turn around time too long, to be practical. So it's Mexico. He comes down and instead of asking an American already established to recommend someone who can accomplish the paper work, he takes the recommendation of someone he meets in a bar or a waiter in a restaurant. And this facilitator has never done anything like this before. He learns at the expense of his new customer. Immediately everything seems to be getting done backwards. For instance, a lease is signed and paid for before the environmental permit is issued. "What if they don't issue the permit. Did we lease a building we can't use?" The whole paperwork process is like that, a maze of starting at 10 and working back to zero instead of the other way around. But everything does get done eventually.
Then it dawns on them that they're are going to have to choose someone to run the Plant. Here is the mistake. They choose their Warehouseman who's name is Juan because he's been a great employee and he's Mexican and he is always talking about retiring to Mexico anyway. He is also an English speaker. However, no one has ever heard him speak Spanish. Well, they promote him and he moves to Mexico and starts hiring people. He starts by hiring many of his extended relatives he has all over Mexico. This creates two classes of employees right from the get-go. Problems swell when the third or fourth payroll is sent and no work has been done. They get rid of Juan and they have to fire most of the people that he hired. And these former employees quickly file labor demands that have to be individually handled as separate cases by expensive lawyers. Then they make the same mistake over again by hiring another Mexican American to fix the whole mess because he speaks English and talks a good game. Let's call him Juan II. But nobody watches him either. He puts fictitious people on the payroll and pockets their wages. And, of course, variations of the same problems happen all over again. Honestly, I have known three companies that have done variations of this same episode and went back to the US with a lot less capital that they came with, only to forever complain about how difficult Mexico is to do business. Mexico graduates many business majors every year that are very capable of dealing with the system. And many of them speak English very well and are very computer literate. This is where you go to find management talent. And remember, the legal systems in other countries, especially in Latin America, are not designed to bail the UN-informed out of bad choices like the legal system in United States is designed to do.
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