Design options to consider when setting organizational boundaries include:
- Setting boundaries around complete processing segments, so employees can clearly identify, evaluate, and control the inputs and outputs of each segment.
- Placing boundaries so they minimize the likelihood of passing problems from one work unit to another.
- Creating multifunctional teams of employees who are responsible for producing a complete end product or a clearly defined component of the final product.
- Reassigning administrative and/or support tasks so that these multifunctional teams have quick access to all the resources they need to succeed.
As an example, Colgate's liquid detergent plant in Cambridge, Ohio is the sole producer of dish and laundry liquids for the company and currently employs about 400 people. It was designed to have an organizational structure that was different than other Colgate plants in order to avoid their manufacturing and labor problems. All employees at Cambridge were salaried and there were only two job classifications, Operator Technician and Maintenance Technician. The ultimate goal of the plant design was for every technician in each classification to be qualified to perform every task in that classification. The leadership team’s responsibility was to see that technicians had the knowledge and resources they needed to do their job in the most effective way possible.
Every technician belonged to a shift team. There was only one layer of management between the teams and the plant manager. Chris Miller, one of the team leaders, said he saw his job as, “pushing responsibility for decision-making down to the lowest possible level, and having the team members make some decisions that were formerly made by managers and foremen.” A shift team operated the production line from bottle forming through filling, packaging and palletizing, until the finished product was placed in a truck for immediate shipment - there was no warehouse. This gave the shift team members complete ownership over the manufacturing and shipping process from start to finish.
Shift teams monitored the quality and quantity of the product produced. They also tracked key measures related to the operation of their group, such as attendance and training. Team members weren't replaced when they were absent; other team members had to cover when someone was out. During the first year of operation, over half the employees never missed a work day, although, as salaried employees, they would have been paid whether they were at work or not.
There was no job classification for a quality inspector at Cambridge. Instead, the members of each shift team assumed responsibility for controlling product quality. Everyone, up and down the line, constantly monitored both the product and the manufacturing process. When a problem was detected, corrective action could be taken on the spot by the shift team on their own initiative. Knowing there was no inspector to catch off-specification product made team members extremely diligent. All team members were trained in the use of tools and techniques such as Variance Analysis and Statistical Process Control so they'd be able to monitor operations and recognize and correct deviant operating conditions. Computer screens at each work station allowed employees to oversee the entire process, not just what was happening at their own station, and helped them to diagnose problems in the process down to the software level. This speeded up the response time considerably when something went wrong.
Since startup, Cambridge has evolved into one of the largest tonnage-producing Colgate plants in the world. Overhead and costs-per-case have been consistently reduced. Plant effectiveness has set records for the company and hundreds of millions of dollars in savings have been realized. The plant has reached its goal of becoming a prototype for detergent plants world-wide as competitors such as Procter & Gamble and Unilever have used Cambridge as a world-class benchmark. Reuben Mark, Colgate's chairman, has been so impressed by the plant's performance, he directed that all new Colgate plants be designed using the Cambridge model.
The moral of all this? If you don’t want to be the guy with the shovel following the parade, rethink how your business is organized. And do it now, while there's still time.
Tuesday, September 9, 2008
Monday, September 8, 2008
Redefining an organization's boundaries.
The next step in designing more effective organizations is for functional or business unit managers to get with their teams and decide where to set external and internal boundaries around their departments. The guidelines to follow in this exercise are:
- The organization should consist of self-contained work units that are responsible for discrete product processing segments that have clearly defined inputs and outputs.
Boundaries should minimize the transfer of variation from one work unit to another, and shouldn't separate people who need to work together and learn from each other.
In traditional firms, work sometimes gets transferred from one unit to another because of tradition or history. In an insurance company, for example, I found that claims were partially processed on floor A, then transferred to floor B for further processing, and finally returned to the initial area A for completion. Upon investigation, I found that a long time ago, an employee was transferred from department A to department B and at the time, she was the only one who knew how to do her particular task. So, the work followed her when she moved. Even though she had been retired for many years, the claims continued to follow that route and no one had ever asked why before. Rearranging the flow so the claims processing was all done in department A removed two queuing steps which greatly speeded up the processing time.
The dilemma of separate ownership of processing stages is that no one understands the whole process anymore. So, errors in the early stages go unrecognized until they re-appear as problems later in the process. Sometimes, these problems can't be fixed at that stage and the product has to be thrown away. This is true in service settings as well where once a customer has been badly treated, it's seldom possible to undo the damage caused.
I'll give more examples tomorrow illustrating non-traditional boundary choices and the reasoning behind them.
- The organization should consist of self-contained work units that are responsible for discrete product processing segments that have clearly defined inputs and outputs.
Boundaries should minimize the transfer of variation from one work unit to another, and shouldn't separate people who need to work together and learn from each other.
In traditional firms, work sometimes gets transferred from one unit to another because of tradition or history. In an insurance company, for example, I found that claims were partially processed on floor A, then transferred to floor B for further processing, and finally returned to the initial area A for completion. Upon investigation, I found that a long time ago, an employee was transferred from department A to department B and at the time, she was the only one who knew how to do her particular task. So, the work followed her when she moved. Even though she had been retired for many years, the claims continued to follow that route and no one had ever asked why before. Rearranging the flow so the claims processing was all done in department A removed two queuing steps which greatly speeded up the processing time.
The dilemma of separate ownership of processing stages is that no one understands the whole process anymore. So, errors in the early stages go unrecognized until they re-appear as problems later in the process. Sometimes, these problems can't be fixed at that stage and the product has to be thrown away. This is true in service settings as well where once a customer has been badly treated, it's seldom possible to undo the damage caused.
I'll give more examples tomorrow illustrating non-traditional boundary choices and the reasoning behind them.
Friday, September 5, 2008
Summons, a poem by Robert Francis.
Robert Francis is one of the best-kept secrets in American poetry. He wrote in a clear, concise, musical style that combined the best qualities of Robert Frost and Emily Dickinson. Yet his style was uniquely his own. This is a poet not to be missed.
He was born in Upland, Pennsylvania in 1901 and educated at Harvard University. Prolific in many disciplines, Francis also wrote a novel, We Fly Away (1948). He died in July, 1987.
Summons by Robert Francis
Keep me from going to sleep too soon
Or if I go to sleep too soon
Come wake me up. Come any hour
Of the night. Come whistling up the road.
Stomp on the porch. Bang on the door.
Make me get out of bed and come
And let you in and light a light.
Tell me the northern lights are on
And make me look. Or tell me clouds
Are doing something to the moon
They never did before, and show me.
See that I see. Talk to me till
I’m half as wide awake as you
And start to dress wondering why
I ever went to bed at all.
Tell me the walking is superb.
Not only tell me but persuade me.
You know I’m not too hard persuaded.
He was born in Upland, Pennsylvania in 1901 and educated at Harvard University. Prolific in many disciplines, Francis also wrote a novel, We Fly Away (1948). He died in July, 1987.
Summons by Robert Francis
Keep me from going to sleep too soon
Or if I go to sleep too soon
Come wake me up. Come any hour
Of the night. Come whistling up the road.
Stomp on the porch. Bang on the door.
Make me get out of bed and come
And let you in and light a light.
Tell me the northern lights are on
And make me look. Or tell me clouds
Are doing something to the moon
They never did before, and show me.
See that I see. Talk to me till
I’m half as wide awake as you
And start to dress wondering why
I ever went to bed at all.
Tell me the walking is superb.
Not only tell me but persuade me.
You know I’m not too hard persuaded.
Thursday, September 4, 2008
Innovative sites help to provide fresh input.
At this stage in the design process, I find it helpful to take key members of the design team on a tour of innovative work places, many outside of their own industry. Each tour typically takes a week with four or five full-day or half-day visits scheduled. I've found previous clients to be very accommodating in this regard. Customers and suppliers can also be visited if they've got something relevant to share.
Host companies often claim that preparing for these visits helps them evaluate how they're doing, renews their commitment to making their design ideas work, and allows them to tell the design story to new employees. The more they explain why they did what they did, the more they talk themselves into supporting the essential nature of their new work arrangements.
Design team members value the opportunity to ask questions of their opposite numbers, employee to employee, VP to VP, and appreciate that they're willing to take time out from their busy jobs to share their experience and learning with others. They hear about the good, the bad and the ugly, and from this they form their own opinions about what it takes to make organizational innovations work and how well they're working out.
Here's an example: Some years ago, senior management from TRW's Electronics Systems Group set out to learn about better ways to organize and run their business. They attended seminars and organization design courses. They visited successful plants in comparable industries around the U.S., including Motorola, IBM and Hewlett-Packard. They visited successful plants in other industries, such as the auto and aluminum industries. They toured Japan where they visited ten of the most successful Japanese companies. Afterwards, when they reflected on their learnings, they identified the following common denominators in each of the successful organizations they visited:
- All employees were actively committed and involved in helping run the business.
- The whole organization was clear and agreed on its purpose and on the goals it was trying to achieve.
- There was an emphasis on providing customers with uncompromising quality.
- All employees received prompt and accurate feedback on personal and organizational performance.
TRW's senior management was particularly impressed by the energy these successful companies spent developing and encouraging employee involvement. They resolved to aggressively increase their emphasis in this area. Given what they'd learned, they began by describing how things could be different in a workplace that incorporated some of the ideas they'd seen. To share their vision of the scope of change involved, they contrasted how work was currently done in specific areas with how it might carried out be three years from now. This helped put the magnitude of the task before them in proper focus.
Tomorrow is poetry day. Next week I'll return to the topic of how to consciously design more effective organizations.
Host companies often claim that preparing for these visits helps them evaluate how they're doing, renews their commitment to making their design ideas work, and allows them to tell the design story to new employees. The more they explain why they did what they did, the more they talk themselves into supporting the essential nature of their new work arrangements.
Design team members value the opportunity to ask questions of their opposite numbers, employee to employee, VP to VP, and appreciate that they're willing to take time out from their busy jobs to share their experience and learning with others. They hear about the good, the bad and the ugly, and from this they form their own opinions about what it takes to make organizational innovations work and how well they're working out.
Here's an example: Some years ago, senior management from TRW's Electronics Systems Group set out to learn about better ways to organize and run their business. They attended seminars and organization design courses. They visited successful plants in comparable industries around the U.S., including Motorola, IBM and Hewlett-Packard. They visited successful plants in other industries, such as the auto and aluminum industries. They toured Japan where they visited ten of the most successful Japanese companies. Afterwards, when they reflected on their learnings, they identified the following common denominators in each of the successful organizations they visited:
- All employees were actively committed and involved in helping run the business.
- The whole organization was clear and agreed on its purpose and on the goals it was trying to achieve.
- There was an emphasis on providing customers with uncompromising quality.
- All employees received prompt and accurate feedback on personal and organizational performance.
TRW's senior management was particularly impressed by the energy these successful companies spent developing and encouraging employee involvement. They resolved to aggressively increase their emphasis in this area. Given what they'd learned, they began by describing how things could be different in a workplace that incorporated some of the ideas they'd seen. To share their vision of the scope of change involved, they contrasted how work was currently done in specific areas with how it might carried out be three years from now. This helped put the magnitude of the task before them in proper focus.
Tomorrow is poetry day. Next week I'll return to the topic of how to consciously design more effective organizations.
Wednesday, September 3, 2008
Identifying distinctive competence.
Do you know your firm’s Distinctive Competence? What's the unique thing that it does really well? What quality or attribute sets it apart from its competitors? Knowing this critical characteristic is particularly helpful as a firm seeks to find ways to grow further. It helps in identifying the best partners in completing or expanding its distinctiveness.
Many factors create distinctive competence. It may be a function of serving a unique market niche, like Hot Dog On A Stick. It may be delivering a highly specialized product, like Deco Breeze Fans. Or it may be its quality of customer intimacy and superior service, like †he Ritz-Carlton Hotel chain. Or, its low cost, like Wal-Mart. For example, Kodak’s distinctive competence is in imaging. Kodak’s understanding of this has allowed it to expand into seemingly unrelated businesses like pharmaceuticals which use similar processing methods.
Ultimately, whatever it is leads to competitive advantage. When you think you understand and can communicate your distinctive competence, test it with your customers. Is this capability what they think is special about you? Does it create value in the mind of the customers? Is it something they care deeply about?
A business will be much more successful when its employees and customers have a simple, clear impression of why its distinctive competence is important. Defining distinctive competence helps the firm and its customers stay focused.
Many factors create distinctive competence. It may be a function of serving a unique market niche, like Hot Dog On A Stick. It may be delivering a highly specialized product, like Deco Breeze Fans. Or it may be its quality of customer intimacy and superior service, like †he Ritz-Carlton Hotel chain. Or, its low cost, like Wal-Mart. For example, Kodak’s distinctive competence is in imaging. Kodak’s understanding of this has allowed it to expand into seemingly unrelated businesses like pharmaceuticals which use similar processing methods.
Ultimately, whatever it is leads to competitive advantage. When you think you understand and can communicate your distinctive competence, test it with your customers. Is this capability what they think is special about you? Does it create value in the mind of the customers? Is it something they care deeply about?
A business will be much more successful when its employees and customers have a simple, clear impression of why its distinctive competence is important. Defining distinctive competence helps the firm and its customers stay focused.
Tuesday, September 2, 2008
Recapping the design process.
O K, so in the past few weeks I've written about how to get started designing more effective organizations using the steps outlined below;
- revisiting and refreshing the organization's purpose.
- developing strategies to influence customers, competitors, investors, employees and the broader community in ways that will make it possible to achieve that purpose.
- identifying key employee behaviors and capabilities essential to success.
- creating an operating philosophy that will encourage and support those behaviors.
- agreeing on guidelines to be used in designing jobs, boundaries, decision authority, information flow, reward systems, and developing operating policies and practices that will encourage the desired behaviors.
I suggested that each of these steps involve members of senior management, because as venture capitalists are prone to say, "If the light ain't on at the top, it's dim all the way down." Mostly, this involvement entails pulling learning from previous experiences out of people instead of pushing new ideas into them. I've found the challenge in setting this up is in finding ways to get people to tell me what I would have told them. In this context, asking the right question is more powerful and persuasive than providing a prepackaged answer.
The final step in this first part is to understand the business's distinctive competence, that is, how it plans to be different and better than its competitors.
I'll deal with this tomorrow.
- revisiting and refreshing the organization's purpose.
- developing strategies to influence customers, competitors, investors, employees and the broader community in ways that will make it possible to achieve that purpose.
- identifying key employee behaviors and capabilities essential to success.
- creating an operating philosophy that will encourage and support those behaviors.
- agreeing on guidelines to be used in designing jobs, boundaries, decision authority, information flow, reward systems, and developing operating policies and practices that will encourage the desired behaviors.
I suggested that each of these steps involve members of senior management, because as venture capitalists are prone to say, "If the light ain't on at the top, it's dim all the way down." Mostly, this involvement entails pulling learning from previous experiences out of people instead of pushing new ideas into them. I've found the challenge in setting this up is in finding ways to get people to tell me what I would have told them. In this context, asking the right question is more powerful and persuasive than providing a prepackaged answer.
The final step in this first part is to understand the business's distinctive competence, that is, how it plans to be different and better than its competitors.
I'll deal with this tomorrow.
Monday, September 1, 2008
Developing design guidelines.
At Ford Hermosillo, design team members were asked to talk about organizations they'd worked for in the past where they felt motivated, informed, involved and effective. They then described the organizational conditions that made this possible- how decisions were made, how they were rewarded, and how they interacted with others. This allowed them to create the following design guidelines based on their previous collective experience:
Jobs should have broad, clearly defined responsibilities and should provide opportunities for autonomy, variety, growth and feedback.
Informed decision making at the lowest possible level should be developed and encouraged.
Rewards should recognize demonstrated knowledge, skills, initiative, quality, performance and teamwork, and should be based on individual contributions as well as overall plant performance.
Career guidance and development opportunities should be created to encourage all employees to broaden their skills, to increase their knowledge of the business, and to develop to their fullest potential.
Working conditions in all areas of the plant should support safe, pleasant and efficient practices.
Artificial status distinctions should be minimized. Special treatment should reflect functional necessity only.
Open, direct two-way communication should be encouraged and facilitated between all levels and all areas in the organization.
Information should go first to people who need to act on it.
Every employee should understand how his job impacts on the total effort. Functional or departmental boundaries shouldn't separate people who depend on one another or need to work together to produce a quality product.
The primary responsibility of supervision is to help people define and plan to achieve personal and organizational goals, to make sure they have access to the resources they need, and to interface with other groups as required.
Jobs should have broad, clearly defined responsibilities and should provide opportunities for autonomy, variety, growth and feedback.
Informed decision making at the lowest possible level should be developed and encouraged.
Rewards should recognize demonstrated knowledge, skills, initiative, quality, performance and teamwork, and should be based on individual contributions as well as overall plant performance.
Career guidance and development opportunities should be created to encourage all employees to broaden their skills, to increase their knowledge of the business, and to develop to their fullest potential.
Working conditions in all areas of the plant should support safe, pleasant and efficient practices.
Artificial status distinctions should be minimized. Special treatment should reflect functional necessity only.
Open, direct two-way communication should be encouraged and facilitated between all levels and all areas in the organization.
Information should go first to people who need to act on it.
Every employee should understand how his job impacts on the total effort. Functional or departmental boundaries shouldn't separate people who depend on one another or need to work together to produce a quality product.
The primary responsibility of supervision is to help people define and plan to achieve personal and organizational goals, to make sure they have access to the resources they need, and to interface with other groups as required.
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