Tuesday, September 9, 2008

Setting boundaries continued.

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.