The Danger of Missing Stratum IV

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From the Ask Tom mailbag –

Question:
We have silos. Everybody is in a power struggle. We used to have a great reputation, but I think we outgrew it. The company seems lopsided. Sometimes sales outstrips our ability to fill orders, so some of our sales orders turn into back orders, some of our back orders turn into canceled orders and some of our best customers defect to the competition. Other times, production outstrips our ability to sell, so our finished goods don’t get sold, they stack up in the warehouse. The warehouse gets full, so we rent another warehouse. We carry inventory so long it turns obsolete and costs to hold, eat up our profit. We are like a monster machine. Just read a book by Ken Blanchard Be a Silo Buster. Do we really have to bust up the company and start over?

Response:
With all due respect to Ken Blanchard, you created those silos for a reason. Do NOT bust them up. You need efficient, profitable internal systems. It is not a matter of busting up silos, it is a matter of integrating them together. This is a classic example of a company growing into Stratum IV. This is similar to the chaos we see in Stratum II companies, but on steroids. This is not a few individuals stepping over each other. This is whole departments, internally focused, head down, nose to the grind stone without care or consideration for the other functions in the company.

But, the fix is not to tear them down. The fix is integration and requires capability at S-IV. This is not finding the constraint in a single serial system (S-III), but understanding the impact of one system on another system (S-IV). This is not root-cause analysis, but systems analysis. We have reinforcing systems and balancing systems. This requires, not serial thinking, but parallel thinking.

This is not multi-tasking (because humans cannot multi-task), but truly seeing the dependency, inter-dependency, contingency, and bottle-necks that exist among out multiple systems and sub-systems. This requires a parallel state of thinking. Two specific things to look at –

  • Balance of each system output, optimized to its surrounding systems output.
  • Handoff of work product from one system to the next system as work output flows through the organization.

Optimization
Sales has to be optimized to production. There is no sense selling inventory that cannot be produced timely to the sales order. There is no sense producing finished goods that cannot profitably be sold timely to the market. The output of both systems has to be optimized so they work in sync. Reinforcing systems and balancing systems.

Handoff
A department, head down, will work to their own internal efficiency. The state of their work product may be incomplete or carry a defect for the next stage in the work flow. Work does not flow up and down in a department. Work flows horizontally through the organization, output handed off from one department to the next.

  • Marketing hands off to sales.
  • Sales hands off to estimating
  • Estimating hands off to contracting
  • Contracting hands off to project management
  • Project management hands off to operations
  • Operations hands off to QA/QC
  • QA/QC hands off to warranty
  • Warranty hands off to research and development
  • Research and development hands off to marketing, and so the cycle goes

Each handoff must be inspected and improved. This is the role at S-IV.
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To read more on system constraints, theory of system constraints, The Goal by Eli Goldratt.
To read more about reinforcing and balancing systems, The Fifth Discipline by Peter Senge.

The Danger of Missing Stratum II

The Danger of Missing Stratum III
The Danger of Missing Stratum IV

3 thoughts on “The Danger of Missing Stratum IV

  1. Ash Patel

    Tom hit the nail on the head by suggesting that silos should stay intact, but the way they interact must change. The first few chapters of Value Stream Mapping by Karen Martin covers this very problem in a little more detail. It’s like a how-to for systems analysis and implementation at a S-IV level.

    Reply
  2. 1st Performance

    I think what you typed made a great deal of sense.
    But, what about this? what if you typed a catchier post title?
    I am not suggesting your information isn’t solid, however what
    if you added a post title that grabbed people’s attention?
    I mean The Danger of Missing Stratum IV | Management Skills Blog is kinda
    vanilla. You could peek at Yahoo’s front page and see how
    they create article titles to grab viewers interested.
    You might add a video or a pic or two to get readers excited about what you’ve got to say.
    In my opinion, it could bring your posts a little livelier.

    Reply
    1. Beg to differ

      Tom’s referring directly to a principle he teaches in his book, Outbound Air. The title’s very relevant and perhaps even a little exciting for those who’ve read the book.

      I clicked through to read this post mainly because it was very specific. I know exactly what I was in for. If it was written like “Destroy interdepartment wars at work”, I’d pass. Reads like yet another article mill piece from Entrepreneur or Fortune online.

      Unless you’re making content for entertainment or infotainment, clarity trumps persuasion.

      Reply

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