“The reason we called you in,” Derrick explained, “is that we have a margin problem. We’re just not as profitable as we should be.”

“How do you know?” I asked.

“Easy!” he said. “Revenue is up and profit is down.”

“How do you think that happened?”

Derrick took a moment. “We’re a bit stymied. Every time we figure out the problem, and think we have it fixed, at the end of the month, the numbers tell the same story. Revenues up. Profit down.”

“I tell you what I would like to see. Could you get me a copy of your org chart?”

“Our org chart?” Derrick looked at me like I was from Mars. “I said we have a profit problem, why do you want to see our org chart?”

“Derrick, you’ve looked all over, trying to discover what is wrong. Your problem is not a what. Your problem is a who.”

From the Ask Tom Mailbag:

Question:
Can you describe the difference between a Stratum II Supervisor and a Stratum III Manager related to their roles and accountabilities?

Response:
Every company and every business model is different, so there will be small differences when you look inside your own company. But let’s look at some generalizations which you can adapt to your specific situation.

Quite often, I use a manufacturing model as an illustration, because most people can identify with these descriptions.

Stratum I – Production, using equipment, tools and machines. The direct output in this Stratum is typically what your customer experiences as your product or service.

Stratum II – Makes sure production gets done. This role is highly engaged in coordinating all of the elements required for production. This includes the scheduling of Production personnel, materials required and machine time (equipment availability or other resource allocation). This role begins by translating customer demand or work orders into specific output targets for production, managing the pace of that production and counting the direct output to make sure production gets done.

Stratum II is also typically responsible for meeting the quality specification in the production process. This may include internal inspection, making measurements to confirm the product or service meets the standard specified by the customer. Where tolerances are critical, additional quality inspections may be performed by an external team, but the resolution for any discrepancy will likely include the participation of the Stratum II Supervisor.

Finally, Stratum II is also responsible for the maintenance of all internal systems, including preventive maintenance on machines, care and storage of tools, inventory and handling of raw materials and finished goods. The most important internal system is often the people system. It is the role of Stratum II to maintain productive relationships with each team member to promote communication about production problems, quality issues, pacing issues and to gather data about the efficiency of the production system.

Stratum III – Creates the system. It is the role of Stratum III to map out the production work flow, to analyze the sequence of steps, to monitor the effectiveness of the systems, and most importantly to change the system design to promote efficiency, profitability. This role includes the replacement of capital equipment through life cycles, managing budgets related to production, introduction of new technology and training programs.

The success of the role at Stratum III requires close collaboration with the Stratum II supervisor, to gather data (counting output, counting discrepancies etc) related to the current production system, and to implement changes to the system going forward. Stratum II is often the valuable conduit to collect input from the production team related to the workability of specific processes and sequences.

A critical role of the Stratum III manager is in the hiring process. Stratum III is responsible for creating the specific roles in the production team, evaluating the necessity and requirements of those roles. In the hiring of production personnel at Stratum I, Stratum III plays the role of the Manager Once Removed (MOR). This role promotes rich conversations with the Stratum II Supervisor (the Hiring Manager) related to the hiring strategy, protocol and selection.

This short description can be adapted to other business models, using Time Span to calibrate the roles. In some business models, production may occur as a result of teams playing Stratum II, III or IV roles. This will require an adjustment of those roles required to make sure production gets done and roles required to create the systems in which people work.

This conversation was prompted by Wednesday’s post on Where to Start?

“Before you start meddling with the people around you, your team members, your colleagues, you have to figure out your role,” I nodded. “In the midst of your organization, what is your role?”

“I guess I am the designer of the system,” Ruben floated the trial balloon.

“You guess?” I asked.

“I am the designer of the system!”

“And what are your accountabilities, as the designer of the system?”

“As the designer of the system, it is my accountability to make sure that the output of our work is consistent. That our quality meets the standard that we set, every time,” Ruben explained, gaining more confidence.

“And what is the value to the organization, to create that consistency?”

From the Ask Tom mailbag:

Question:
What do you do when you have a team member with an over-inflated ego. This person does NOT have the capability to work at a higher level. Yet, because they have been here a long time, they think they should be given a promotion and the compensation that comes with it. They are already overpaid in their current role.

Response:
This is where titles and compensation get all mixed up with egos and status. The one thing that gets left out in the cold is the WORK. In most cases, I could care less about the title in the role, I care more about the WORK.

Whenever I am approached about promotions, raises, change of title, my first response is, “Fine, let’s talk about the WORK.”

What you describe is not an isolated incident, but a systemic problem where your organization has had no calibration to determine the level of work (capability) required in its roles. Compensation gets out of hand, people receive raises and title changes based on time served (like we are running a prison).

So, the answer to your question is not a specific technique to resolve this specific situation with this specific person. This is a systemic solution which requires the organization to continually define the WORK, the capability required to complete the work, and to assess the effectiveness of the people we have in those roles, doing the WORK.

This assessment, the Personal Effectiveness Appraisal, continually calibrates, over time where the person is, in relationship to the WORK. This is a simple assessment, a required managerial leadership practice. It asks these questions.

1. Is this person working satisfactorily in the role?
2. In that role, is the person working as effectively as someone in the top half of the role or the bottom half of the role?
3. And in that half, is the person working as effectively as someone in the bottom, middle or top of the role?

This simple calibration, discussing the work and effectiveness, helps everyone – the team member, the manager and the manager once removed (MOR) to have helpful discussions about appropriate task assignments where team members are working at (at least near) their maximum capability.

When used over time, with all roles, the organization creates higher levels of trust by engaging in productive conversations about the work (in roles) and effectiveness. This prevents a lot of nonsense where team members have inappropriate (miscalibrated) understandings of their own capability related to task assignments.

From the Ask Tom mailbag:

Question:
I was in your Time Span workshop last week. Fascinating. Where do we start? What are the first moves that we make?

Response:
The first moves are always with yourself. Elliott’s intention was that Requisite Organization be a comprehensive organization-wide managerial system. And the first moves are always with yourself.

Organize Around the Work
Define the roles that are necessary. The first missteps an organization makes, is to focus on the capability of their people. Before you examine that capability, you must know what capability is necessary in the roles. It’s like MBWA. Before you do all that walking around, it would be a good idea to know what you are looking for.

Defining roles is fundamental managerial work that most would like to skip, and that is where it starts. What is the work that is necessary?

Only after you have defined the market need and determined a viable product or service, where there is enough value that the customer is willing to pay for, that we can profitably produce, with enough volume to create an organization, we can begin.

Organize Around the Work
What is the work that is necessary? What is the direct output of our production teams that creates the product or service that our customer experiences?

Organize Around the Work
With our production teams, how do we maintain the pace of that production to meet market requirements (sales orders)? What are the roles necessary to coordinate all the materials, machinery, equipment and people at the right time, to create our product or service? How do we maintain the quality standards demanded (necessary) by the market? How do we count what we produced, overproduced, underproduced to make sure production got done?

Organize Around the Work
As your volume builds, things begin to happen, problems crop up. Over and over. Some of the new work has less to do with production and more to do with operations, operational work. With some analysis, we begin to systematize the work with an eye to operational efficiencies and profitability. What analytic work is necessary? What systems need to be constructed and monitored? How do our systems prevent problems? How do we change our systems to accommodate new problems?

This is where you start, by looking at the roles in the organization. Organize around the work.

From the Ask Tom mailbag:

Question:
Can a third party, like a consultant, operate in the capacity of the MOR?

Response:
The Manager Once Removed (MOR) is a specific role inside the organization. On the surface, it may appear plausible that someone from the outside could step in and move things along, but, there is a missing critical element.

We may give an outside person, like a consultant, authority to act in some capacity, but they are still outside the organization and being on the outside relieves them from accountability. At the end of the day, they get to walk away.

Examples abound in government. There are lots of people who would like to have “oversight” on a given issue, jump in with both feet, throw some people under the bus, act all high and mighty, spout their obtuse opinion. But at the end of the day, they get to walk away with no accountability. Doesn’t it make sense that if you have the authority to call the shots, that I should hold you accountable for the moves you make?

The MOR must have both authority (oversight) and accountability. It is that accountability that makes the oversight effective.

“Don’t you think you are being a little hard on me?” Torrey floated.

“Not at all. I am just heading off the excuses I expect to hear when your team doesn’t meet your goal,” I replied.

“My goal. But it’s not really my goal,” Torrey protested. “It’s the team’s goal.”

“No, the project goal is your goal. It is you, the Manager, that I hold accountable for the project goal. Regarding your team, I only expect them to do their best.”

“But, but,” Torrey sputtered.

“But, what? You signed off on the project budget, based on the resources and the schedule. You signed off on the Goal, the What by When. I will judge your effectiveness, to manage the project resources and the schedule along the Time Span of this project.”

Sitting in an airplane, with daylight fading behind the tail of the aircraft, watching the city candles flicker in the valley below. Three days working with groups in San Diego, got to spend time with Ozzie Gontang who always makes me think.

As this recovery struggles along, I find myself working, more and more, with new managers and I am struck by the remarkable role they play in the fabric of our organizations.

“You have just completely redefined the role of the manager,” came the observation from the other side of the room.

I don’t think it was me. I think it was somewhere between Elliott Jaques, Wilfred Bion, Jerry Harvey and Lee Thayer.

“You are not a manager so people can report to you. Your role, as a manger, is to bring value to the problem solving and decision making of the members of your team. And you, as a manager, are responsible for the output of your team.”

Question:
You say that American management has just about weaned managerial judgment out of the picture. I think I know what you mean. Sometime, when I look at positive results of the team’s efforts, they were just blind dumb luck. And other times, we did fifty things right and barely achieved a marginal standard. So, tell me, with all this focus on Results, how would we measure effectiveness.

Response:
Effectiveness is a matter of judgment. Effectiveness is a matter of managerial judgment. How well does Rudy perform in the achievement of the desired goal? Given all the ins and outs, the difficulties faced, the unanticipated, unplanned monkey wrenches that get in the way, how well does Rudy perform?

This is a matter of managerial judgment.

Given that:
1. Any task (or role) requires a certain capability.
2. The person assigned has the appropriate capability.

The judgment is whether the person is committing their full capability to the task (or role).

This is NOT a “matter of counting outputs, super credits for super outputs, or penalties for lateness or sub-standard quality.” * This is about bringing their full capability to the completion of the task.

It is the job of the manager to observe and account for all the surrounding circumstances and make this most important judgment. And it is precisely this judgment that most managers avoid.

*Elliott Jaques, Requisite Organization, 1989.

From the Ask Tom mailbag:

Question:

I manage a department of 12 people and have been quite successful over the past 5 or 6 years in improving the quality of the work and the morale of my team.

I have a team member with good skills but, he takes forever to get anything done. In my effort over the years to make him more productive I’ve afforded him the opportunity to become skilled at many different tasks, each time hoping that this would be the one that “clicked”. His production level, however, never improves even after the “learning curve” of any new skill is overcome.

I’m finally facing the fact, that this guy will never make the shift from being a thinker to a doer. Letting him go is difficult for me though, since I’ve acted all this time as his “enabler”. I probably should have realized his limitations a lot sooner and avoided the situation I’m in now.

What’s your take on this?

Response:

Some people master a skill quickly; others may complete a task only after some hard work (which takes time). Your response (training him in many skills) to the amount of time for task completion may have been misguided, making matters worse, even slowing his production time.

1. Determine what you need this team member to do. This should be based on what the company needs from him. What is his role? Write this down. Instead of training him on many different tasks, focus on the essentials of his deliverables. Don’t create a role around him. Determine the role and determine his capability to fill that role.

2. Baseline evaluation of the “candidate.” This is a very serious conversation. You have had these conversations before, this one is different. Your prior conversations have been searching for something he might be good at. This conversation will focus on what the company needs from him in his role. This will be a focusing conversation. The next conversation will be your evaluation, after one day, of his baseline performance in that role.

3. Improvement metrics. Rather than looking to train him on many different skills, the focus should be on throughput speed in the essential deliverables the company needs from the role. Examine each step in the process that speeds him up or slows him down. We don’t need him to learn a whole bunch of other skills, we simply need to get him faster at the essential skills.

4. Evaluate his long term contribution. After a period of three weeks, as a manager, you will know whether his behavior is becoming more effective or staying the same. As his manager, it will be time for you to make a judgment. It will be time for you to make a decision. Is the candidate becoming more effective in the essential role that we have for him? This is a yes or no question.

5. If the answer is yes, then you have a contributing member. If the answer is no, inform your manager that you are de-selecting this person from your team. If your manager has another role which might be suitable, turn this person over to your manager for placement. If your manager has no other role, it is time to release this person to industry.

Every part of this should be explained to the candidate. There should be no secrets. The candidate should understand the consequences of underperformance. At the same time, underperformance does not make him a bad person. It is likely that he will be relieved that he can look for a position more appropriate to his speed level, rather than live in the shadow of underperformance and constant scrutiny.