Category Archives: Organization Structure

Competition and Manipulation

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“So, you’re the culprit,” I repeated. “What specifically did you do that was so counterproductive?”

“I remember, it wasn’t anything extreme. We have different sales channels and different product lines, with outside sales, inside sales, internet sales. I began to hand out bonuses for each department with the highest gross margin, another for the highest revenue in the quarter.

“It’s funny, now that I think about it, when I handed out those bonuses, the room was quiet. There was no jubilation or high-fives, just a nod and a polite thank you.”

“Tell me about the down-side?” I asked.

“I found out later,” Reggie explained, “that each department gamed the gross margins. They would pump up the pricing in the last week of the quarter and then rebate it back to the customer in the next quarter. In the end, we still got our standard margin, but each department manipulated the bonus system. And all the progress we made on cross-selling was lost.

“And it’s not so much that they had to pay the piper in the next quarter, but look at all the wasted energy, counterproductive to what we stand for. And the last thing on our mind was doing a good job for the customer.”

The Danger of Healthy Competition

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“It was worse than I thought,” Reggie stated flatly. “What I didn’t realize when I opened up this little fracas, was that the competition started long ago. I nosed around some of my sources. It’s been a dysfunctional fight for the past six months, with not only my three internal candidates, but two others. They are all spread across three departments, so I never saw it.”

“What’s been going on?” I asked.

“Mostly, it’s the subtle non-cooperation of one department with another. Convenient delays, rough hand-offs, missing information. Nothing malicious or brazen, but I have five people working against each other, working against the company.”

“Who’s the culprit?”

Reggie’s demeanor changed. He sat straight up in his chair. The nerve was struck. Chin down, looking over his glasses, furrowed brow, he finally spoke. “I’m the culprit. I tried to create a little healthy competition, but what I created was an environment where individual agendas were more important that teamwork. I created intense internal focus within each department, when I need cooperation between departments.”

“How do we fix it?”

“First, we have to start with the culprit,” Reggie shrugged. “And that would be me.”

Someone in the Wrong Role, How to Reassign

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“But he has been doing a terrible job, as a Manager,” Cheryl observed.

“So, do you want him out of the company? Should he be gone?” I asked.

Cheryl shook her head. “No, Harold has too much knowledge, he knows everything about everything, he is just in the wrong position for our company. What he is doing now, works against us. But he could be so valuable in a different role.”

“Right now, you have Harold in the role as a Senior Manager, which you say is the wrong place for him. But you don’t want to fire him, just reassign him. How do you think that will work, in Harold’s eyes?”

“He’s not going to like it,” Cheryl replied, still shaking her head. “He might quit and we really do need his technical knowledge. I am afraid he is going to be embarrassed in front of his peers, in front of his direct reports. This move is going to be very touch and go.”

“So, what is the one thing you have to do, to make this move successful?” I pressed.

“Somehow, we have to allow Harold to save face in front of the company. I am just not sure how to do that.”

Hot Spots

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“So, I am the one to fix this problem with my silos,” Regina slowly realized. “And I can’t just leave my managers in the room to figure it out. Where do I start?”

“Putting your managers in the room is not a bad idea, but they will not be able to figure it out without you. Your role is the integrator,” I said.

“So, I get them in the room, then what?”

“Your managers are competent at work flow charting. Get them to step back and draw, not a system flow chart, but a functional flow chart.”

“Not sure I understand,” Regina quizzed.

“Your managers can flow chart the steps in a system. This exercise would be to flow chart all the systems in your business model sequence. Take this list, put a box around each element and flow them sideways on the white board.

  • Marketing
  • Business Development
  • Sales
  • Contracting
  • Engineering
  • Project Management
  • Operations
  • QA/QC
  • Warranty

In this exercise, we are not looking for the problems inside each function, we are looking for the problems that exist as one function hands off work to the next. We are looking for transition issues, capacity issues, clarity, timing, dead space, delay, undiscovered defects, inspection points.”

“How will we find those?” Regina asked.

“This is a hot spot exercise, just look for the pain. Your managers may not be able to fix the issues, but they know exactly where they are.”

Dotted Lines Create Ambiguity

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“Each department manager turned toward internal efficiency because you told them to. No waste, no scrap, predictable output,” I said. “But now you have multiple departments, multiple systems and subsystems. You have silos. Silos that compete. Silos that compete on budget. They compete for resources. They compete for your managerial attention. Most companies stay stuck here. It’s your move.”

Regina was thinking. Her eyes looked down, her vision went inside. “I am the problem,” she observed. “I told them to be this way?”

“You are the problem,” I agreed. “And you are the solution. Your departments are perfectly capable of creating those internal efficiencies, but those internal efficiencies have to be optimized. Work goes sideways through the organization. It starts with marketing, then goes to sales, then to contracting, then to operations, then to warranty, looping into R&D. Work gets handed off from one department to another.”

“So, I can’t just put all the managers in a room and tell them to figure it out?” she guessed.

“Your role is one of integration,” I nodded.

“Like all the dotted lines on the org chart?” Regina offered.

“Your dotted lines on the org chart have your best intentions. Intuitively you understand the horizontal cross-functional working relationships, that’s why you drew the dotted lines. But dotted lines create ambiguity. No one understands the specific accountability and the limited authority that goes with those dotted lines. So people make stuff up. And that’s where the trouble begins.”

The Problem is Normal

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“Each department manager turned toward internal efficiency because you told them to,” I repeated.

Regina was stunned. She had difficulty seeing the root of the problem as her management directive.

“All crumbs lead to the top,” I said. “And, don’t think it’s because you are a bad manager. Every company has to become system focused at some point. It’s normal. But the solution to become efficient creates the next step of organizational friction. All these internally focused departments, these silos, have to work together.”

Regina’s look of surprise began to calm.

I continued. “If the problem comes from an internal focus by each department, where do you think we will find the solution?”

Regina turned her head. “With an external focus?” she floated.

I nodded, “Yes, and that’s where you come in. This is a higher level of work.”

You Told Them To

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“It’s killing us,” Regina complained. “Our silos are killing us.”

“How so?” I asked.

“It’s like there is a little internal competition out there. It started with the blame game. Departmental managers in a meeting, pointing fingers at a problem. Not my fault, everyone said. Then it became CYA behavior. Departments began to build steps into each process to actually shift responsibility for problems to other functions.”

“Why do you think that happened?” I pressed.

“I don’t know,” Regina replied. “There was a time when I thought a little competition was appropriate. It seemed to help everyone perform at a higher level.”

“So what is happening, now that there is a little competition?”

“Our production department cranks up output, while our warehouse department tries to figure out what to do with all the finished goods. The sales department promises delivery with no visibility to purchasing, so we run out of raw materials. Production gets choked off and we run overtime while guys stand around with nothing to do. It’s a mess.”

“Why do you think it happened?” I repeated.

“I don’t know. It was like we just grew up into the problem.”

“You did. You just grew up into the problem. You told everyone to be efficient, no waste, no scrap. You wanted high utilization of precious resources. Each department went internal to re-sequence for that efficiency. It was a noble move and required at the time. Each department manager did it, because you told them to.”

Silos are a Normal Phenomenon

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From the Ask Tom mailbag –

Question:
How do you overcome the obstacles of silos when the silos are the organizational culture and come from the top?

Response:
I originally posted this last week and then left you hanging as I went underground, buried in travel.

Silos, in an organization, occur as a normal phenomenon. It is counter-productive to growth and profitability, but it is perfectly normal and predictable. It happens.

Silos emerge as a natural by-product of stage three growth. To reduce the noise in Go-Go, there begins an internal focus to create systems. Systems are good. Systems create internal efficiency, internal predictability and a focus on profitability (profitable action).

_________Adolescence – internal focus on system creation
______Go-Go – define and document methods and processes
___Infancy – focus on sales, production, find a (any) customer

The problem is the internal nature of the focus. In adolescence, it is a required focus, but, as a solution to the problems of go-go, it creates internally focused silos that emerge as the next organizational challenge. Silos are normal, but will grind an organization to a halt, cap its growth and make everyone miserable.

To continue its normal growth, a process of integration must occur.
____________Prime – multiple systems/sub-systems create friction, integration required

This is no easy task, and requires capability at S-IV level of work. The saga continues. Tomorrow, I promise.
______

This model is adapted from a comparative study of two models, Corporate Lifecycles, Ichak Adizes and Requisite Organization, Dr. Elliott Jaques.

Temper Tantrums Don’t Work

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From the Ask Tom mailbag –

Question:
How do you overcome the obstacles of silos when the silos are the organizational culture and come from the top?

Response:
Whenever I look at organizational underperformance, total throughput, all crumbs lead to the top. The culture an organization has, is the culture the organization deserves. And, all crumbs still lead to the top.

But your question is “What to do?”

Temper tantrums don’t work. Parents know that. Most management consultants who think they have the answer are behaviorists who have no children.

Visually, we can draw pictures of it. Interruptions in workflow, rough hand-offs from one function to another, undiscovered defects blamed on another department. Some CEOs believe a little internal competition keeps everyone sharp, when the product of that strategy may be counter-productive.

But it works in sports? Yes, but sports are not organized to accomplish work. Sports are organized for entertainment.

Indeed, what to do? Comments?

The Symptom Goes Underground to Fester

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WHY I wrote Outbound Air –

Every company wants to go to the next level. Most have no clue what the next level is. This model provides guidance, anticipates predictable challenges and provides solutions to assist from one level to the next.

_______________Stable – challenge is sustaining the machine, relevance to the market
____________Prime – multiple systems/sub-systems integration
_________Adolescence – internal focus on system creation
______Go-Go – define and document methods and processes
___Infancy – focus on sales, production, find a (any) customer

This model guides us in the creation of structure. Organizational structure is the defined accountability and authority in the working relationships of the team. As the organization winds its way through these stages, its challenges assume false appearances, symptoms. Most think they have a communication problem or a personality conflict. They fall prey to resolving the symptom that only goes underground to fester.

It is only when the organization understands structure, that it can begin to define the accountability and authority necessary to get work done and that is WHY I wrote Outbound Air
_____

A detailed version of this model (SI-SVII) is contained in the appendix of Outbound Air. This model is adapted from a comparative study of two models, Corporate Lifecycles, Ichak Adizes and Requisite Organization, Dr. Elliott Jaques.