Category Archives: Organization Structure

Your Customer is Not Your QC Department

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“You cut your lead time from six weeks to four weeks. Higher throughput with the same number of people, with the same equipment, in the same facility, you lowered your cost. You shifted from just getting the orders out the door, to a consistent, predictable system. And that’s when your troubles began?” I was curious.

“Yes, we were certainly focused on our systems,” Arianne continued, “but we had to match a competitors warranty. We figured, no problem, but we were wrong. We had our cost-to-produce down, but our warranty returns went through the roof. Everything we made up in cost savings went right back out the door in warranty repairs and replacement. We had a quality problem.”

“Pace and quality,” I said softly.

“Yes, our throughput was quicker, but it just meant we were making mistakes faster.”

“What did you do?”

“We were relying on our customer to be our Quality Control department. Bad move. We had to retrench, put inspections after each major step, so if we had a problem, we could identify it before we made another thousand parts. We tracked everything on white-boards. We didn’t make it to six-sigma, but enough quality improvement to make a big difference.”

“So, finally you got organized, accelerated your throughput, beat your internal quality standards. It must have been a proud moment,” I encouraged.

“Not really,” Arianne replied. “That’s when the rug got pulled out from under.”

Shift to Efficiency

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“You were more organized, but you almost went broke?” I pressed.

“Yes, we managed to get all the orders out the door, but it cost more to produce, than the revenue could cover,” Arianne replied.

“So, you needed to raise your prices?”

“Not that simple,” she explained. “We had competition. Our competitors price-to-the-customer was 15 percent below our cost to produce the same product. We waited for two years for them to go out of business. There was no way they could sustain that loss. But after two years, we figured out they weren’t losing money after all. They had found ways to be more efficient and productive.”

“What did you do?”

“It wasn’t enough to be organized. We had to examine every step. Turns out there were more efficient ways to work. We changed the sequence of some of the steps. Some steps could be done at the same time by different teams, increasing throughput. It was amazing. We cut our lead time from six weeks to four weeks. Higher throughput with the same number of people, with the same equipment, in the same facility, we lowered our cost. We shifted from just getting the orders out the door, to a consistent, predictable system.”

“Problem solved?” I asked.

“Not really. That’s when our troubles really began.”

That Sounds More Organized

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“Why are we having this discussion in the first place?” I asked. “What do you see, as a manager, that is creating a problem?”

Arianne was puzzled. She knew the answer, but didn’t know the words to express it. “There are all kinds of issues. I guess it’s just getting organized. Our company has grown, things are more complicated, now. It used to be, everybody did a little bit of everything, and somehow, all the work got done. Now we have more customers, way more customers, and the volume, we now do, in one day, what we used to do in a month. We started out with eight people, now we have eighty-five.”

“When you think back to when your company was small, and then you added more people, what was the biggest change that you noticed?” I pressed.

“I remember, clearly, everybody was doing a little bit of everything, and then we had to divide up the work. Some people would work on one part, others would work on another part, and someone else was assigned to find new customers,” Arianne explained.

“Well, that sounds more organized,” I observed.

“Are you kidding. That was the beginning of the first set of problems. We ended up with two people doing the same thing, duplicating work. And other work that no one was doing, gaps all over. I felt like Hans Brinker, plugging the dike with my thumb. But there were too many gaps. Too many customers, too many orders. It was a mess.”

“What did you do?”

“Somehow, we got it sorted out. We drew a big flowchart on the wall, with boxes for each of the major steps. It became easier to see the holes in the dike, and where work was duplicated. We made checklists, created push schedules. It was a lot of work, a lot of effort, a bunch of overtime, but at least we got all the work out the door.” Arianne took a breath.

“Well, that sounds more organized,” I repeated.

“Are you kidding,” Arianne sat forward. “That was when we almost went broke.”

Accounting – What’s the Level of Work?

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From the Ask Tom mailbag –

Question:
We are working on the structure of our accounting department. We have a comprehensive list (spreadsheet) of ALL the tasks that need to be completed from daily transactions, to weekly flash reports, to monthly financial statements, to quarterly reports and annual compilation activities. But all this work keys around, seems to be performed by one individual, the accounting manager. We have two additional people in that department, but we need help figuring how to distribute the work to the right person.

Response:
This is an accounting department, but the same principle applies, no matter the discipline. The futile approach would ask “Can this person do this and can that person do that?” The result would be a helter-skelter mish-mash of who would be accountable for what. It might help, but you would remain in a state of disorganization. Especially where you have a spreadsheet of tasks, enough to go around for three people in your accounting department, you need a systematic way of figuring this out. This is not complicated.

You say you have a spreadsheet. As comb through the list of tasks, the central question is to identify the Level of Work. Add a column in your spreadsheet that identifies the Level of Work (LOW) for each task. Your Accounting Manager needs to self perform those tasks at S-III and delegate S-II and S-I tasks.

S-I – Clerical, transactional input from coded paperwork, proofing batch transactions for accuracy, printing reports and schedules. This would include A/P and A/R data entry, timesheet entry, including job cost transaction input for labor and materials. Matching paperwork from work orders and POs to invoices received from vendors. Collecting, sorting and filing required paperwork to support higher level decisions related to disbursements or billing activities. [Scope of task assignments range from (1) day to (1) week to (1) month with no task assignments longer than (3) months].

S-II – Coding paperwork (making decisions) for transactional input, coding job costs of materials and labor including split allocations according to formula or system criteria created by manager. Reconciliation of accounts to workpapers. Second level review of transaction input from S-I activities. Compilation activities of reports and schedules required for routine reports for accuracy, completeness according to a publishing schedule created by manager. [Scope of longest task assignments range from (3) months to (12) months].

S-III – Creation of systems for all accounting functions, including documentation of steps, checks and balances, reconciliation points, review steps, identification of thresholds, risk assessment, and operating parameters. Third level review (signature) of transaction schedules for execution of disbursements (cash), movement of cash and cash management. Forecasting and budgeting. Cross-functional work with departments and divisions to support the financial analysis required for operational decisions (bid profitability, bid qualifying, project budgets, work-in-process, milestone completions, payment apps, collections). [Scope of longest task assignment range from (12) to (24) months].

You can flesh these guidelines out to assist in identifying the Level of Work in each line of your spreadsheet. Once the Level of Work is defined, it is easy to determine what tasks the Accounting Manager must self-perform and what tasks can (should) be delegated to appropriate team members.

How Long Have You Been Working This Late?

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It was 6:30p when I stopped by Miguel’s office. “What’s up?” I asked.

Miguel picked his eyes up off the paper, holding his place on the schedule with a ballpoint pen. “Just going over tomorrow. It’s going to be another big day. Three special orders to get out the door.”

“Where is everyone, why are you still here?”

“Oh, we shut down at 4:30p. My crew is up with the chickens, tomorrow we start at 6:30a. I run a staggered shift. The first guys get the day started, then we’re full strength by 7:30a. The first wave is off by 3:30p, while the second wave picks up the pieces for the day.”

“Why are you still here?” I repeated.

“Well, there is just a bunch of little things that have to be done each day. Sort of out of control, huh? This won’t last forever. My schedule is getting better.”

“How long have you been working this late?”

“Gosh, ever since I became the supervisor, I guess. But it’s going to get better, soon.” Miguel looked optimistic.

I didn’t believe him.

Things Fall Apart

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“I don’t think you have an attitude problem. I don’t think you have clearly defined the accountability and the authority that goes along with that dotted line. That’s why dotted lines are so dangerous,” I said.

“So, what should I do? This Key Result Area is not a high priority, but the work still has to get done,” Megan explained.

“You are shooting yourself in the foot when you describe -it’s not a high priority-. If the work in this area is not done, what happens to its priority?” I asked.

Megan thought. “You’re right, the tasks will take about five hours a week, but if they are not completed, all hell breaks loose, other things begin to fall apart.”

“So, what should you do with that dotted line?” I pressed.

“Get rid of it, change its color, make it bold,” Megan retreated. “I guess I have to specifically define what I want, how much time it should take and what the result should be.”

“You guess?”

It’s Just a Dotted Line on the Org Chart

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It’s been a whirlwind of a week. I would like to welcome our new subscribers from workshops in Minneapolis, Des Moines and Austin.
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“What do you mean, she doesn’t know she is accountable? It’s very clear to me,” Megan complained. “She has a very clear dotted line to that area of responsibility. I know it’s not her highest priority, but still, she is responsible.”

“So, there is a conflict in her priorities?” I asked.

“Not a conflict, really, she has to get it all done. Just because it’s a dotted line doesn’t mean she can ignore it. Besides, at the bottom of her job description, it says, -and all other duties assigned.- That should cover it.”

“As her manager, what do you observe about the way she handles the conflict in her priorities?” I pressed.

Megan thought. “I think it’s an attitude problem. It’s almost as if she doesn’t care about one part of her job.”

“I thought it was just a dotted line?” I smiled.

Megan stopped cold. “You think the problem is the dotted line?”

“Dotted lines create ambiguity. Ambiguity kills accountability. What do you think?”

Not a What, But a Who

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Derrick located a copy of the org chart. “A little out of date,” he remarked.

“It’s time stamped only three weeks ago,” I said.

“Yeah, well, it’s still out of date.”

“So, if I think you have a system problem, where should I look on the org chart?” I asked.

“All these people are doing production, and the supervisors make sure production gets done. You have to be looking at our managers, they create our systems, monitor and improve our systems,” Derrick observed.

“Yes, and I see you have five manager positions. These are the roles accountable for your systems.”

“That’s why it’s a little out of date. One manager got promoted to Vice President and we figured he could still cover his old position. This manager, here, got an offer from another company, and we decided that we might be able to do without for a while. And our controller wanted to move to the northern part of the state. And with the internet, she does her work from home.”

“Let me get this straight. You have five manager positions, monitoring your systems, yet only two out of five actually show up for work here?”

Traumatic or Planned?

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From the Ask Tom mailbag –

Question:
You talk about how important it is to match a person’s capability with challenge in the role. You also say that as people grow and mature, so does their Time Span capability. What do you do with talented people when promotional opportunities are limited?

Response:
It’s a dilemma for every organization and why it is important for every company to stay “green and growing.” When personal opportunity stops, it is inevitable that you will lose that person. This can be traumatic, or it can be planned.

Look at any McDonald’s store. Inside you have a team of motley teenagers flipping burgers, sizzling fries and making chocolate shakes (my favorite). While I often joke that any employee who shows up for their shift five days in a row can be the manager, the long term potential for advancement is limited. For most companies, the prospect of short careers and high turnover would not be desirable, for McDonald’s, it’s their business model. Traumatic, or planned?

For McDonald’s, it’s planned, predictable and normal. For most kids behind the counter, it’s their first job and 1-2 years is all that’s expected. Any company with limited opportunity for advancement has to face that fact. Managers-Once-Removed (MORs) should be trained to look for the signs and be prepared for those coaching conversations. As a rule the company should gear its training programs to handle the normal course of turnover and gear it’s systems to accelerate proficiency in performance. That’s why fry baskets have timers and hamburgers are cooked on conveyor chains.

So, if the organization can stay green and growing, perhaps it can create those opportunities internally. But rarely for everyone and rarely forever.

The Dotted Line

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I don’t talk much about Cross Functional relationships. It’s advanced stuff. But when it rears its ugly head, it’s a mess. Cross Functional relationships are, most often, defined in the organization by a dotted line. Dotted lines create ambiguity. Ambiguity kills accountability. Get rid of the dotted lines on your organization chart. They are killing you.

In Cross Functional relationships, two managers, most often in roles at the SAME Stratum, work together, but neither is the manager of the other. In this example, YOU are the manager, so it is your problem to define their working relationship. And you cannot define their working relationship with a dotted line.

Most organizations don’t know how to define this relationship, so it is often left undefined and that is where the trouble starts. It looks like a personality conflict or a breakdown in communication, but it is a structural problem because YOU did not properly define the relationship.

Elliott Jaques (Requisite Organization) specifically defines these Cross Functional relationships so we can get on with the work. This replaces your dotted lines.

Cross Functional Relationships

  • Prescribing relationship
  • Audit relationship
  • Coordinating relationship
  • Monitoring relationship
  • Service getting relationship
  • Advisory relationship
  • Collateral relationship

On the face of it, defining these relationships, up front, resolves the dotted line, resolves the ambiguity and creates accountability.

Who can call who into a meeting?
Who can instruct who to do something?
In a disagreement, who decides?

Over the next few days, I will talk about each of these relationships and the clear accountability between the people in a Cross Functional relationship.
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