Category Archives: Organization Structure

Sustained Achievement

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What is the function of management? I often ask.

In organizations, we design roles for people to play. So, what is the role of management?

Every employee is entitled to have a competent manager, with the time span capability to bring value to their problem solving and decision making.

I once asked the definition of an entrepreneur. I was sternly instructed that an entrepreneur is that person who creates an organization that leverages the skills and talents of other people to create something that no one individual could produce on their own.

And, so it is with a manager. That person who leverages the skills and talents of other people to create something that no one individual could produce on their own.

Individual achievement is a myth. The truly great works of mankind are nestled in the collective works of people transformed from a group to a team. Sustained achievement is the collective work of people, transformed from a team to an organization, that continues to create beyond the original ideas of the founder.

By Design, or By Chance?

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I was just about to leave when Lawrence stuck his hand in the air. “What about the people?” he asked.

“The role of the Manager,” I started, “is to create the system and make the system better. The most important system is the people system. How people work in your organization is top priority for the Manager. Look, here is the bad news. Right now, your people system is working exactly as it was designed to work.”

“How can that be?” Lawrence replied. “Our people system sucks.”

“You designed it that way, or by choice, you decided to leave it to chance. Either way, you designed it to suck.”

“But, it’s not my fault. I have only been a manager here for two months.” Lawrence was backpedaling big time.

“And so, for the past two months, you have supported a system by doing nothing about it,” I replied. Lawrence was looking for a better excuse, but I stopped him. “Look, in the short time you have been a manager, have you drawn a brief diagram about how people work around here, how they relate to each other, how they depend on each other? Have you written job profiles to document the specific accountabilities of each person on the floor?

“Lawrence, you are in charge of the most important system in your company, the design of how people work together as a team.”

The Source of Organizational Pain

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Sometimes people on your team don’t fit. Culture is that unwritten set of rules that governs our required behavior in the work that we do together. Some people don’t fit. It doesn’t make them a bad person, they just don’t fit.

Some companies hire for culture, assuming the company can train the technical stuff. Some companies require the technical stuff assuming the candidate can adapt to the culture.

Organizational structure is the way we define the working relationships between each other. Organizational structure is culture.

Based on your product or service, your business model, what is the relationship your customer wants with your organization? The Discipline of Market Leaders documents three types of relationships (why customers buy from us).

  • Product Superiority (Quality)
  • Low Cost
  • Customer Intimacy

This narrative set the stage in 1995, and, now, there are more ways to define the customer relationship. (I would like to hear how you describe yours.)

Your customer relationship platform drives everything else, specifically your structure. It is the basis of your business model. As a small business owner, being able to accept credit card payments is one of the most important small business tools that should be at the top of your list. By accepting credit cards, you’re making it easier for customers to do business with you. When choosing a credit card processing provider, it’s best to compare the credit card processing fees they charge so you can get the best possible deal.

What Changes About the Work?

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What will be the nature of work?

As we adopt technology into the enterprise, what will change about the work? Those who sit in my workshops know that I define work as – decision making and problem solving? What will be the nature of decision making and problem solving as we embed technology into our internal production systems?

Production Work (S-I)
Physical robotics are already creeping in to production work (S-I). Robots are most often adopted into physical work that is repetitive, requiring precision cuts, punctures, bends, dipping, pouring, lifting. Robots are also useful in production environments where human involvement is uncomfortable (cold, heat) or dangerous (hazardous exposure). As companies adopt robotics and other technology, what changes about production work? What decisions are left for humans?

Supervisory Work (S-II)
And, what of supervisory work (S-II)? Typical (S-II) tools are schedules and checklists, the role is accountable for making sure production gets done, on pace and at standard spec. If we can sense most critical items in a production environment, with precision, in real time, what decisions are left for humans? As companies adopt technology, what changes about supervisory and coordinating work?

Managerial Work (S-III)
And, what of managerial work (S-III)? Typical (S-III) tools are work flow charts, time and motion, sequence and planning. The role is to create the system that houses the production environment. Most sub-enterprise software (as opposed to full enterprise software) is simply a transaction system that records transaction activity through a series of defined steps. Most computer software contains embedded rules that enforce a specific sequence of task activity. If most systems are designed around software systems, what decisions are left for humans? What changes about system work?

Executive Management Work (S-IV)
With a concentration in Ops (COO), Finance (CFO), Technology (CTO), the essence of executive management is functional integration. Most enterprise (full enterprise) software is designed to integrate end to end functionality across the organization. It contains hooks that communicate from one function to the next, with a plethora of configurations possible depending on the desired integration. If functional integration is controlled by enterprise software, what decisions are left for humans? What changes about functional integration work?

These are not idle questions.

It’s All About the Work

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“Yes, but we can’t afford to fire this person, right now. If we did, we would lose everything they know about our system. I know their performance is unacceptable, but we would be lost without the things they know about our processes, our machines, the tolerances, the setups.”

“So, where does that leave you,” I asked.

“Between a rock and a hard place. We can’t even let this person find out that we are recruiting for his replacement. He might quit.”

In the beginning, most companies organize the work around people and their abilities. As the company grows, an inevitable transition must take place. At some point, we have to organize the people around the work.

This looks like a people problem. This is a structural problem.

If you think your organization is people dependent, where work is organized around the people we have, what steps would it take to transform into a system dependent organization? It starts with the simple documentation of processes and roles. That’s the first step to prevent becoming hostage to an underperformer.

Is the COO Irrelevant?

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From the Ask Tom mailbag –

Question:
I read your book, Outbound Air, again.

And I was thinking there might be a conflict with trendier/newer business models. A lot of companies seem to be pushing flatter structures and mixed function work-groups. So there isn’t really a role for COOs as say, the CEO’s internal quarterback

My understanding is that COOs exist to corral the various functions i.e. highest timespan
while the CEO is dealing with strategy, major threats etc.

So does the timespan model change for these flatter-structured businesses where the COO is supposedly irrelevant?

Response:
Elliott’s response to a similar question goes like this –
“I hear these things, and I just have to ask, who is kidding whom?” It is not that the role of the COO disappears, but it is certainly different.

Small Organizations
First, many organizations (small ones) are not level (V) organizations in the first place. Indeed, many companies are level (III) organizations, so they have production, supervision and a CEO, who really plays the role of a level (III) manager. Nothing wrong with this small company, the CEO can make a wealthy living out of it.

Growing Organizations
As the company grows, the level of work will necessarily increase to level (IV). There are multiple functions (systems) inside the company that must be integrated together. Again, the CEO in a level (IV) company will play the role of the integrator. In a larger, more mature company, this would be the role of the COO.

Maturing Organizations
In a level (V) company, the CEO must leave the integration role and truly focus on strategy. Without an effective COO at level (IV), the CEO will necessarily be dragged down into the weeds (back into integration activity). And, as long as the CEO is doing work at level (IV), the company will not grow, likely grow and contract in fits and starts, never effectively integrating their multiple systems. Yes, it is possible to have a dysfunctional level (IV) organization.

Digital Technology
Over the past two or three decades, technology arrived. Indeed, computer systems (note the word system) supplant many level (III) functions. MRP and ERP software systems, in their algorithms, require very specific steps in specific sequences, level (IV). The algorithms were created by some very smart teams who created systems and system integration in a variety of disciplines.

However, with effective technology implementation, the managerial work changed. So, let me pose this question. If we have a technology platform that serves to move data between multiple functions in the company, integrating those functions together, a level (IV) role, then what is the work of the COO?

Here is a hint. Work is decision making and problem solving. In the presence of an effective ERP system, what decisions are left to be made and what problems are left to be solved by the COO? There is an answer to that question.

Your thoughts? -Tom

How to Test Capability at S-IV

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From the Ask Tom mailbag –

Question:
Your post last week helped to explain our dilemma in transitioning an (S-III) Inventory Manager to an (S-IV) VP-Inventory Control role. You said we should have tested him with a project prior to promoting him. Maybe it’s not too late. I know we already promoted him, but could we give him a project as a training tool to introduce him to this new level of work.

Response:
Yes, not a bad idea. This project will give his manager an indicator of how your Inventory Manager is making this transition. The biggest difference in this transition is a subtle shift from a single system internal focus to a multi-system external focus.

  • S-III – System (creates the system, monitors the system and improves the system)
  • S-IV – Integration of multiple systems and sub-systems (attention to dependent systems, interdependent systems, contingent systems and bottlenecks)

So, here are the elements to embed in the project.

  • The project has to be real. No contrived projects as a test. If you want to build a leader, it has to be a real project.
  • Your new VP-Inventory Control needs to be the project leader, under the coaching of his manager. The VP-Inventory Control’s manager is likely to be the CEO (S-V).
  • The members of the project team need to be interdisciplinary, from functions outside of the authority of Inventory Management. As the project leader, your VP-Inventory Control will have to gain willing cooperation from the team, not as a manager, but in a cross-functional role as project leader (prescriber authority). He will have to negotiate with each project team member’s manager for their participation.
  • To be effective, the VP-Inventory Control will have to understand how separate systems impact each other.

Here are the learning objectives of the project (how to evaluate).

  • How well does the VP-Inventory Control understand the systems outside of inventory control? How does he seek to understand those systems? How does he speak with others and ask questions outside of inventory control?
  • How well does the VP-Inventory Control select people to be on the project team? How does he staff the project team? How does he anticipate the input he will need from others outside his own area of expertise?
  • How well does the VP-Inventory Control state the mission of the project, gain willing cooperation from others where he is NOT their manager?
  • How well does the VP-Inventory Control negotiate with peers in the organization to use their resources to accomplish project goals?

It might have been helpful to engage in this type of project prior to the promotion. But, this project can still be helpful to the new VP’s manager (likely, the CEO).

The Struggle for Emerging S-IV

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From the Ask Tom mailbag –

Question:
It took a long time, but our company has grown. Our business model is a distributor, it’s all about supply chain for our customers. Because our business model is driven by the logistics of incoming and outgoing material supply, we recently promoted our warehouse manager to VP-Inventory Control. For us, it was more than just a change of role title. Our warehouse manager took us through re-binning our inventory, bar coding SKUs, RFIDs on serialized product. He is a really bright guy. But his promotion to VP-Inventory Control seems to have gone to his head. With his new-found power, he has emerged as a prima-donna. In our executive team meetings, he believes that inventory control should be the deciding factor in every business decision for the company. If he keeps this up, he is going to get fired.

Response:
Indeed, the move from a Stratum III (S-III) inventory manager to an (S-IV) is a dramatic change in level of work.

  • S-III – System (creates the system, monitors the system and improves the system)
  • S-IV – Integration of multiple systems and sub-sytems (attention to dependent systems, interdependent systems, contingent systems and bottlenecks)

The focus at S-III system level is internal. We demand each of our systems be efficient, profitably leveraging its resources for maximum output. Your inventory manager did just that with a bin system, bar codes and RFIDs. Kudos.

The focus at S-IV is integration. With an internal focus on inventory management, his new role is to assist in the integration of inventory with all the other systems in the company. It is no longer a matter of profitably leveraging resources for maximum output, but optimizing output with the other systems in the company. It is a matter of how one system’s output (reinforcing system) is impacted by another system’s output (balancing system).

This requires the focus for the new S-IV to transition from internal to external. You don’t have a prima donna personality conflict. You have not clearly defined and communicated the new role, nor its differences from the prior role.

You also skipped a step. How did you know if the inventory manager was ready for these new accountabilities? You didn’t. You blindly promoted and now you have a bit of a chocolate mess. The step you missed, prior to the promotion, was assigning S-IV project work, coaching and evaluating the output. Team members should NEVER get a promotion. They earn promotions by successful completion of project work similar or identical to the work in their new role. -Tom

Without This, a Void Filled With Shenanigans

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I am told that we need more leadership around here. I am told that we manage things, but we lead people.

My experience tells me otherwise.

I believe, especially as companies grow larger, that we need more management. I would concur that it is very difficult to manage people. People resist being managed. But, it’s not the people who need to be managed, it’s the relationships between those people. In a company, it is the working relationships that need to be managed.

I hear about personality conflicts in an organization. But, I don’t see a personality conflict, I see an accountability and authority issue. In an organization, we rarely define the accountability and authority in the working relationship. We never defined where people stand with each other, who can make the decision, who can make a task assignment and who is accountable for the output.

We take relationships for granted. We take for granted that people know how to behave with parents, with siblings, with teachers. We take for granted that people know how to behave as managers, but, in most cases, managers behave the same way they were treated by their managers.

There is a science to all this. It has to do with context. Effective managers are those who create the most effective context for people to work in. It is that unwritten set of rules that governs our behavior in the work that we do together. There is a science to context.

Organizational structure is context. It is the defined accountability and authority in our working relationships. Without it, people fill the void with all kinds of shenanigans. Not their fault. It is the responsibility of the manager (including the CEO) to set the context.

Don’t Get Rid of Your Silos

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This Thursday, Nov 3, 2016, in Fort Lauderdale, public presentation of Management Myths and Time Span. Register here.
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From the Ask Tom mailbag –

Question:
In your workshop, for the bottom three layers, S-I-II-III, you said there was an internal focus. What happens at S-IV and S-V?

Response:
The Basic Building Block (S-I-II-III) populates every organization, no matter how big or how small. These layers have an overriding internal focus. Why? Because, we told them they had to be internally focused. We (S-IV and S-V) created very specific work instructions, to be efficient, profitable, no waste, no scrap, high utilization of available resources. Those work instructions are internally focused.

S-V – Business Unit President – Internal AND market focus
S-IV – Internal AND external system focus (multi-system integration)
S-III – Internal system focus
S-II – Internal implementation focus (make sure production gets done complete, accurate, on-time)
S-I – Internal production focus

To be effective at S-IV requires a combined internal and external system focus. As the organization grows, it creates more than one system. It ends up with multiple systems and sub-systems. Individual roles grow up into teams. Teams are created inside a single function, or department. With multiple departments (multiple systems and sub-systems) we observe the silo effect. Silos don’t get along with other because they are internally focused.

This internal focus is normal. We told each S-III system to be internally focused, but now we have a silo problem. You likely heard you need to get rid of your silos. Wrong. You need those silos AND you need those silos to be internally focused (efficient, profitable and predictable). The resolution to the silo issue is not to get rid of them, but to integrate them together.

Multi-system integration at S-IV requires an internal AND an external focus. Roles at S-IV have to be able to see outside a single serial system and understand the impact of one system on another system. Roles at S-IV are integration roles, optimizing multi-system output and transitions or work handoffs from one system to another system.

Some companies stay stuck with silos. Some resolve this organizational friction. But to resolve it, requires capability at S-IV, integration, a holistic look at the organization. -Tom