The purpose of system and sub-system integration is not to get rid of our silos, but to integrate them together. The second issue in this integration has to do with individual system capacity and total system throughput.

As organizations grow, there is constant pressure on efficiency (lean, six sigma, MUDA), but as the internal systems multiply, efficient as they are, they begin to get in each other’s way. It is not enough to have a collection of perfectly efficient systems, the organization now has to look at total system throughput. Capacity output and constraints of each system come into play.

Is it possible for Sales to write so many orders, that it outstrips the capacity of Operations to complete those orders? Unfilled sales orders become back-orders. Unfilled back-orders become cancelled orders. Customers go to competitors. What’s the problem? Both Sales and Operations are running full-tilt within the constraints of their function, but one function is outstripping the capacity of the other.

Let’s flip this around. Our Operations function has the latest, greatest state-of-the-art equipment, a cracker-jack operations team and the capacity to crank out finished goods like there is no tomorrow. Yet, if our Sales function is somewhat anemic, not that they are writing no sales orders, but certainly not selling everything that gets produced, what happens to the unsold finished goods? Into inventory they go, stacked in the warehouse. Until the warehouse gets full, then what do we do? We get another warehouse. What is happening to the cost-of-goods-sold?

This second issue of system integration is optimizing the capacity of each function as it sits next to its neighboring functions. There are dependencies, inter-dependencies, constraints, contingencies and bottlenecks that govern total system throughput. It does no good to write sales orders for products and services that cannot be filled.

Even small organizations assemble systems and sub-systems, and face the same system integration issues as large organizations. Remember, this is not an exercise to eliminate silos, but to integrate them together.

The first integration issue has to do with work as it travels sideways through the organization, from one function to the next – marketing – sales – project management (account management) – operations – quality assurance – research and development – accounting – human resources.

The first issue is to establish the quality standard of the work output as it travels from one function to the next. What does sales always say about the leads that marketing gives them?
“The contact person you gave me hasn’t worked at the company for three years.”
“The telephone number you gave me is a fax machine.”
“The email address you gave me is misspelled and bounces when I send to it.”

What’s the problem? Marketing is proud of the quantity of leads passed to sales, but, the leads miss the mark. The first step to integration is to establish and enforce the quality standard of work output.

In construction, there is a critical work hand-off between the estimating function and project management function. If there is a defect in that hand-off, the defect will be embedded in the project until it surfaces in either operations or quality inspection. The integration of those two functions (estimating and project management) demands the hand-off meeting has a hard agenda with detailed checklists. Problems identified in this hand-off meeting are easier to correct on paper than later, after steel and concrete.

The second issue related to integration has to do with capacity, subject of our next post.

Each level in Elliott’s level-of-work schema corresponds to a macro organizational function.
S-I corresponds to production work, timespan 1 day to 3 months.
S-II corresponds to supervisory work, to make sure production gets done, timespan 3 to 12 months.
S-III corresponds to system work (single serial system), timespan 1-2 years.
S-IV corresponds to system integration work (multiple systems and sub-systems), timespan 2-5 years.

Integration is a fancy word, what does it mean?

As the organization matures, grows larger and more complex, distinct functions emerge. These started as single roles, but grew into teams. Here is the quick list –
-Marketing
-Sales
-Project Management (or Account Management)
-Operations
-Quality Assurance (QA/QC)
-Research and Development
-Accounting
-Human Resources
There are a ton more, depending on the business model, but you get the drift.

Each of these functions begins internally focused, mostly because we said so. We told each function they had to efficient, internally profitable, no waste, prudent use of internal resources. We told them to be internally focused.

As we stack more functions next to each other, we can see the problem we created. The problem presents itself as a communication breakdown, sometimes a personality conflict. Each function competes for budget, prestige and managerial attention. This is the silo effect.

And we have all been told to get rid of our silos. Not so. We put those silos in place for very specific reasons. It is not a matter of getting rid of our silos, it is a matter of integrating them together.

Integration is a fancy word. What does it mean?