A new plant management structure for a new ‘world economy’ – in 1985

“We are in a world economy that puts new competition in front of companies who never dreamed they could have competition. Companies are being driven to a least-cost-producer mentality with a focus on new ways of using capital and a just-in-time inventory approach.” If Michael Hora had offered that view of the world last month, he would be right in line with most of the conventional ...
By Bob Vavra, Editor July 15, 2007

“We are in a world economy that puts new competition in front of companies who never dreamed they could have competition. Companies are being driven to a least-cost-producer mentality with a focus on new ways of using capital and a just-in-time inventory approach.”

If Michael Hora had offered that view of the world last month, he would be right in line with most of the conventional thinking about manufacturing. Had he offered those views in 1997, he would have been considered far ahead of his time.

When Plant Engineering readers found that quote from Hora, then a vice president and partner for management consulting firm A.T. Kearney, it was May 23, 1985. In the middle of the Reagan Era, the world was in the midst of a changing political and economic landscape. By the end of the decade, communism in Russia was in ruins and the Berlin Wall was torn down.

Manufacturing was undergoing its own revolution. Computers were commonplace, and the strategic role of the plant engineer was evolving. In 1985, A. T. Kearney executives were asked by Plant Engineering editors to evaluate the role of the plant engineer and to look at how that role would change in the future.

Several structures were discussed as to how to organize the modern plant engineering and management function in 1985. All the Kearney experts agreed, though, that it was the mission of the organization, not its structure, which was the area most in need of definition and change. “A comprehensive mission definition,” the editors wrote, “is the foundation of a successful organization. Once the mission is agreed to, appropriate responsibilities can be assigned.”

“When you understand your mission, you know what you’re there for,” said Hora. “The classic case is the plant engineer who says ‘my job is to provide the best plant engineering and maintenance operation at the least cost.’ That’s not a mission. He must understand the business that he’s in. He must take his part of the responsibility for that business.”

One area of plant management that was evolving, and that Kearney experts pointed to in particular, was the way maintenance costs were viewed. “Management is beginning to recognize that all the money they spend for maintenance, which they thought was free and which they used like a free service, should be controlled like other operations,” said Delbert Wible, then a manager with Kearney. “Production has been squeezed in terms of incentives and measurements as tight as it can get. The focus is now shifting to other areas of uncontrolled costs like maintenance.”

In light of these changing manufacturing dynamics, Kearney consultants drew up several organizational charts for plant management %%MDASSML%% everything from a plant manager overseeing parallel maintenance and engineering managers and departments to an operational team approach, with each team having individuals skilled in maintenance, engineering and operations.

Hora said that what really mattered was how plant engineers chose to approach their role in the organization. “The plant engineer can take two positions: He can take the defensive, or he can say, ‘Maybe I can lead the way to a different way of having this function contribute to the company.’”

The editors summarized the A.T. Kearney insights the same way: “Plant engineers must change their thinking from a department level to a company level. They are going to have to take their part of the responsibility for the business instead of limiting their responsibility to projects, increased capacity, maintenance, equipment uptime, which is not the business.”