Organizational alignment: Why it is so important
In the US, manufacturing jobs continue to decline, typically moving to countries with lower labor cost. In my view, labor costs are not the chief impediment to U.S. manufacturers being competitive, but rather the root cause is a lack of productivity and insufficient focus on eliminating waste in their processes.
Labor costs are typically only about 15% of total costs. Literally cutting labor costs by 20% would only reduce total costs by 3%; and if done, is typically to the detriment of morale, production capability and efficiency, and overall ability to manage all other costs. Several recent studies indicate that reducing labor costs does not often result in improved overall business performance. It would be better if we engaged our people in helping us to reduce our 85% non-labor costs by just 5% (a net reduction of over 4% in total costs).
Further, economists suggest that for each job lost in manufacturing, there is a corresponding loss of three to five jobs in the community %%MDASSML%% in restaurants, car dealers, hotels, and other businesses which are part of the local economy. Reversing this decline should be a paramount concern to business and political leaders.
One critical issue that must be addressed in becoming more competitive and stopping this decline in manufacturing is becoming more productive with the labor that we have. Doing this requires that we align the organization for manufacturing excellence. It’s common to hear phrases within an organization such as “We’ve got to get everybody pulling on the oars at the same time”, or “We’ve got to get everybody on board with our strategy”.
Maybe the need for these kinds of rhetorical statements is obvious, but just exactly why is it so important to align an organization to a common strategy and set of goals? What are the fundamental drivers for this need, and how do we accomplish that elusive alignment that is so badly needed?
In Edgar Schein’s groundbreaking book Organizational Psychology, he opines: “The first major problem of groups in organizations is how to make them effective in fulfilling both organizational goals and the needs of their members. The second major problem is how to establish conditions between groups which will enhance the productivity of each without destroying intergroup relations and coordination. This problem exists because as groups become more committed to their own goals and norms, they are likely to become competitive with one another and seek to undermine their rivals’ activities, thereby becoming a liability to the organization as a whole.
“The overall problem, then, is how to establish collaborative intergroup relations in those situations where task interdependence or the need for unity makes collaboration a necessary prerequisite for organizational effectiveness.”
My personal experience is that this quote is a reasonable reflection of reality. Given this, it is my observation is that one should be especially careful about using Management By Objectives or MBO. This is particularly true when there is a high degree of interdependence between groups, but the groups are held accountable for different measures. Two groups that clearly fit this description are production and maintenance. The opportunity for conflict is very high, increasing the likelihood for poorer overall performance, in spite of clear individual group objectives.
Schein goes on to observe that the very process of organizing in order to better manage inherently creates competing groups- shifts, areas, departments, divisions, plants, etc. And “group competition” between these functions is intrinsic in any complex organization. Each group “competes” for limited resources, recognition and rewards, executive attention, pay and bonuses, and so on.
My own observation is that while organizing is essential for becoming more effective, a poor structure and/or strategy can be very detrimental to the overall goals. Group competition within an organization leads to organizations becoming “politicized” to one degree or another. Hence we often here a phrase similar to “it’s just politics”, when one person or group leader in the organization does something that is not well received in another group. Politics is simply the exercise of power to achieve a goal. When goals are not aligned, we can have destructive politics, and this is not good for the overall health of the business.
Schein’s studies also provide excellent insight into what happens both within and between competing groups? Within a group, its members become more closely knit, more task oriented, and more formalized and structured to present a common position on most issues. On the other hand, between groups, each group tends to perceive the other groups as the “enemy”, competing for recognition and rewards, scarce resources, executive attention, and seeking primarily to “win” the perceived prize.
As subtle hostility increases toward other competing groups, perceptions are often distorted to support each group’s own particular position. Examples of where this can happen in a manufacturing plant include competition between shifts, plants, production and maintenance, and even divisions.
His studies also indicate that at any given time, you’re likely to have a “winning” group which tends to retain cohesion, but after the “win” become less task-oriented and more complacent. The “losing” group tends rationalize their loss (e.g., the other side had an unfair advantage), but after losing often become more intense and even more task-oriented, and often reorganize to become more effective and increasing the probability of “winning”. Thus continues the cycle of competition among the groups.
Some competition is healthy and creates a zeal for improvement, but excessive or destructive competition is not, particularly when it is covertly to the detriment of the organization’s overall performance. Examples of destructive competition include running a process above its inherent capability to make production quota, or not sharing information across shifts to help all shifts, or not sharing an improved or recognized set of best practices among plants to help all plants.
Since we can’t eliminate shifts, departments, divisions, or other inherently competitive groups, how do we effectively use groups (or teams) to be more successful as a business? We must align the organization to a higher purpose, or what Schein calls superordinate goals %%MDASSML%% goals that have a higher purpose than any one group and align all groups to that purpose giving each a common goal and sense of identity. More importantly, whenever there is a conflict between groups, each must always revert to the superordinate goal/measures in making decisions.
For example, “We’re going to be the best manufacturing plant in the world” might be a superordinate goal. Or, constantly reminding people, especially managers, that we must always be asking “What’s the right thing to do for the business overall, all things considered?”
It’s not enough to say any of these things once and expect people to respond. They must be constantly repeated until they become a habit, or part of the culture of the organization.
|Ron Moore is Managing Partner of The RM Group, Inc., Knoxville, TN, and author of Making Common Sense Common Practice: Models for Manufacturing Excellence, now in its third edition from Butterworth-Heinemann. He holds a BSME, MSME and MBA. He can be reached at (865) 675-7647 or by e-mail at RonsRMGp@aol.com .|