The First 90 Days (42 page)
Authors: Michael Watkins
Tags: #Success in business, #Business & Economics, #Decision-Making & Problem Solving, #Management, #Leadership, #Executive ability, #Structural Adjustment, #Strategic planning
Employees are inappropriately rewarded.
Effective managers align the interests of each decision maker with the interests of the group as a whole. This is why teambased reward systems are effective in some organizations: They focus everyone’s attention on the group’s ability to work together.
Problems arise when measurement and compensation schemes fail to reward employees for either their individual
or
their collective efforts. Problems also arise when rewards advance employees’
individual interests at the expense of the group’s broader goals—such as when multiple employees who could serve the same set of customers lack incentives to cooperate. This was the problem confronting Hannah Jaffey at the beginning of the chapter.
Reporting relationships lead to compartmentalization or diffusion of accountability.
Reporting relationships help you observe and control the workings of your group, clarify responsibility, and encourage accountability. Hierarchical reporting relationships make these tasks easier but can lead to compartmentalization and poor information sharing. More complex reporting arrangements, such as matrix structures, broaden information sharing and reduce compartmentalization but can dangerously diffuse accountability.
[3]For an in-depth exploration of these issues, see Michael C. Jensen,
Foundations of Organizational Strategy
(Cambridge: Harvard University Press, 1998).
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.
Aligning Key Systems
Systems (often also referred to as “processes”) enable your group to transform information, materials, and knowledge into value in the form of commercially viable products or services, new knowledge or ideas, productive relationships, or anything else the larger organization considers essential. Again, as with structure, ask yourself whether the processes currently in place support the strategy. That is, will those processes enable your group to meet—or even exceed—the goals laid out in the strategy?
Keep in mind that the extent and types of processes you need depend on whether your primary goal is to drive
[4]
flawless execution or stimulate innovation. You can’t hope to achieve high levels of quality and reliability (and low costs) without an intensive focus on developing processes that specify both the ends and the means (methods, techniques, tools) in exquisite detail. Obvious examples of this are manufacturing plants and service delivery organizations. But these same sorts of processes can impede innovation. So if stimulating innovation is your goal, you need to develop processes that focus more on defining ends and rigorously checking progress toward achieving them at key milestones, and not so much on controlling means.
Doing Process Analysis
They then mapped and improved each of these processes, developing appropriate measurement schemes and altering reward systems to better align behaviors. They also focused on identifying key bottlenecks. For critical tasks that were insufficiently under control, they revamped procedures and introduced new support tools. The result was a dramatic increase in both customer satisfaction and the productivity of the organization.
Table 6-1: Process Analysis Example
Production/Service-Delivery
Support-Service Processes
Business Processes
Processes
Application processing
Collections
Quality management
Credit screening
Customer inquiry
Financial management
Credit card production
Relationship management
Human resource management
Authorizations management
Information and technology
management
Transaction processing
Billing
Payment processing
Your unit or group may have just as many processes as the credit card company. Your first challenge is to identify those processes, and then to decide which of them are most important to your strategy. Those vital activities are your
core processes
. For example, suppose your group’s strategy emphasizes customer satisfaction over product development. You would want to ensure that all the processes involved in delivery of products or services to customers support that goal.
Aligning Systems with Structure
If your group’s core processes are to support its strategy, they must also align with the unit’s
structure
(the way people and work are organized). We can compare this relationship to the human body. Our anatomy—skeleton, musculature,
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skin, and other components—is the
structural
foundation for the body’s normal functions. Our physiology—circulation, respiration, digestion, and so forth—is the set of
systems
that enable the various parts of the body to work together. In organizations as in human bodies, both the structure and the processes must be sound and reinforce one another.
To evaluate the efficiency and effectiveness of each core process, you should examine four aspects:
Productivity.
Does the process efficiently transform knowledge, materials, and labor into value?
Timeliness.
Does the process deliver the desired value in a timely manner?
Reliability.
Is the process sufficiently reliable, or does it break down too often?
Quality.
Does the process deliver value in a way that consistently meets required quality standards?
When systems and structure jibe, both elements reinforce each other and the strategy. For example, a customer service organization structured around specific customer segments also shares information across teams and responds effectively to issues that affect all customer groups.
When systems and structure are at odds—such as when different teams compete for the same set of customers, using different sales processes—they hamstring one another and subvert the group’s strategy.
Improving Core Processes
How do you actually improve a core process? Start by making a
process map
—a straightforward diagram of exactly how the tasks in a particular process flow through the individuals and groups who handle them.
Figure 6-2
shows a simplified process map for order fulfillment.
Figure 6-2:
A Process Map
Ask the individuals responsible for each stage of the process to chart the process flow from beginning to end. Then ask the team to look for
bottlenecks
and
problem interfaces
between individuals responsible for adjacent sets of tasks.
For example, errors or delays may occur when someone in customer relations communicates the need for special handling of an order to the fulfillment group. Process failures are commonplace during handoffs of this kind. Work with the team to identify opportunities for high-leverage improvements.
Process analysis stimulates collective learning. It helps the entire group understand exactly who does what, within and between units or groups, to carry out a particular process. Creating a process map also sheds light on how problems arise. You, your boss, and your group can then decide how best to improve the process. You have two options: radical process reengineering or incremental continual improvement.
A few words of caution. You are probably responsible for a number of processes. If so, manage them as a portfolio.
Do not try to introduce radical changes in more than a couple of core processes at a time. Your group will not be able to absorb so much change. As mentioned previously, do not immediately automate problematic processes, a tactic that rarely solves the real problem underlying process inefficiencies. Problems with processes usually center on miscommunication, confused expectations, and misunderstanding about how the business works. Solving deeper problems will yield bigger benefits than simply resorting to automation.
