Growth

Trouble in the pipeline

SmartCompany /

Signs of dysfunctional organisations show up every day, as people interrupt the work of others to satisfy their own needs with no thought to the company’s “value chain”.

There was this business that manufactured plastic pipes. The day I visited it was a hive of activity because, the foreman explained, to tackle the company’s financial strain it had a special offer on five-centimetre corrugated pipe and was working flat out to satisfy the orders.

 

For a moment, that appeared to be a great idea, although it wasn’t clear how the product had been priced for sale. As the tour proceeded, we walked out into the open section behind the factory where there were oceans of five-centimetre pipe but it was plain, not corrugated.

 

I asked how long the product had been lying idle in the yard. “Yonks,” said the foreman. So why not have a sale on it, rather than the corrugated? “You had better ask the sales manager. It beats me!” It turned out that no one in the factory had been asked for their input on a sale of corrugated pipe.

 

This is what is called “organisational dysfunction” and although it may seem an absurd story, one that “wouldn’t happen here”, the fact is that it happens every day.

Consultants dine out on such stories. Why? Because people in different sections of a business see things from their own perspective and there is no overall constraining mechanism to put their view of things into the wider picture of the organisation.

This is particularly the case with emerging businesses that have grown quickly without installing mechanisms that retain the culture while embracing the dynamics of growth.

 

It is particularly so in the manufacturing environment where “Marketing and Management” decide on the sales strategy for the firm. Often the result is that they do bring in a new customer or a big order and they get their commission and everyone in the front office is ecstatic.

In the meantime, the direction goes out to the foreman to “get this order out yesterday” because the sales people want to make a big impression with the new customer. The foreman, exasperated but without the authority to refuse, interrupts his schedules to fit the job in.

 

Then the long-standing customer, whose order has just been sidelined, is on the phone complaining. No one has thought to check with production. “It doesn’t happen here!” My foot!

 

The importance of organisational effectiveness was emphasised by the American guru Michael Porter by demonstrating what he calls the “value chain”. This is the chain of events from the supplier through the internal operations of the business to the customer.

What the customer gets is the product of how well this chain works. If it is dysfunctional and communications are poor, the end product and therefore the customer satisfaction will be affected.

 

People are interrupting production every day of the week. It might be the partner in a law firm who believes that her job is more important than that of an associate; or a distributor of power tools who is paid an incentive by keeping low stock with the result that it can’t respond to customer orders in a timely fashion; or the simple manufacturing process where machinery is stopped to tool up for the interrupting job.

 

If management can constantly keep in mind the necessity for organisational effectiveness as the central key to success, it will sometimes be necessary to say “no” to a new customer and it is always better for that customer to wonder why you said “no” than for the other customers who have been waiting in line to wonder why you said “yes”.

 

Ensuring that the value chain works effectively is the central responsibility of management.

 

 

To read other Louis Coutts blogs, click here.

 

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