Your Company's Efforts to Achieve Its Goals
You might compare your firm's efforts to reach its goal (or goals) to a long and potentially perilous journey to a far-off and, perhaps, unseen destination. In fact, given the uncertainties the world's economies are throwing at you day after day, you would not be far afield if you were to compare your journey to that of a 15th century voyage to the New World.
We would like to help you get there.
Stop What You Are Doing
When most business executives and managers think about creating and sustaining business growth, they almost invariably begin by asking, "What should we do in order to improve and grow?"
More often than not, that is actually the wrong question to be asking—at least if taken in the sense in which it usually is framed.
However, we have discovered a secret—a secret that has helped many companies, like Toyota Motor Corporation (the most successful automobile manufacturer in the world and a model that many seek to emulate). That secret is simply this:
The simplest, lowest-cost and most effective starting point in a quest for improvement and growth is not moving forward with things you think you ought to do; rather, it is simply to identify those things you are presently doing that you should not be doing at all.
Chances are your executives and managers are already consumed with many initiatives that—sadly—may not be leading to a sustainable competitive advantage. Some of the initiatives may even end up contributing to added complexity, while adding little or nothing to your competitive advantage.
So, launching some new and even more grandiose initiative is probably a very bad idea, right now.
We believe that the very most important first step in an ongoing process of creating and sustaining harmonious growth is to begin by examining your current reality—how your company is working and failing to work on a day-to-day basis.
If you are up to the task, this will mean examining company rituals, behaviors and activities with nothing being out-of-bounds for consideration. We will help you discover the "tribal knowledge" resident in your organization so that those things that have done nothing to bring you closer to your goals and, yet, have exhausted your time and sapped your energies for months, or even years, can be finally exposed and rooted out.
You will need to examine policies and processes that have led you, as executives and managers, to become frustrated time and time again.
Deal with Uncertainty
Reality is full of uncertainty.
Nevertheless, you and your management team would like to have relatively predictable results. So, to increase your chances of success, it becomes necessary to somehow estimate the level uncertainty in your business processes for planning purposes—and then incorporate that uncertainty into your measurements, as well.
Sadly, many of the traditional tools and approaches to management budgeting, forecasting and planning do precisely the opposite of this. Instead of measuring and planning for uncertainty, the tools tend to give your management team the illusion of certainty and accuracy by providing what appear to be precise numbers. These are, however, "precisely wrong."
The illusion of certainty projected by this precise numbers mask the underlying uncertainty, instead of highlighting it for management purposes.
Accuracy (in terms of decimal-precision) gives management a false sense of security. If your management team has a number in their hands that is more precise than the noise level, no beneficial data are added to the situation.However, it does mislead management by providing a false sense of certainty about the circumstances.
It is impossible effectively to protect your organization against the effects of uncertainty using forecasts and the false security of "firm commitments."
When companies plan in detail, they attempt then to manage in detail. Management is forced to look at hundreds—perhaps, thousands—of details. This is the precise opposite of focus. You and your team will need to discover ways to effectively deal with uncertainty while bringing focus to your management efforts.
But, uncertainty can also lead to conflict.
Deal with Conflict
When management faces conflict, the reflexive action is to search for compromise. Unfortunately, compromise merely masks the situation by taking the best of the worst and the worst of best and calling it a "solution."
In managing supply chains, for instance, there is a common conflict about how much inventory should be held at any given stocking location. We define the common conflict using a diagram like the accompanying illustration.
Everyone agrees on the ultimate goal (A). The whole management team wants to make more money for the company. The sales folks, however, who are rewarded based on sales, want more inventory to help assure that what gets ordered gets shipped.
On the other hand, the CFO, who pays the bills every month for new (and increasing) inventory; the expenses of heating and cooling the warehouses; the expenses of buying and maintaining the warehouse computers, racking and equipment; the interest on the borrowed money; the growing payroll for inventory-related personnel and much more wants to see inventory levels reduced.
The core conflict is between (D) increase inventory levels and (D') reduce inventory levels. The arrows between the entities represent logical assumptions made by the various persons involved in the management conflict.
For example, certain assumptions are made when we say that, "We must improve customer service in order to make more money." The assumptions may more may not be correct. However, they should be openly examined, at least. After all, perhaps just raising prices would help the firm make more money—then again, perhaps not.
Similarly, there are assumptions made when we say, "In order to reduce the cost of carrying inventory, we must reduce inventory levels." The underlying assumptions should be examined carefully. What if an option no one has considered—say, the use of a third-party logistics firms—would actually reduce the cost of carrying inventory?
The most powerful solution comes, however, if the management team is able to break the assumptions underlying the core conflict—the assumptions underlying the arrow between D and D'.
What if the management team were to discover that there is another alternative altogether? What if the managers and executives were no longer forced to choose between increasing inventory levels or decreasing inventory levels?
Toyota Motor and hundreds of other firms have found a supply chain solution that breaks this core conflict. It goes by many names: Lean, Just-in-time (JIT), RFS (repetitive, flexible supply), and more.
The key is to increase replenishment frequency: this allows firms in the supply chain to hold lower inventories while, at the same time, also improving customer service levels.
Making the Conflict Logic Visible
Many time executives and managers fail to deal with conflicts in their organizations effectively in part, at least, because the conflicts are never articulated—except perhaps in outbursts of anger or frustration.
The Evaporating Cloud, as the diagram above is called in Theory of Constraints parlance, is a great way to put management conflicts down on paper. The arrows connecting the entities then become the point factors for discussion. Each of the parties to the discussion can state explicitly the logical assumptions underlying the various arrows in the diagram. These assumptions can then be carefully examined in the absence of "corporate politics" and in the realm of reality and rationality.
Once the assumptions are on the table, the team can begin to work toward innovation in breaking the core underlying conflict—the conflict between D and D'.
Many times, breakthroughs to increased profits and a more harmonious environment may be achieved at zero cost to the organization. This is true because, quite often, the core conflict is rooted in invalid assumptions or just plain bad policy (whether written or unwritten). Such conflicts can be rooted-out and improvements can be made very rapidly.
Stop Blaming—Start Improving
Cross-functional conflicts can raise emotions to a high level. Reducing the conflicts to logic and openly discussing the logic and assumptions underlying longstanding conflicts helps stop "the blame game" and defuses many of the emotions that might otherwise be involved.
Emotional turmoil and blaming are simply roadblocks to finding real breakthrough solutions to ongoing improvement. Nevertheless, having the right attitude about resolving an issue is of little use if you do not also have the tools to articulate the conflict in a rational, emotion-dropping way.
The Evaporating Cloud provides just such an effective tool. Whether your job is managing internally, or managing your supply chain across dozens of outside vendors, effective tools to deal with uncertainty and conflict are must-haves. Either find them and learn to use them effectively, or seek help from someone who can help you get off to a running start. Time may be short!
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You will find more on this topic if you read TOC Thinking by Yishai Ashlag.