The Interactive Organization Chart

Basic Business Cents
The Interactive Organization Chart
The organization chart is a diagram of the reporting relationships of employees and defines the chain of command. The typical org chart shows the top executive at the top of the diagram with direct reports in a row below, followed by the next layer of reporting relationship and so forth with the first line of employees at the bottom layer. This is referred to as a vertical or top down organization. It implies that decisions are made above and no matter where you are in the chart you do as you are told by the person above. Communication is hampered by layers of management who buffer communication by passing on what they deem necessary or what is to their advantage.
Many organizations today prefer a horizontal or systems view org chart. This chart also starts with the top executive at the top but horizontal lines of key processes of the organization. An example might be product A portrayed across the chart from suppliers to design, assembly, inspection, distribution and marketing. Products B, C. etc. would be in lines under product A. The reporting relationship would then be the product managers to the top executive.
As more is learned, thoughts on the proper org chart change. A more complete chart is the Interactive Organization Chart that depicts key functions as shown below. The Top Executive title is replaced by Leadership, recognition is given to the office of Strategy, Process includes the horizontal layers of the horizontal structure listed above, Marketing is recognized as a key process, and the importance of organizational culture is portrayed as an equal department.
LEADERSHIP
STRATEGY PROCESS MARKETING
CULTURE
Leadership means defining the aim or vision of the view of the organization at some point in the future and then modeling the way to achieve it.

© Louis E. Schultz

Strategy embodies responsibility for strategy planning, acceptance by the entire organization, deployment throughout the organization, and completion.
Culture may be the most important element and is overlooked by most organizations. Today’s Human Resources Manager or Personnel Manager is saddled with a thankless task, driving the periodic employee reviews. Employees don’t like them and managers really don’t like giving them. They are thought necessary because many managers do not provide performance feedback to employees in real- time as they should so this process was created to force feedback, at least once a year. Now this office has something meaningful and challenging. Leadership might provide direction but Culture drives the organization. Elements of this position include communication, understand and acceptance of direction, explanation of “why”, listening, working conditions, happiness, and satisfaction of the workforce. A job performed well by this office will be reflected in employees who are self- motivated, enthusiastic, inspired, and compelled to achieve the aim of Leadership.
As you can see, none of the functions can stand alone. Silos with moats around them will not be acceptable or useful, each function must interact with other functions yet each has a definite area of responsibility. By working together as a team in this model, success is more likely to be achieved.

© Louis E. Schultz 

Setting the Direction for Our Lives

Basic Business Cents
There are two similar models to find your proper niche, one for your business and one for your personal life. The “Hedgehog Concept” developed by Jim Collins and described in detail in his book, Good to Great, is a useful tool to use to make sure you stay focused on what is important in your business.
Three questions the organization must research deeply as depicted in this chart. If the employees are not deeply passionate about what they are doing, the quality and quantity of their work will not be very good. The next question is what can you be the best in the world at means that “pretty good” is not good enough. You need to find a niche at which you are very good, even the best in the world. This talent needs to be defined and discovered; if not in the organization it must be obtained. The third question is what drives your economic engine. If you cannot make enough money from this pursuit to fund costs and a reasonable profit, then the niche needs to be further refined. The spot in the middle is ideal position to satisfy these three needs. This concept is often used as a check and balance on the organization’s strategic plan to see if the three questions are satisfied.

The Japanese have a concept for personal guidance, which they call “Ikigai”. The term ikigai is composed of two Chinese characters, iki which means life and gai which means what one hopes for in life. Everyone, according to the Japanese has an ikigai but it takes a deep self-examination to discover it in order to bring satisfaction and meaning to life.

That Which You Love

That Which The World Needs
Vocation
That Which You Can Get Paid for

Mission

Ikigai Passion

That Which You Are Good At

Profession

The overlap area which you love and that which you are good at is defined as your passion in life. The overlap of what you love and what the world needs is your mission in life. The overlap of what the world needs and what you can get paid for is your vocation. And, the area of overlap between that which you are good at and that which you can get paid for is your profession.
The area in which all four circles overlap, Ikigai, is the secret to enjoy life. A lot of soul searching, thought, education, training, and maneuvering may be necessary to find your niche in life but the rewards of happiness and self-satisfaction make it very worthwhile.

The two models are very similar; maybe repetition will drive the point home. It is a tragedy in life if we don’t find the right direction in which we find a need in the world that matches what we are good at, we love doing it, and we get paid a reasonable income for doing it. 

Basic Business Book

The new book, Basis Business, by Green Ivy Publishing contains more than 150 of the Basic Business Cents articles for your reference.  It is not a novel to be read from cover to cover but a collections of lessons learned that can be read one at a time to give time to reflect on how it relates to your business and what you can do to improve.
All organizations need to continually improve performance. Large businesses hire consultants and send employees to training sessions for that purpose. Small businesses have trouble with this because of time and cost investments. Basic Business consists of short articles on performance improvement that can be read at the pace and convenience available of the small business people.

Memorable Quotes by Deming, Part II

Continuing the discussion of often-used quotations from Dr. W. Edwards Deming, we find more comments on the inevitability of change in our work.

• “It is not written anywhere that survival is mandatory.” One only needs to look at the changes over the years of the companies listed on various stock exchanges. In my early years in the computer industry, we talked about IBM and the Seven Dwarfs-Burroughs, Control Data Corporation, General Electric, Honeywell, National Cash Register, Univac, and Xerox Data Systems. None of them capitalized on the change to minicomputers. Digital Equipment, Data General, and Varian became the leaders. However, none of them were a factor in the next generation of microcomputers and Apple, IBM (yes they came back), Dell, and Compaq capitalized on the new opportunity. Apple and IBM made the transition into tablet computers. As Deming said, change is not an option.
  
• “If you want to be ahead, then you have to get ahead.” We all want to get ahead in life or have our company get ahead. We won’t get there unless we do something different. We have to improve, innovate, and dare to make breakthroughs to get ahead.
  
• “Customers expectations are only what you and your competition led them to think.” We all know we have to meet, if not exceed, customers’ expectations, but Deming has a point; what leads customers to develop their expectations. Certainly, specifications to make their systems work are an input. But designs tend to be based on what is available in the industry. They review offerings of you and your customers and design around them or change their purchasing to reflect what they believe is realistically available.
  
• “We can’t make it on satisfied customers, they will switch. We need loyal customers who will wait in line and bring friends. Profit is six to ten times greater with a loyal customer.” Advertising and promotion costs are significantly higher to attract new customers, and communication and testing costs are minimized with existing customers.
  
• “Doesn’t anyone give a hoot about profit anymore?” This comment usually followed a discussion of his chain reaction theory introduced to Japanese leaders in the summer of 1950. It is:
  

o “Improve quality. Costs decrease because of less rework, fewer mistakes, fewer delays, snags: better use of machine time and materials which leads to-
o Productivity improves-
o Capture the market with better quality and lower price-
o Stay in business-
o Provide jobs and more jobs.” This chain reaction became engraved in
Japan as a way of life. “Simple, so simple”, he would often say to emphasize the point.

• Deming’s work provokes people to think, whether it’s in a classroom or on a drive across town. At New York University where he taught for many years, Deming often liked to ask his students which other courses they were taking that would help them have a positive impact on the U.S. balance of trade. “Looking at their faces, you can see them getting mad as they realize their other classes really do not contribute to reducing the balance of trade”, he said.

1. “The Japanese have much to teach Western enterprises, such as eagerness of top management to learn and to treat people as treasures not as assets.” Considering the investment in training, coaching, and understanding strengths of employees, turnover is very costly. Retaining loyal employees is not only the moral thing to do, it is also makes sense economically.
   
2. “Dogs like a pat on the back, and so do people.” Positive reinforcement is useful in encouraging employees. Pride in work and receiving satisfaction from doing work that is valued is key to employee motivation. This doesn’t mean that you never coach employees to improve but do not be overly critical.
   
3. “He who tooteth not his own horn the same doth not get tooteth.” Don’t be arrogant but at the same time have a conviction that what you are doing is right and good. Don’t hide your light under a bushel.
   
4. Closing out his famous four-day seminars where he talked about the futility of people doing their best in processes which were not capable of providing the output expected of them, he would say, “And now I leave you with five words, I have done my best.” He was reinforcing what he often said about workers, they are doing their best and he was too. At this point in his last seminar, 10 days before he passed away at age 94, there was not a dry eye in the house. 
   

New Book

I have been a volunteer for SCORE for nearly ten years.  During that time, I learned that small companies have the same problems as large ones and what I learned in my career is helpful to them.  That led to writing a newspaper column for small businesses and that led to a book.  Basic Business is a collection of over 150 lessons learned over 30 years of management consulting tailored to the small organizations.  It is available through local bookstores or online in hard copy or in electronic format.

Memorable Quotes by Deming, Part I

Basic Business Cents

Dr. W. Edwards Deming was one of the great statisticians employed by Stanford University to teach American industry about methods that allowed them to rapidly ramp up production of war-time goods during World War II. After the war, the Japanese leaders invited Deming to teach them these techniques. They were an island nation, production capacity destroyed by the war, and few natural resources, so they were desperate. He is generally credited with turning their economy around and helping them become a factor in the world economy. He then focused on improving the quality of American industry through his process thinking methods.

Some of his oft-quoted comments are:

·      “Good intentions are not enough. They must be accompanied by profound knowledge. Deming often said, “People are doing their best.” Workers and managers alike intend to do a good job but their processes and knowledge may be limiting their results. Dictionary definitions of profound and knowledge can be interpreted to mean deep understand of perceived truth. It involves knowledge of variation, understanding that no process is perfect, and variation always exists. Quality for international trade must be good enough to command a market.” If the quality of the product or service is not sufficient to entice people to buy it, there is no market.

·      “Better quality is the answer to industrial survival in the western world.” Worldwide communications are so efficient today that people know where they can find the best value, i.e., quality vs. cost. People no longer have to accept poor quality.

·      “How would you know?”  Without data, you don’t know how to make proper decisions. We often expect people to know information that they have no way of finding or analyzing.

·      “When a system is stable, telling workers about mistakes is only tampering.” Using statistical methods, like control charts, to analyze data allows people to take correct action to improve the processes., and avoid incorrect action. If a manager takes action on individual points, the variation will only be increased. Deming called this action “tampering”. If the process is stable and the mean is not acceptable or if the variation is to be decreased, the process must be improved. Simply criticizing or making demands of the employees will just make it worse.

·      “People with targets and jobs dependent upon meeting them will probably meet the targets, even if they have to destroy the enterprise to do it.”  If the targets are arbitrary, people will find a way to achieve them even if it has a detrimental effect elsewhere. It the process is not able to achieve the desired target, the employee will find a way to reach it, no matter at what cost. If the process is capable of doing more than the target, the employee will tend to not go beyond the target.

·      “People hope for instant pudding,” People want immediate results, but improving quality is a long and never-ending journey. Dr. Noriaki Kano of the Science University of Tokyo said, “I wish quality was easy but unfortunately it is a hot and sweaty job.”

·      “Change is upon us.  It is not optional.” We cannot ever rest on our laurels. Changes in market desires, technology, transportation, communication, environment, and world politics contribute to change in the business climate. We must constantly and forever change.

We will conclude with some of Dr. Deming’s famous quotations in the next article.  It is interesting to note how they are standing the test of time.

Eliminating Defects

Basic Business Cents

Customers are assets that must be protected. It is costly, disruptive, and time consuming to find replacements if we have lost them because of defective products or services. A literature search will find books that say it costs five times as much to win back a lost customer as it is to get a new one and another book that says that is a myth. Whatever, most businesses do not want to lose good customers and therefore must identify and correct defects that cause customer dissatisfaction.

This subject is sensitive to me at present because of an experience last month. I was in the middle of a project when my printer failed. This was the third printer from this manufacturer that failed for me in the last nine years. It was only one year old and under warranty for two more years. After considerable time spent troubleshooting on my own and four hours with the manufacturer’s tech support, I was told the faulty parts were not covered by warranty and I would have to call another number to purchase the parts. I got out a competitor’s portable printer that I had not used in 15 years and it worked with only the replacement of a single ink cartridge and allowed me to finish my project. Guess which brand I bought to replace the office printer. This was a product defect compounded by service defects. I may not be an important lost customer to them, but how many others are having similar experiences?

Defects have long-term costs and need to be studied in order to find causes and eliminate or reduce them. Defects are caused by variation in the work processes. This variation can usually be categorized into four areas:

·      Variation in the method employed to produce or servicing the customer.

·      Variation in material employed possibly brought on by different suppliers

·      Variation in machines used, for example, different machines used or tool wear in he same machines

·      Variation in methods of detections or inspection. Yes, sometimes good products are thrown away by faulty inspection processes as well as defects passed.

There is variation in every process but not all cause quality defects in the same degree. They can be grouped into two categories, vital few and trivial many. By studying the causes of variation, the important few that result in defects to the customer can be identified and action taken to eliminate them. Experience and intuition can be helpful in diagnosing the variation causes, but limited. It is better to find the true causes of the variation causing the critical defects by examining the data with the use of statistical tools.

It has become common to provide statistical methods to engineers but it is most effective if all employees, management and entry-level workers alike, are taught the methods to improve their work by analyzing the data statistically. Depending on their positions, the training ranges from 16 to 160 hours in duration.

Defectives are caused by variations. If these variations are reduced, defectives will certainly decrease. This is a simple, strong principle, which holds regardless of types of products or service produced. This will allow us to keep desired customers while adding new ones and enabling the business to grow and prosper.