“Major breakthroughs in time to market, investment, piece cost, and quality come horizontally across the organization, not vertically through individual, isolated functions. And it is our business schools that have not taught how to manage process across functions.” — Louis Lataif, Dean of the School of Management, Boston University quoted in, “MBA: Is the Traditional Model Doomed?”, Harvard Business Review
A group of sailors were out in an old boat. The boat hit a rock and sprung a slow leak. The group began to fight over whose fault it was that they hit the rock. Then they argued over whose responsibility it was to fix the hole. Those on the starboard side shouted that those on the port side, where the hole was, should be responsible for fixing it. All the while, the boat filled with water and floundered in the increasing heavy seas. As the shouting and finger pointing grew, a large wave swamped the boat. Everyone drowned at sea.
Our traditional functional or vertically managed organizations force the people in them to act like those foolish sailors. Individual departments such as accounting, production, sales, service, or development and areas such as branch or field offices, work to optimize their own performance. Goals, objectives, performance measurements, and career paths move up and down within the narrow walls of these functional chimneys or silos. Managers and their teams focus on doing their own jobs or segment of the production, delivery, or support process. Everyone focuses on a narrow piece of the organization while losing sight of the big picture.
Functionally managed organizations reduce organization performance levels, while increasing cycle times and costs by: (1) fostering an “us-versus-them” approach to communications and fighting for organizational resources, (2) leaving unmanaged gaps between departments which disrupt cross-functional work processes, (3) making improvements or changes in one department which hurts the effectiveness of other departments in the process, and (4) losing sight of customer/partner relationships and meeting everyone’s needs. With a narrow focus on their own departments or functions, people in a vertically managed organization easily forget that they’re all in the same boat.
While our organizations have been organized vertically, their operations depend on processes that flow horizontally. In the fifties, sixties, and seventies, that didn’t matter. Expensive layers of inspectors, coordinators, expeditors, supervisors, and managers plugged and patched the leaks to keep their organizations afloat.
In the eighties, manufacturers were forced by their superior quality Japanese competitors to dramatically improve their production processes — or sink. Many manufacturers made huge gains in quality, productivity, cycle times, and cost reduction by rediscovering process improvement techniques developed in America by such pioneers as W. Edwards Deming and Joseph Juran.
By the late eighties, the same cost and service/quality pressures were building in service organizations (and on the administrative side of manufacturing companies). The problem was amplified by the Information Technology revolution that was quickly gathering speed. Managers soon found that buying expensive computer systems and sophisticated software was money down the drain if all they did was automate existing processes. It just meant that things got messed up faster.
The timing was perfect for Michael Hammer’s Harvard Business Review article “Reengineering Work: Don’t Automate, Obliterate”, published in the July-August 1990 issue. A former MIT professor and Information Technology specialist, Hammer “had been frustrated by how fixated many organizations were on using information systems merely to automate the business processes they already had in place.” The decade of reengineering, with all its helpful uses and harmful abuses began.