Old case study I wrote while working with Ingersoll Engineers Thanks for sending it my was Colleen! I thought High Beam would have it forever. Todd McCann

1. Manufacturing Insight8
Informal Systems: Hidden
Work Methods That Could
Put Your Lights Out
O
ur consulting experience has
shown us that the majority
of organizations have some
informal system operating in the back-
ground to keep one or more functions
operable. Your organization probably
has a few of which you may be totally
unaware. You may even be committed
to an informal system and not realize it.
First, let’s formally define informal
systems: An informal system is a work
method that, in most instances:
1. Has evolved over time and
become a habitual practice
2. Is performed by one or, at most, a
handful of employees in a given
function or discipline
3. Runs counter to or bypasses stan-
dard operating procedure; that is,
if there is a standard in place to
which the informal system can be
assigned
4. On the surface appears to be func-
tional
Quite often the informal system
is an organizational dilemma. It can
be productive in many ways; after
all, it has worked in the past.
However, in most instances, it takes
In a previous issue of Manufacturing Insight,
we discussed two case studies of solving
variability in work methods. This article digs
deeper into a cultural agent that will cer-
tainly give operations managers a reason to
make a concerted effort to better understand
how and why operations function as they do.
the place of the correct action/task
because the individual performing
the task simply doesn’t know any
other way to get the job done.
Following are two actual cases
where informal systems were at work.
CASE 1: A manufacturer of engi-
neered processing equipment was
implementing a strategy focused on a
product line. The overarching manage-
ment strategy was driven by the imple-
mentation of cellular manufacturing,
new production planning, and shop
floor controls designed to drive a pull
system that aligned internal and exter-
nal suppliers to manufacturing cells,
assembly, and customer demand. We
were also asked to reorganize and focus
the support staff dedicated to the prod-
uct line. In addition to those tactical
elements, we were to implement new
performance measurements for the
operational environment.
During the reorganization, an
employee (we’ll call him “Joe”), who had
worked plantwide for 30 years and pos-
sessed intimate product and process
knowledge primarily in the product
line to be focused, did not wish to work
in the focused product environment.
Joe determined that he would fit better
in another part of the factory. The new
staff selected to take on Joe’s duties had
worked with the product for an average
of eight years and were considered
knowledgeable and capable of perform-
ing the duties assigned. During the
interview process for the new positions,
none of the candidates had any ques-
tions regarding the operation of the
new environment, since all of them
were heavily involved in its creation
and implementation and were confi-
dent of their own past practices and
experience. A week had passed since the
rollout of the reorganization and, for
some strange reason, virtually no prod-
uct was getting out the door. In effect,
the production system was not oper-
ating and was not in synch with cus-
tomer demand. What happened? Of
course, there was finger-pointing and
shouting, but the people who were
committed to making the new environ-
ment work were not to blame. While
they fully understood their own infor-
mal systems, they had no intimate
understanding of how the factory actu-
ally operated in the past—that is, of
how Joe ran the factory—and therefore
did not know how to transition from
the past to the new process.
The event of reorganization
removed the cornerstone of an infor-
mal system that drove production plan-
ning. Joe, who decided he would fit
better elsewhere, had developed his own
way of planning production. The
method was simple:
w Review the current month’s
production orders.
w Glance at the past dues.
w Look at the next three months’
orders.
w Scour the racks for parts in
inventory to determine what
could be assembled.
w Make sure the plan that was
about to be executed was able
to meet the monthly budget.
w Deploy the troops and expedite
internally and externally sup-
plied components that were
needed to produce the products
that were short components.
w Launch chaos into the factory.

2. Manufacturing Insight 9
What was the outcome of this
informal system? Some customer due
dates were met, some were not; some
orders were shipped up to three
months in advance of the required
date; and past-due orders were always
in the hundreds of thousands of dol-
lars. But they could always say that
they made their monthly budget or
even exceeded it! You can imagine the
activity and the waste that was going
on in the factory. Some purchased
components wouldn’t make it in time
for a specific order and another order
may have hit during the planning peri-
od and… Wham! Forget the first order;
now produce this one! It was the pro-
grammed chaos of an informal system
at work.
The Bourton Group dedicated
personnel to work with the product-
focused personnel from all three shifts
to stabilize the environment and ulti-
mately set a record for shipments
while simultaneously reducing the
past-due orders. Together, we helped
create an environment where produc-
tion planning changes were effectively
managed. The company reduced its
customer lead time from four to two
weeks, increased inventory turns,
reduced past dues to zero, and gained
market share due to reduction in
response time to market.
CASE 2: The manufacturer of a com-
modity product for new commercial
construction, renovation, and after
market engaged us in developing a
strategy to reprocess the entire man-
ufacturing operation with alternative
technologies. The organization was
manufacturing its product with out-
dated, labor-intensive technology
with manual assembly operations
that really required automation. The
scenario for the engagement could be
stated as, “What would we need to do
differently if we doubled the current
daily shipments?” In addition to
recasting the manufacturing technol-
ogy strategy, the divisional president
asked if we could offer insight into
opportunities to enhance their cur-
rent mode of operation. About four
weeks into the project we uncovered
some very interesting informal sys-
tems that, remarkably, as in Case 1,
dealt with production planning—only
with a twist. The twist was the intrin-
sic knowledge of what tooling to use
for the job and which changeovers
didn’t rock the limited operational
capacity of the gateway cells.
We identified three employees in
the plant who were operating informal
systems. The first employee was a fore-
man over the gateway manufacturing
cell’s operation, the second was a pro-
duction planner for a critical depart-
ment that had long runs coupled with
long setup times, and the third was
another foreman supporting assembly
with a large array of components.
If any of these indi-
viduals went on vaca-
tion for an extended
period, product output
suffered. The opera-
tional knowledge that
these individuals pos-
sessed was never com-
pletely transferred to
their peers or recorded
for reference. The
manufacturing pro-
cesses that they operat-
ed would be brought to
their knees if these indi-
viduals were to leave
the plant permanently.
The president of the
division had just come
on board and was sur-
prised to hear this type
of situation existed at
this location, since
operationally it was a
sound unit. On the surface, all
appeared to be operating adequately.
Now, this is not to say that out-
put wouldn’t eventually regain its
original level if these folks left, but
think of the learning curve for the
replacement staff who would be
held accountable for delivering the
output—it would be steep and take
more time than if the knowledge
were shared in the first place.
How many times have you heard
employees say, “When that person
leaves, he will be taking a wealth of
knowledge with him.” In most
instances, they are probably correct.
So what can you do to ensure that
this does not occur in your plant? If
you are ISO-certified, you should
have no problem, right? Think again.
Todd McCann has over 10 years’ experience in the manufactur-
ing and service industries. His career focus has been on CMMS,
and his professional practice areas include developing and imple-
menting scheduling systems, training production staff in manufac-
turing methods, and implementing total productive maintenance
management systems.
The plants in both case studies were
ISO-certified. Certification does not
guarantee that you have a foolproof
operation. But where to begin?
There are telltale signs that informal
systems are operating. Of course, we are
assuming some form of transition takes
place when an individual moves from
one function to another or leaves the
company. Here are a few cautionary
signs. If an individual:
w Moves from one function to
another and a remarkable state of
confusion manifests itself
w Takes a brief or extended leave of
absence and a peer cannot seam-
lessly perform the duties of the
absent worker
w Leaves the organization and, sud-
denly, the function appears to
become limited in its ability to
perform in comparison to when
the individual was present
Many operations managers might
see the outcome of these events as insig-
nificant. However, they would be bet-
ter served if they stopped to think
about the ultimate cause of the disrup-
tion. What is worse, it is extremely
probable that the individual’s absence
may be propagating the creation of yet
another informal system!
Our hope is to make operational
managers (whether newly hired or
firmly established) aware that we are
all creatures of habit. Sometimes those
habits are helpful and sometimes they
are harmful. The hidden danger is
when the habit is simultaneously
helpful and harmful, and the former
obscures the latter.