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    • Preparing Yourself for the Working World Paul Brainard
    • Power , Politics & Conflict in Organizations Paul Brainard Tree Free Press La Verne, California
    • Editing Valentina Silva Alex Johnson Copyright © 2009 by Tree Free Press All rights reserved. No part of this book may be reproduced or trans- mitted in any form or by any means, electronic or mechanical, includ- ing photocopying, recording, or by an information storage and re- trieval system, except by a reviewer who may quote short passages in a review to be printed in a magazine, newspaper or on the Internet, without permission in writing from the publisher. Published by Tree Free Press La Verne, California 91750 treefreepress.com Second Edition 2009 Library of Congress Control Number: 2009900942 ISBN 978-0-9761193-1-9 Manufactured in the United States of America Cover design by Lily Brainard
    • Table of Contents Introduction Why You Need to Read This Book 1 Part I - Organizational Politics & Power Chapter 1 Organizations 9 Chapter 2 Getting Hired 13 Chapter 3 Increasing Your Workplace Power 19 Part II - Effective Leadership Chapter 4 Leadership 35 Chapter 5 Change 53 Chapter 6 Managing Conflict 65 Part III - Operations Management Chapter 7 Business Resource Model 92 Chapter 8 Department Performance Measurements & Ongoing Improvement 95 Chapter 9 Pinpointing Improvement Opportunities 145 Chapter 10 CEO 159 Chapter 11 Real World Scenario Ethics Exercise Overstating Operating Income 173 Appendix 177 Index 179 v
    • INTRODUCTION Why You Need to Read This Book Politics, not sound management practice, is the dominant force driving business organizations. Most companies are more politically driven than performance driven. This is a primary cause of the numerous failures of once stable companies we recently experienced. Maneuvering for control or power, in a group having conflicting interrelationships, is one definition of politics. This book discusses some of the political forces you will encounter in the workplace and teaches you useful and effective ways to use those forces to your advantage. These political influences are often destructive, as we witnessed in the recent sub-prime mortgage crisis. After reading this book you will be able to recognize the political activities for what they are and respond in a productive manner, while at the same time increasing your power in the organization. 1
    • 2 Power, Politics & Conflict Introduction 3 Leadership Change Soon after starting to work, a business school graduate has a fair To improve its productivity, an organization needs to be able to chance of being put into a supervisory position. The graduate change. Yet, changing an organization is much more difficult to may end up supervising people who have more work experience implement than you might expect. In chapter 5 you will learn and believe they are better qualified to fill the supervisory position. about common barriers to change and ways to overcome those This often creates conflict with those being supervised becoming barriers. hostile to the supervisor. Supervising people who are hostile to you is challenging, Conflict especially when the people you are supervising have been with Interpersonal conflict in an organization is the cause of a lot of the company several years, while you are relatively new to the misery and anxiety suffered by employees. Understanding how company. to manage conflict not only minimizes the potential for conflict to By reading this book, you will learn what you need to do to bring you grief, it also gives you a lot of power in the organization. become an effective leader, how to motivate people to perform All employees must deal with conflict; therefore, the power derived closer to their potential, and how to manage the conflict leaders from conflict management is available to any employee. typically encounter. Chapter 6, which is devoted to conflict management, discusses some of the common types of conflict you may Management Tools encounter and how to manage conflict to your own advantage. In addition, you will learn basic management tools that can be used with confidence to improve an organization’s productivity Challenges & Opportunities and profitability. Working people today face many challenges. Job stability is a By the time they graduate, business students have studied a thing of the past due to the export of jobs, downsizing, lot of management theory. Unfortunately, the amount of theory consolidations and ownership turnover. This has been aggravated studied can be overwhelming, making it difficult to recall and put by a lack of leadership. Not enough leaders have the skills and to use in their work. This book streamlines the theory and gives power necessary to improve the productivity of our organizations it to you in a usable and effective form. in a competent style.
    • 4 Power, Politics & Conflict Introduction 5 Many leaders manage for short term results, jeopardizing the Even if you do not aspire for a position of leadership, long term existence of the organization. Their actions often understanding and practicing the concepts presented in this book negatively impact productivity at the expense of owners, creditors will make your job easier and less stressful. In addition, you will and employees, sometimes to the point of bankrupting the be of greater value to your employer, increasing your job security companies under their leadership. and compensation. Global competitive pressures will only increase with time and more jobs will be exported to places like China and India. We It is suggested that you study Part I when preparing to go to currently face rising unemployment, as companies struggle to work full-time. After you have found a job and are working full- remain liquid and search for ways to increase productivity. time, study Parts II and III as you focus on building your working Fortunately, increased productivity can be readily achieved by knowledge. working smarter, using established ongoing-improvement business management tools. After you have studied the book, keep it handy as a reference tool. Whenever you encounter a situation discussed in the book, There is a widespread need for leaders who have both the skills you can refer to it and respond to the situation in a productive and power necessary to improve the productivity of our manner. Your ability to use this material will allow you not only to companies using a direct and effective approach. This book take greater control of that situation but also to increase your explains how a leader acquires the power needed to change an power within the organization. organization, and it shows how to use a few simple management tools to improve the productivity of an organization in a straight forward manner. Companies that employ leaders who utilize the tools presented in this book will enjoy a competitive advantage. How to Use This Book This book is packed with valuable information about the forces that drive organizations. If you study this book, you will learn how to accelerate your advance to positions of power in an organization and how to use that power to improve the productivity of the organization.
    • 6 Power, Politics & Conflict Part I Organizational Politics and Power 7
    • 8 Power, Politics & Conflict CHAPTER 1 Organizations For the purpose of this book, an organization is defined as a structured group of people with some common purpose. Organizations include corporations, small businesses, nonprofit businesses, government agencies, volunteer groups and social clubs. The word ‘company’ is used throughout this book for illustrative purposes, but most of the stuff discussed in Part I of this book would apply to many types of organizations. Parts II and III apply mainly to business operations. When the word ‘product’ is used, it can mean either tangible products that a company manufactures and sells, like furniture, or an intangible product, like computer repair service. The expression, ‘CEO’, is used to indicate the most senior leader of an organization. 9
    • 10 Power, Politics & Conflict Organizations 11 Organizations are Complex People are Competitive Organizations may appear simple in theory and can be nicely People also have a competitive nature. We often desire, and summed up using flow charts like the one on page 93. When maneuver for, power or prestige within the organizations we are you consider the multitude of details that comprise an members of. We sometimes believe we should be in control of organization’s operations and the complexity of its membership, the organization, instead of those who are currently in control. an organization is a highly complex organism. Every organization We may sometimes feel a need to control the behavior of others, is unique and constantly evolving. Granted, some for better, others although we do not like it when others try to control us. for worse. Organizations are Political People Can be Productive These competitive and controlling conflicts create political forces People are often kind, honest, and exceptionally resourceful. in organizations. Like it or not, politics are inseparable from These qualities make humans very productive creatures, with the organizations and spawn a lot of additional conflict in ability to improve the quality of life for themselves and those around organizations. The level of conflict in an organization can range them, without degrading the quality of life of others. from subtle tensions to unbridled hostility. Some of this conflict is productive, but much of it is destructive. The ability to manage conflict is an important source of power in an organization. People Can be Destructive Unfortunately, human nature is also corrupt to some degree. People sometimes lie, cheat, steal or even kill to get what they desire or believe they need. This willingness to lie, cheat, etc., is often destructive and can harm other people and society as a whole. Since an organization is a collection of people, an organization will reflect some of the productive behavior and some of the destructive behavior of its members.
    • 12 Power, Politics & Conflict CHAPTER 2 Getting Hired When a company needs to hire an employee, one or more people will make the selection. The person who will supervise the candidate will usually make the final decision. This will be based on the decision-maker’s perception of the candidate, regardless of the accuracy of that perception. What is the decision-maker looking for? Here are four key criteria: The candidate must appear to meet the minimal skill and experience requirements of the position. Resumes and application forms are often used to determine whether the candidate has the requirements. To fill a management position, many companies require that the candidate have a college degree. The candidate must appear dependable. The decision-maker will want someone who will show up to work as expected, on time, and will require little supervision when completing 13
    • 14 Power, Politics & Conflict Getting Hired 15 assignments. References and schooling background are to ask such as, “What do you feel is the most challenging commonly used to help determine if a person is dependable, aspect of the position?” or, “What do you like best about but it’s your own actions that ultimately matter. Arrive early working here?” to job interviews; if you wish to be considered for a position, The decision maker has needs. Try to get a clear don’t be late. understanding of his or her needs, and ask questions if you need to. Show that you understand their needs by repeating The candidate must appear non-threatening. A candidate them. “I see, you need someone who can . . .” If you believe with too much confidence, skill, experience, drive, or talent that you can meet their needs, let them know, by stating in a can be perceived as a threat to the hiring decision-maker. confident tone something like, “I am able to do that.” The decision-maker will want someone who will be submissive and loyal to the decision-maker, yet isn’t Selling Yourself necessarily looking for someone who has a submissive Talking at length about how wonderful you are, is not a good personality. For some positions, the decision-maker may way to sell yourself. A better way to sell yourself is to persuade want a person with an aggressive personality, yet will still the decision-maker to talk about how great he or she is. want whomever they hire to submit to them. The use of leading questions to encourage people to talk Listen attentively to what the interviewer says, and when about their interests is a valuable sales tool. When you meet the asked a question try to give complete answers that are not decision-maker, keep your eyes open. Take mental notes on his too lengthy and don’t go off on tangents. Many over confident or her environment and décor. The office may be decorated candidates make the mistake of talking too much and not carefully listening to the person conducting the interview. with pictures or objects that indicate their interests. For example, an avid golfer may have pictures of golf courses, a cup or a The decision-maker must simply like the candidate for paperweight with a golfing theme. whatever reason and feel emotionally at ease in the candidate’s Towards the end of your interview, if you have an opportunity, presence. try to get the decision-maker to talk about his or her interests. To help the decision-maker feel comfortable in your Make a pleasant comment about a picture or object, or ask an presence, encourage the decision-maker to talk about the open-ended question. For example, if you notice a picture of a company, the position, his or her background or interests. golf fairway, you might ask something like, “That’s a nice picture, You can do this, by asking open ended questions about the do you like to golf?” The more you can get the decision maker company and the position. If no particular questions come to talk about his or her interests, the more comfortable they will to mind during the interview, have a couple of questions ready feel about you.
    • 16 Power, Politics & Conflict Getting Hired 17 Dress A degree may be important for getting your foot in the door, but Always look your best for a job interview. Dress conservatively, it takes experience to gain an understanding of how a business and don’t worry about over dressing for an interview. Wear a operates in the real world. tie, even if it’s a factory worker type position you are applying for. For an office position wear slacks, a tie, and a coat if you have one. Avoid multi-color hair. For a management position, consider a coat and tie to be mandatory. Drug Screening Pre-employment drug screens are common protocol. Many companies will send a potential hire to a clinic to test for illegal drug usage. This is a product of the political environment during the Reagan presidency, an era of increasing illegal drug use by employees. Some substances can be detected thirty days or more after being taken, so stay clean when looking for a job. Why Companies Hire People With Business Degrees Companies hire people that have business degrees for management positions not only because business school graduates have received formal training in management practices. Companies also want employees who will conform to company culture, follow instructions, complete assignments, take on new tasks, and be reliable. Having a degree indicates that a candidate has those desired qualities. To earn a degree one must conform to academic standards, follow instructions, complete assignments, learn new things, and have some self-discipline.
    • 18 Power, Politics & Conflict CHAPTER 3 Increasing Your Workplace Power After you have been hired for a position, you will need to begin building your power foundation. Having a sound power foundation will make your job easier and less stressful, allowing you to accomplish a lot more. Some power comes from having a management position, but a lot of power is available to all employees, no matter what their position. Power is the ability to do something. People often incorrectly believe that power is the ability to do what we want to do. This myth keeps a lot of people from utilizing the power they already have. People frequently struggle and sometimes destroy themselves attempting to do what they want to, but cannot, do. In the process, they ignore the power that would be available to them if they attempted to do what is actually possible. Utilizing the power of what you can already do, will eventually give you the power to do more of what you want to do. 19
    • 20 Power, Politics & Conflict Increasing Your Workplace Power 21 The Power of Time job using the theory they learned in school, but without the proper In an organization, time is the foundation of individual power. power foundation, these efforts will likely fail and may even trigger The longer you stay with the same company or industry, the greater hostility from fellow employees. will be your ability to increase your power. For example, an The newly employed should focus on learning as much as entrenched front-line employee who has been with a company possible about the company and the industry. He or she should ten years may have more power than a president who has been not focus on using the theory learned in school to change the with the same company for only a few months. company. Opportunities to invoke change can be taken advantage of when appropriate, but the main focus should be on increasing one’s working knowledge. When you start working in a company, it may take a year just to get basic working knowledge of the organization and for other Working knowledge is power. The more you know about employees to accept you as part of the company culture. Use the company and its industry, the greater the power you will have those initial months to observe and learn as much as you can. in the company. Make sure that you acquire the skills and knowledge After working at a particular company for awhile, you may necessary to do your job well. Understand how your job fits discover that it is poorly managed. This can lead to a lot of into the organization and how it impacts the other positions around frustration. The frustration may be so great that you feel you you. Learn how the company and industry operate from beginning cannot continue working there and need to find another company to end, and learn who the industry players are. to work for. If you can tough it out, with time and patience you may be able to increase your power enough to make some changes Who has power and authority in the company? that will make your job tolerable. Who is really in charge? What are their priorities or obsessions? Working Knowledge Who are the important customers and suppliers? Your real education begins when you start working. For someone who has just graduated from college and is beginning to work in What are the major drivers of profit? his or her desired field, the first months or even years are mainly What are the critical internal processes? educational. Some recent college graduates may feel cocky about having their new degree. They may try to invoke change in their new
    • 22 Power, Politics & Conflict Increasing Your Workplace Power 23 Becoming Accepted Understanding When joining a company do not be surprised if some of the other The Power Organization employees show you subtle, or even outright hostility. A new Your company will likely have a formal organizational structure employee brings an element of uncertainty to a company culture, with the CEO or president at the top, senior managers under the an element that threatens insecure employees. CEO, and so on. Titles can be deceiving. You need to uncover In companies where communication is poor, existing the organizational power structure and discover who really has employees may not know why the new person was hired; some power. may wonder if their own jobs are in jeopardy. Contrary to popular belief, the CEO is often not the most powerful person in the company. There may be people under the As mentioned earlier, it may take a year or longer to become CEO who wield greater power, for a variety of reasons. accepted as part of the company culture. If you are respected Sometimes the receptionist is one of the most powerful people in by other employees and not considered a threat, you will be the company and may be more influential than the CEO. In a accepted more quickly than if you are not respected and family-owned business, the owner’s spouse may have more considered a threat. power than the owner or the CEO. In a company where the CEO avoids conflict, a front-line worker who frequently complains Dress to the CEO may have a lot of influence. The perception other employees have of you makes a fundamental difference in the amount of power you have in a company. One way to discover who has power is by observing the conflicts Personal appearance plays an important role in how the other that arise and noticing how people react to them. Those employees perceive you, especially when you are new to the employees and managers who are able to confront and manage organization. The way you dress is very important as your peers conflict will have greater power. Those who fear and avoid conflict develop their impressions of you. will have less power. Those who choose to instigate conflict will If you dress slightly more professionally than your peers, they have power in an environment where they are allowed to instigate will have more respect for you than if you dress more casually conflict. than they. On the other hand, if you dress a lot more professionally than your peers, they may feel you are pretentious. Try to find a Learning Your Real Job middle ground, a style that will garner respect as well as When hired, you will be given a list of your job duties and acceptance, while maintaining your own comfort. responsibilities. The list may be given to you in the form of a
    • 24 Power, Politics & Conflict Increasing Your Workplace Power 25 written job description, or it may be communicated to you orally surprise yourself and find it can be done, or you will reach a over time. Write out your job description as you see it, and point where it will be obvious to your supervisor that you will modify it as you learn more about your position or as new duties need additional resources to complete the task. At that time are flung at you. consult with your supervisor about how to proceed, and let your Don’t assume that a formal job description completely defines supervisor decide whether to provide the additional resources, your duties and responsibilities. Chances are, your job will be modify the task, or abandon the task. somewhat different than the one portrayed by a formal job description. Sometimes it will be unclear, at first, what your actual Internal Customers job is, and you will need time to learn what is expected of you by Treat the other employees that you do work for, or pass work your superiors. on to, as your internal customers. Try to give good customer Your superiors will regard some of your duties as paramount, service to all of your customers. while others will be less significant to them. Determine what the Make a list of the people you do work for, or pass work to, most important duties are, prioritize them, and make sure you and what it is you do for each of them. Try to understand their understand how to do them according to your supervisor’s expectations of the work you do for them. Do quality work expectations. based on their expectation of quality. If they want it given to them in a particular form, try to accommodate them as best you At times you may have a job duty pushed onto you that you feel can. should be the responsibility of another employee. This can be frustrating, but it can also be transformed into a source of power. For example, if one of your duties is to prepare some paperwork If the additional responsibility causes you to have too much and then pass it on to another department, find out from the people work to do, making it difficult to do your duties in a satisfactory who get the paperwork after you in what form they want it given manner, the additional responsibility can undermine your power. to them. Details that may appear trivial to you may have a big But if you can find a way to assimilate the responsibility into your impact on your fellow employees. Would they like the paperwork work schedule by working smarter, having the additional assembled in a certain order? Do they want it stapled or do they responsibility and working knowledge will increase your power. want you to use a paperclip? Is there a certain time of day they It’s best to always convey a can-do attitude to your supervisor want you to give it to them? Would they prefer that you give and peers. Even if you know a task assigned to you is unfeasible them the paperwork once a day in a large batch, or do they want with available resources, it’s often best to respond initially with a several small batches throughout the day? By modifying how can-do demeanor, and even attempt to do the task. You may you do your work, you can make their work easier.
    • 26 Power, Politics & Conflict Increasing Your Workplace Power 27 You may wonder why you should care about making someone or projects for your supervisor’s supervisor, or other managers else’s work easier. of greater seniority. When you start a new job, you will need to learn who has Earning Respect real authority and power, and which people you will do work When other employees see that you do good work and that you for, directly or indirectly. Even if your other bosses don’t give are making their work easier for them, you will earn some of you instructions or orders directly, try to discover their their respect, which will increase your power. They will be more expectations of you. Again, think of your direct supervisor, and likely to support you and less likely to undermine you. anybody else you do work for, as your customers, and focus on Earning the respect of other employees takes time and sincere providing good customer service. effort. Some people will never appreciate what you do for them, but most of your fellow employees will eventually learn to respect Learn what is important to your supervisor and others in authority. If you don’t know what their expectations are, ask. Do not you if you treat them the same way you wish to be treated. Over presume to know what your supervisor thinks is important. Many time, this pool of respect will become an important source of power for you. managers lead by whim. What may be important to your supervisor one day, might be irrelevant to he or she the following As you advance to more senior management positions, you day. should try to nurture a culture in which employees treat each A lot of what is important to your supervisor may have little other as internal customers. Setting an example, over time, will to do with work. Even if you disagree with your supervisor about make it easier for you to gain acceptance of this. On the other the importance of what you have been asked to do, meeting his hand, if you do shoddy, careless work, or if you ask employees or her expectations will give you greater freedom in how you to do something that you are not willing to do, they will have less perform your duties. respect for you and will be less cooperative in implementing your If you do not keep your supervisor satisfied with your requests. performance, your supervisor will want to supervise your duties Your Most Important Job Duty more closely. This restricts your freedom and power. On the other hand, if your supervisor is satisfied with your work and Your primary job duty is to keep your supervisor and the other feels you are supportive of his or her position, it makes your job superiors (your other bosses), satisfied with your performance. easier and increases your power. It can also make it easier for In most jobs you will have more than one boss. You will you to decline doing unethical things your supervisor may ask of likely have a direct supervisor, but you may also do some work you.
    • 28 Power, Politics & Conflict Increasing Your Workplace Power 29 Some tips on managing a demanding and unethical supervisor Time Management are discussed a little further in ‘Time Management’, and again in Sometimes your superiors may make excessive demands of you. Chapter 6, starting on page 81. On top of your regular duties, they may add additional tasks and projects that will require more time than you have available. No one can keep their supervisor entirely happy all the time, so Many senior managers overlook the value of employee time. it’s important to learn what things are most important to one’s They often pile non-productive work on employees, and it seems supervisor, and prioritize. If your supervisor is unreasonable, they don’t understand that they are wasting a valuable resource. antagonistic or unethical, you may wish to find another job. If The higher up a manager is in an organization, the more power you can tough it out and, with time, build up your power they have to squander employee time with non-productive foundation, your relationship with your supervisor may improve projects. to a tolerable level. Time is a constrained resource and should be treated as such. Managers should be using their time to increase company income, One mistake I made early in my career was arguing with my rather than wasting it on fruitless projects or battling problems supervisor because I disagreed with how he was managing the created by senior management. division we worked at. Even though he was clearly mismanaging the operation and behaving in an unethical manner, I did not handle Prioritize and schedule your duties and projects by listing what the situation constructively. I openly voiced my opinion of his needs to be done, and when, based on your supervisor’s performance, thus creating a lot of conflict between us. This expectations. conflict with my supervisor undermined my position, and I was If you are working on an important project, trying to meet a not one of the employees offered a transfer position when the deadline, and your supervisor gives you a new project he or she plant was shut down. wants done right away, explain that the other project is also due Had I focused on meeting the expectations of my supervisor right away; then ask your supervisor what project they need done and not worried excessively about behavior over which I had no first. Ask this in the spirit of good customer service and a desire control, my job would have been easier and less stressful. I to take care of your supervisor’s needs. Often your supervisor would not have been terminated and could have left the company will have forgotten about the other duties or projects already on my own terms. assigned to you and may tell you to put them on the back burner because they are no longer a priority.
    • 30 Power, Politics & Conflict Increasing Your Workplace Power 31 If your supervisor feels you are sincerely trying to take care of If you get promoted to a position of greater influence or power, his or her needs, your supervisor will likely be more willing to try to keep your ego in check. People who acquire too much help you resolve the conflict of priorities. power, too fast, often don’t know how to manage the additional leverage, which can lead to self destructive behavior. As you get accustomed to your regular duties, find ways to do them smarter and faster, to free up time for those unexpected Choosing An Industry projects dropped on you. Having more time to work on the As mentioned before, the longer you stay with the same company, unexpected projects will help reduce the pressure and stress of the greater your chances will be to increase your workplace getting them done on time. power. If you leave one company and start working at another, you will lose a lot of the power you accumulated at the first Selling Yourself company. Your ability to sell your ideas to management and to other One way to conserve more of the power you have employees will greatly impact your power foundation. People accumulated at one company is to stay within the same industry who are good at selling usually have a lot of power within a when you switch jobs. Staying in the same industry will allow company. This is one reason why many CEOs rise from sales you to use more of the working knowledge you obtained in your positions. previous job. That working knowledge will be an important It is a good idea to study up on some sales and negotiating source of power for you at the new company. tools. Even if you are somewhat introverted and not comfortable with aggressively selling yourself, there are sales and negotiating Early in your career, try to find an industry that interests you. It is techniques that can be used subtly, yet effectively. The use of hard to know what industry will maintain your interest unless you leading questions can be a very effective sales tool and will be have some experience working within it. Unfortunately, it can discussed in greater detail in chapter 5. take several job changes to find an industry that truly interests Ego Check you. If you are a currently a full-time student without much work As your power increases, don’t swagger. Insecure employees experience, seek out opportunities for work experience in the may feel resentful or threatened by your increased power. They industry you plan to labor in after you graduate, maybe as an may try to attack and undermine your power, creating additional intern or a volunteer. The earlier you get real-world experience, conflict you won’t need. Ignoring you or speaking critically of the sooner you can acquire working knowledge, to help you you to others, are some of the ways they may attack you. These determine if you really would like to work in that industry. types of attacks are usually best responded to by ignoring them.
    • 32 Power, Politics & Conflict Part II The Art of Leadership After you have worked for a company long enough to develop a sound power foundation, you should be in a position to instigate some change and improve the company’s productivity. The amount of change you can invoke depends on the amount of power you have built up, as well as the amount of knowledge you have of change management tools. At this point in your career you may be managing a department or function, leading a small company, or running your own business. 33
    • 34 Power, Politics & Conflict CHAPTER 4 Cornerstones For Effective Management The most effective and productive senior managers I have had the pleasure to work with, were not effective because they had business degrees. What they each did have, that allowed them to be effective, was several years of experience in their industries, respect for their employees, and the know-how to use a few Leadership management tools sensibly. To be an effective business manager you need 3 things: Adequate working knowledge, including a detailed Leadership is about motivating and directing people to achieve understanding of company processes, products or services, desired results. as well as your customers and market place. Leadership skills to motivate and direct employees, People are the most critical and valuable resource of a company, suppliers and customers. and often the most expensive. Labor is usually one of the largest A ‘toolbox’ of management tools that are readily usable. costs of a company and consists of wages, payroll taxes, worker’s comp insurance, plus any benefits, such as a 401(k) plan or health In the previous chapter you learned the importance of increasing insurance. your working knowledge and how to build your power Since your employees are a valuable and expensive resource, foundation. Chapters 4, 5 and 6 will teach you what you need to it is important to get the most out of them. To increase company know to be an effective leader and overcome barriers to change. productivity, some managers may simply try to coerce employees Chapters 7, 8, and 9 will show you how to use some to work harder. This may create some short term improvement fundamental management tools to improve an organization’s in productivity; however, these improvements will be limited and productivity in a direct and effective manner. temporary. To get permanent improvements in productivity, smarter processes are needed. An effective leader will create a culture of ongoing improvement — a culture in which employees are motivated and directed to develop smarter processes. 35
    • 36 Power, Politics & Conflict Leadership 37 If done properly, having employees develop smarter processes Support & Develop will not only improve productivity. Giving employees a challenge An effective leader will support the team by ensuring members they can overcome, can increase their self-esteem and improve have the resources needed to reach their performance morale. measurement goals. A leader should develop team members so they are able to Roles of a Leader work smarter and advance to more challenging positions. This Assemble a Team involves training, and empowering the team to utilize their Leaders need to assemble a team of people. More often than experience and knowledge in improving company processes. not, a leader will be put into a position where the team is already assembled. If this is the case, the new leader needs to evaluate Qualities of an Effective Leader the team and reassemble it where needed. This involves replacing In order to be effective in the long run, a leader must possess members who leave the team, replacing members who cannot, certain personal qualities and skills. If they are missing these or will not, contribute to the team effort, and expanding the team qualities and skills, they may do more harm than good. when needed. A leader also organizes and orchestrates the team. This Adequate Working Knowledge involves assigning responsibilities and duties in a sensible manner, An effective leader understands the company or department they making sure each team member’s skills match his or her are leading, at many levels. Leaders with the best working responsibilities, as well as making sure members are coordinated knowledge of their company usually started at a lower level, and moving together in the same direction. worked for the company for several years, and eventually ascended to their leadership position. Determine Direction Since a leader determines the team’s direction, he or she needs Confidence to communicate this clearly and often to all members of the team. An effective leader has confidence in what he or she is doing. One way to keep team members on the same course is to make Confidence is necessary to prevail over the various obstacles a key performance measurements part of the company culture. leader will encounter. Confidence goes hand-in-hand with Chapter 8 covers performance measurements in greater detail. adequate working knowledge of an undertaking. If you are unsure about what you are undertaking and have low confidence, you can easily be thrown off track by employee resistance and other obstructions.
    • 38 Power, Politics & Conflict Leadership 39 Having confidence doesn’t mean having an excessive ego and a Ethical Behavior feeling of superiority over those being led. Many CEOs who do For this book, ethical behavior is simply defined by the Golden not have adequate working knowledge of an undertaking may Rule: “Do unto others as you would have them do unto you.” rely on their arrogance to overcome employee resistance and Effective leaders treat other people as they would like to be other obstacles. With or without confidence, a leader who lacks treated; they are open and honest with employees and don’t have adequate working knowledge will likely lead the company down hidden agendas. They understand the motivational value of being the wrong path. open with employees. Effective leaders are able to own up to their mistakes, and Ability to Motivate can admit it when they don’t know something. They contribute Some people seem to have an innate gift for motivating others. to the wealth of a company rather than being parasites that suck For the rest of us, the ability to motivate people in an ethical wealth from the company. manner can be acquired from practicing certain behaviors and skills: Unethical behavior often accompanies ineffective leaders. Leaders who do not have the necessary knowledge or skills to be effective, Confidence, gained from experience and working and those who abuse their leadership positions to line their own knowledge. pockets, frequently obtain their positions via unethical behavior. The ability to empathize with other people and treat them Unethical behavior includes personal misrepresentation, with respect. cooking the books, hiding mistakes, pretending to know something one doesn’t actually know, telling others what they Using various motivational tools explained in greater detail want to hear instead of the truth, and undermining of peers. at the end of this chapter. An unethical leader may try to deceive the team with illusory Managing Conflict behavior. He or she may dress up in expensive suits and drive an An effective leader is able to manage the conflict he or she expensive car to give the allure of success. They may dress encounters. Conflict can quickly undermine a leader’s power, casually and talk in a folksy manner, to induce other to let down making work days difficult and unproductive. The ability to their guard. manage conflict is essential to getting things done. Chapter 6 is Some people will eventually notice inconsistencies and detect devoted to managing conflict. the deceptive leader’s façade. Unfortunately, others will ignore the inconsistencies and accept the façade as fact. When people
    • 40 Power, Politics & Conflict Leadership 41 are told what they want to hear, they are inclined to accept it as find out. An effective manager doesn’t need to know everything, truth, even when it’s an obvious lie. but he or she does need to know where to get knowledge when they need it. Reputation Employee perceptions of a leader are an important source of Behavior Types power. Leaders that have a reputation of doing quality work will As a leader, you will need to understand the different types of encounter less resistance when they ask the same from their behavior you will have to work with, and how to manage and employees. utilize them to their greatest potential. The following are specific If you treat employees with respect, you will get more workplace behaviors and should not be used to label an entire cooperation when you ask team members to treat each other person in the real world. Nobody is perfect. To some degree, with respect. If you ask your team to do things that you aren’t we all exhibit the following behaviors, the positive ones as well willing to do yourself, they will view you as a hypocrite and give as the negative ones. you more resistance and less support. Adult Acknowledging Your Shortcomings Adults are reliable, self-motivated and handle conflict well. You As discussed above, it’s important to have good working can give them a task or project and it will get done with little knowledge so you can handle whatever it is you are undertaking supervision. They show up to work as expected, on time. They without making a lot of mistakes. But even the greatest knowledge know how to handle or diffuse the conflict they encounter. In will not guarantee you error-free work. When you do make a other words, it isn’t necessary to spend a lot of time supervising mistake, don’t be afraid to admit it, learn from it, eat a little humble them. pie, and move on. Adults have an inclination to improve their area of Do not try to cover up your mistakes with lies or BS. In the responsibility. Adults are usually not obsessed with controlling long run, employees will respect you for admitting your mistakes. others. On the other hand, if you are caught trying to cover up your mistakes, you will lose a lot of the respect others may have for An adult employee is a great resource. There are many adults you. working in companies today; unfortunately, most companies do The same thing applies when you don’t know something. If not know how to utilize the potential of this resource. Too often you are asked about something you don’t know, do not try to CEOs and supervisors over-control, confine and demoralize adult BS your way out of it. Just say you don’t know, but that you will employees, stifling that potential.
    • 42 Power, Politics & Conflict Leadership 43 Adolescent can occur when they get into too much trouble and are scared Adolescents are not very reliable or self-motivated. They may straight or when they get religion and discover that their corrupt complain excessively, and be frequently tardy or absent. They ways are also destructive to themselves and their loved ones. may foster conflict and cannot be counted on to complete The most ruthless or talented of the corrupt often rise to the assignments without supervision. top of our organizations. Their operational styles vary. They Adolescents need to be closely supervised and should be may act like pompous thugs, bullying people to get what they limited to positions that have clearly defined and documented want; or they may be friendly and smooth talking, using flattery job descriptions. They should be limited to making structured to get what they want from others. decisions and trained how to make those decisions. Adolescents can be a useful resource for a company, but the If you suspect an employee is behaving dishonestly, don’t jump cost of supervising them needs to be considered. Adolescents to conclusions without hard proof. Monitor the situation and are not beyond hope. They often mature with time and good review management controls to make sure adequate controls are mentoring by a supervisor. On the other hand, an adolescent in place to prevent such activities as theft of company property, who is not adequately supervised can become a costly liability. supplier kickbacks, or misrepresentations of performance. Honesty Competence An honest employee is one that is adverse to lying, cheating or A competent employee is one who has the knowledge and skills stealing to get what he or she wants, and behaves in an ethical needed to adequately perform his or her present duties and manner. responsibilities. An incompetent employee is one who doesn’t have the Corrupt/Liars knowledge and skills needed to carry out his or her duties and responsibilities, even though they have been in their position for A corrupt person is one who will lie, cheat or steal to get what he enough time to acquire the necessary knowledge and skills. or she wants. The corrupt that advance to positions of power Managers who fear conflict will often accommodate can become destructive parasites that negatively impact a incompetence rather than confronting the problem. This drags company’s wealth. Sometimes they are so destructive they down the company and demoralizes the employees who work destroy the organization. around it. Effective leaders understand that the cost of With this type of person you need to watch your back. You accommodating incompetence is too great, and will confront and can’t fix them. Sometimes, however, they fix themselves. This remove it.
    • 44 Power, Politics & Conflict Leadership 45 Some options for removing incompetence: upon how well they like the candidate. Their prejudice can make Train the employee to give he or she the necessary skills failure out of success, and vice versa. Some employees and knowledge. Whether this can work depends on the understand this and use BS and flattery to advance to better requirements of the position and the abilities of the employee. positions. In summary, most people don’t rise in organizations due to their abilities but, rather, through their relationships with Modify the job duties of the position or relocate the employee the right people. to a position he or she can handle. Terminate the employee and replace that individual with a Reaction to Conflict person who has the necessary knowledge and skills. Taking Some employees fear conflict and avoid it at almost any cost. away a person’s main source of income is neither a pleasant The lower their perch in the organization, the greater the likelihood or easy response, but in some cases it may be the best of their being bullied into submission. Leaders who fear and resolution for both the company and the employee. avoid conflict will allow a destructive amount of conflict to exist in the organization. This is costly for the organization and is Sometimes employees who do well in one position are moved to demoralizing for its employees. a higher level position because of their good performance; yet in Some employees instigate conflict in a destructive manner. their new position, they find they cannot handle their new This is often done to undermine those they believe pose a threat. responsibilities. This is sometimes called the Peter Principle, which When management allows employees to instigate conflict, states that people rise to their level of incompetence. instigators can become a destructive force in the company. This may be true sometimes, yet when a person advances to On the other hand, employees who understand the value of a position where they fail, they may still continue to advance in managing conflict are able to confront it when needed and the company. Sometimes the people making promotion decisions diffuse or resolve conflict before it becomes destructive. are higher up in the organization and are out of touch with what is actually happening at lower levels. They don’t detect, or are not Type of Person Typically Promoted interested in knowing about, incompetence at lower levels. When companies are making promotion decisions, the decision- Sometimes there is an unreasonable hope of promoting individuals makers generally consider five criteria. Notice that these are out of incompetence. similar to the criteria used for hiring decisions, except for one Unfortunately, many in leadership positions do not know how additional criteria. to fill positions with people who have the right knowledge and skills. Many leaders make a promotion or hiring decision based
    • 46 Power, Politics & Conflict Leadership 47 Candidate is believed to have an acceptable level of skill For lower level employees, you can initially hire a promising and knowledge. This often depends on the perspective and candidate as a temporary employee for 30 to 90 days to determine prejudices of the decision-makers. if he or she has the four qualities. Tell the employee up front that Candidate is accepted as part of the company culture and is the position is a temporary-to-permanent position, and state the not considered a threat to the decision maker. length of the temporary status. For most lower level positions the most important qualities Candidate is dependable. are adult behavior and honesty, if the employee can be trained to Candidate does not complain excessively. be competent. For managers, it is important that they have all Candidate is liked by the person making the final decision. four qualities. For management positions, do more than one interview for each candidate, and meet the candidates in social settings, such Type of Person You Should as for a drink or dinner. Do comprehensive background checks Hire or Promote on the finalists. Perform these activities until you feel confident As a leader, if you want to have team members that produce that you have a candidate who meets the four criteria. results under minimal supervision. You should look for four traits: Having employees who possess the four qualities will make your Candidate exhibits adult behavior. work as a leader easier, more pleasant, and can dramatically Candidate is competent or can be trained to be competent. increase your productivity, your power, and your ability to foster Candidate behaves in an honest and ethical manner. change in the organization. Effective leaders know this, which is why they hire the best employees available. They are not Candidate manages conflict well. threatened by an employee who may in some ways be smarter or more talented than they. It is to a leader’s advantage to find a person having all four of the Many managers and CEOs would feel threatened hiring qualities listed above, even if it takes extra time to find such a someone they believe to be superior in talent. Some managers person. For inside promotion decisions, you may already know are so insecure that they hire people they expect to falter in their if a candidate has these qualities. When hiring somebody from positions. They may believe that the failure of someone below outside the company, even if you do a comprehensive interview them will divert attention from their own shortcomings. and background check, you will not know for sure if a candidate has all of the qualities until you begin to work with that person.
    • 48 Power, Politics & Conflict Leadership 49 Motivating Employees Reducing inventory and production lead times. Motivational tools can be classified as either reward or discipline. Reducing operating costs. Sometimes referred to as ‘carrot or stick’. There is a need for both types. Rewards need to be carefully tailored to produce the desired improvement. Many companies give their department or senior Discipline managers annual cash bonuses, based on bottom-line Discipline is best used for enforcing minimal behavior requirements improvements. for employees: Giving praise and recognition for the smaller improvement steps by simply telling an employee, “Good job.” is important for Reporting to work as expected. maximizing the productivity of employees. Fulfilling basic job duties. Celebrations for recognizing department or company wide Working in a safe manner. improvements, like reduced injuries, provide recognition for Not stealing from the company. employees, and promote feelings of pride and belonging. Not harassing other employees. Peer Recognition/Peer Pressure Discipline includes counseling, verbal warnings, written warnings, Peer pressure combines reward and discipline. When others time off without pay, termination or, in the case of grand theft, are made aware of your accomplishments, you may feel a boost having an employee arrested and terminated. to your self-esteem. On the other hand, it can sting when your Always document in writing any disciplinary action and the peers are informed of your failings. cause of the disciplinary action. If the employee’s behavior does One way to create peer pressure is to set up key performance not improve, you will likely need the documentation if you have measurements for each department, and then periodically to further discipline or terminate the employee. publishing, for all employees to see, each department’s performance based on the measurements. Besides creating a Rewards healthy level of internal competition, the use of performance Rewards are effective for fostering improvements such as these measurements keeps employees focused on improvement goals listed below: while promoting a culture of ongoing improvement. Reducing workplace injuries. Peer pressure can also be used to motivate individual Increasing sales and market share. employees within a department. For example, if your company Improving on-time performance. has several sales people, you may want to post the amount of
    • 50 Power, Politics & Conflict Leadership 51 sales generated by each salesperson so it can be seen by everyone Periodically discuss with your managers their personal goals. If in the sales department, who is performing well and who is not. a manager wishes to make more money, develop an incentive plan according to which he or she will earn bonuses or salary A lot more about performance measurements in Chapter 8. increases when they implement improvements that make the company more profitable. If a manager would rather have an Retaining Employees additional week off every year, find a way for he or she to earn Productive employees need incentives to stay with a company; that additional time off. thus, praise and recognition for their accomplishments are critical. Let’s say that a production manager wants to take an Giving them opportunities to increase their income through additional week off during the year. Give that person a process performance bonuses or promotions can reap long-term benefits improvement goal that will increase company income, as well as for the company. Additionally, understanding and supporting these a cross-training goal that ensures the operation can function employees’ personal goals will boost their morale and increase normally in his or her absence. The improvement in profitability the likelihood of retaining these valuable people. should be greater than the cost of giving the manager an additional week off. Aligning Employee and If most employees desire better health insurance coverage, create an improvement goal that will increase company income Company Goals more than enough to pay for better health coverage for the One approach to motivation is to tailor reward programs to an employees. If the goal is met, give the employees better health employee’s personal goals, in order to align an employee’s insurance coverage. personal goals with company goals. An effective leader stays in touch with the team members and should have some idea of what’s important to them. To help Everybody has different desires and goals. Don’t assume that remove any prejudice or inaccurate assumptions, surveys can be the only thing employees want is more money. Yes, some used to better quantify what employees desire. employees may want to make more money, but others may desire more time off. Some may wish to move to a different position or Tailored incentive programs need to be set up carefully to ensure relocate to a different part of the country. Others would rather equitable treatment for all employees. Goals and rewards need have better medical insurance coverage. to be clearly defined and documented. The goals should be Individually tailored incentive programs can be set up for quantifiable to avoid ambiguity. It should be clearly stated how key managers, and a general tailored incentive program can be the incentive arrangement furthers the goals of the company. The set up for all the other employees. goals need to be attainable, so that failure isn’t inevitable.
    • 52 Power, Politics & Conflict Volunteers CHAPTER 5 Volunteers are people who work because they choose to, not because they are obligated to do the work or are compensated for it. Optimum performance from employees requires the exercise of their own free will. A manager usually cannot simply coerce employees to perform at their potential. Change To some degree, you need to think of employees as volunteers. This will help you to understand how to motivate them to go beyond the minimal requirements of their positions and live up to their own potential. People usually do volunteer work because it gives them a The movement from ineffective business practices to effective feeling of satisfaction from having done something very important. business practices requires change, as does the shift from good Volunteer workers feel that the work they do is even more to better business practices. important than money. Successful volunteer organizations support their volunteers’ self- After you have been working for awhile in your career of choice, esteem. If the volunteers do not feel valued by the organization, you will learn that organizations have many barriers to change. they will likely leave the organization. Some barriers, such as the laws of physics or economics, are often beyond our control. Other barriers, those created by human To get employees to perform closer to their potential: behavior and political forces, can be overcome with patience Treat them as being important, because they are important. and the right tools. People tend to resist change even when the benefits are Treat them as being needed, because they are needed. obvious. The amount of resistance to change in an organization Let them know that their jobs are important, because they is proportional to the amount of change attempted and the span are important. of its impact. Serving others by doing volunteer work is a good way to develop your own leadership skills. 53
    • 54 Power, Politics & Conflict Change 55 Some reasons why people resist change: Execute the plan. People fear the unknown. Monitor feedback on progress. Adjust the plan as needed. If the plan was properly thought out, it may only need minor People don’t like to leave their comfort zones. When they adjustment. are comfortable doing something in a particular way, they are reluctant to change to something that is different or will require additional effort. Organizational Change Requires Power and Good Leadership When people feel they are being forced to change, they may feel like they are giving up power to the person leading the Your ability to invoke change in an organization is directly change. proportional to your power in that organization. If you are new to a company or if you have a weak power foundation, you may only be able to implement small amounts of change at any one Standard Problem/Opportunity time. Solving Process Nevertheless, even after you’ve been with a company for Identify and define the problem or opportunity. Find the several years, you may hit a wall while attempting to change root cause of the problem. Clearly define the opportunity something. In that case it may be best to defer the change, take and how the company can benefit from it. some time to increase your power foundation, and attempt to complete the change later on. Decide what needs to change. A company consists of people, practices, assets and capital. Of those four things, Changing something in an organization often means asking people find the element that needs to change. Most often, it’s a to give up something they are accustomed to in exchange for practice that needs to be added or modified. something foreign. It also means asking them to make an additional The tools to be discussed in chapter 9, will help pinpoint the effort to implement the change. Motivating people to accept and opportunities for improvement that should be given priority, implement change requires power and leadership skills. as well as determine what needs to change. Assess your power foundation relative to those people who Decide on your objective: what to change to, and where will be participating in the change implementation. If you feel a the company wants to be after the change. need to increase your power, increase your working knowledge of the areas involving the desired change. Develop a tactical plan to implement the change.
    • 56 Power, Politics & Conflict Change 57 Power of Position fail. Confidence can be secured with adequate working An employee’s position within the organization will greatly knowledge and a sound change plan. determine his or her formal authority to invoke change. The higher up you are in an organization, the greater your ability to invoke Conflict Management change, and the broader will be the impact of those changes you Conflict management skills are needed to diffuse and resolve the implement. different types of conflict that arise when people resist change. Chapter 6 is devoted to conflict management. Unfortunately, many CEOs squander that authority. An ineffective CEO will sometimes have the entire company working on a change Emotional Resistance program that wasn’t properly thought out. When the results aren’t Emotions often outweigh objective reasoning when a person is as rosy as expected, the CEO may devise another change making a decision or is taking some action. In a situation where program, jerking the company in a different direction. These someone refuses to accept change and seems to ignore the large-scale changes can impact a company for the worse, obvious benefits of change, try to ascertain the emotional reasons sometimes to the point of bankruptcy. for resisting the change. If you can discover the emotional reasons At the other end of the spectrum are the CEOs who haven’t for his or her resistance, you will have a better understanding of built up a sound power foundation and, therefore, struggle to what you will need to overcome in order to complete the change. implement even minor change. For example, if the person has a fear of the change, try to understand the reasons for his or her fear, and find a way to Acceptance reduce it. Being empathetic of the person’s fear will help you to Long-term employees can feel threatened when a person new to find a way to lessen it. the company attempts to change the organization. Acceptance by your fellow employees is beneficial when you wish to invoke Organizational Change Requires change that requires their participation. As mentioned earlier, it Adequate Working Knowledge may take a year or more of working within an organization to be Changing an organization is an involved process. To successfully accepted as part of that organization’s culture. invoke productive change, one must have sufficient working knowledge of the realm in which the change will occur. When Confidence contemplating changes to an organization, make an effort to You will need confidence to stand your ground — against those understand the details of what needs to be changed and get input who are resisting the change or want to see your change program from the people who will be affected by the change.
    • 58 Power, Politics & Conflict Change 59 Too often, managers do not make an effort to understand the enduring vision of what the company could potentially be — a details of what needs to be changed or get input from those vision that won’t erode with time and setbacks. affected, and their change programs result in wasted effort and expense without creating the desired benefits. Opportunities for Change Opportunities for change can come and go in a matter of seconds. Working knowledge is not the sole province of management — You should be prepared to recognize these opportunities and to every employee of a company has ideas about what to change take advantage of them. and how to change it. However, they may not have enough Let’s say you’re in a meeting, and the senior manager leading working knowledge to formulate an effective change plan; and the meeting turns the discussion toward a problem that concerns even if they do, they may lack the power to fully implement it. him. Many people throw in their two cents, incomplete ideas or An effective leader knows how to turn good ideas from comments on what is wrong. You, on the other hand, have had a employees into productive change programs. solution in mind for some time. It’s simple and would be effective, but it involves change. Organizational Change Your challenge is to present the idea vividly, simply and Requires Commitment directly — how it will work and why it will solve the problem. Change can be harder than expected to implement, and a change program that’s not fully implemented is unlikely to be a productive Comprehension one. Managers often start change programs but are unable, for Most people can only grasp new information in short, logical one reason or another, to put them into effect. They may partially steps. Problems with complex origins may be difficult to explain complete the change program and then abandon the program. without losing your audience. This is a waste of company resources and employee time. If you can show the root cause of the problem using a simple Pursuing a change program to its completion requires commitment fishbone diagram, (see Figure 9-2 on page 148) it will be easier from management. to get others to agree on the root cause, and the correct solution will be more obvious. Organizational Change Requires Vision Leading Questions Long term changes to a company require tenacity. Many By asking a series of leading questions, you can lead others to unexpected barriers will arise, and these will take time and effort acknowledge a problem or opportunity, find the root cause of a to overcome. Overcoming all of these barriers requires an problem, invent a solution, and develop a change plan. You’re
    • 60 Power, Politics & Conflict Change 61 more likely to gain consent and acceptance of your plan if their Response: “We would need a forecast of the parts the own thinking produces the same conclusion. Here are some production department will need each week.” simplified examples of how to use leading questions: Developing a change plan: Acknowledging a problem or opportunity: Leading question: “What information do we have that we Leading question: “Are all customer orders being shipped could use to create a forecast?” out on schedule?” Response: “We have the customer order backlog that shows Response: “No.” the products ordered and when the products are scheduled to be shipped to the customer.” Leading question: “Why not?” Response: “Sometimes production doesn’t get all the parts Leading question: “How can that be used to make a forecast needed to produce the orders on time.” of the parts production will need each week?” Response: “When a customer places an order, we can use the Finding the root cause of a problem: bill of materials data file to generate a list of the parts needed to Leading question: “Why is production not getting the parts build the order. Since it takes two days to build and ship most they need on time?” orders, we can schedule the parts as being needed by Response: “A lot of reasons.” production two days before the scheduled ship date.” Leading question: “What is the most common reason?” Continue this process until every root cause have been found, Response: “We don’t order them on time from the supplier.” and a sound change plan for each has been developed. Sometimes another employee will suggest a change that you Leading question: “Why not?” agree with. Again, you can use leading questions to turn that Response: “Because we don’t know what parts production employee’s suggestion into an effective change plan. will need week to week. It changes depending on what our customers order.” Below are more examples of leading questions: Finding a solution: How long does this stuff sit around waiting to be worked Leading question: “What do you need to be able to provide on? the production department the parts they need, when they need How will that increase sales? them?”
    • 62 Power, Politics & Conflict Change 63 How much will that reduce our costs? Senior Management Support Will the production department be able to do that? Sometimes CEOs claim to support a change that they are actually not committed to. When they get distracted by a new problem How exactly will we accomplish that? or interest, they may abandon the change program before it is Who in your department can tell us the best way to get it fully implemented. done? Senior management must be committed to any change Will that be compatible with our software? program that impacts a sizable part of the company, otherwise, it will falter at some point before full implementation and likely fail How will our customers feel about that? to be fruitful. Planting seeds Change Many people are not receptive to the ideas of others, even if the This chapter discussed the need for change in organizations, ideas have obvious benefits. The only ideas they are interested barriers to change and ways to overcome some of the common in are their own. One way to get these people to accept ideas is barriers. In chapters 8 & 9 you will learn what to change, and to plant seeds. what to change to. As opportunities arise, mention suggestions for change to these people. Leading questions can be used to drop a suggestion. For example, you might ask, “What would happen if we put a conveyer between stations 1 and 2? How would that impact our lead time and inventory levels?” Even if the person rejects the idea initially, if he or she heard the idea, there is a fair chance that it will stew in their thoughts. Later on, this person may come up with the same or a similar idea, but now it’s their idea. Planting seeds requires patience because it can take months or even years for idea seeds to germinate, so plant early and plant often. You may not get credit for your ideas, but being an effective leader requires that you sometimes put your ego in the back seat.
    • 64 Power, Politics & Conflict CHAPTER 6 Managing Conflict Interpersonal conflict can be defined as the clashing of differences, factual or perceived, between two or more people. Conflict is the stuff that can make your job emotionally stressful, even painful. Frequent conflict with your boss, your subordinates or peers, not only makes your work more difficult, it also undermines your power in the company. The most powerful people in an organization are usually those that know how to manage conflict and are able to confront it, resolve it or diffuse it; they also know when to ignore it. Working in an organization is like being in a family. You are stuck with each other for several hours a day, maybe five days or more a week, so it is to your advantage that you get along with everybody. This doesn’t mean you need to like everybody or be everybody’s pal but, rather that you try to stay on friendly terms with everybody, even with people who rub you the wrong way. Having any ongoing conflict will suck power from you. 65
    • 66 Power, Politics & Conflict Managing Conflict 67 Some common causes of organizational conflict: There is nothing abnormal about having some fear or aversion of Two people disagree about the cause of, or solution to, a conflict, but you need to be able to rise above the fear and confront problem. conflict when needed, to keep it from controlling you. If you have a reputation of not being afraid to confront conflict, people Two people disagree about their assigned responsibilities will have more respect for you and will be less likely to initiate or territory — “It’s not my job it’s your job.” Or vice versa, conflict with you. “It’s my job, not your job.” An employee disagrees with the actions of his or her Instigators superiors. Sometimes employees deliberately engender destructive conflict. An employee ignores the instructions of his or her supervisor. This gives them a feeling of power, and indeed earns them a limited amount of power in an environment that allows this type An employee does not fulfill his or her responsibilities, of behavior. Managers with excessive fear of conflict often making the work of other employees more difficult. accommodate people who instigate destructive conflict. Somebody acts hostile towards somebody else. This can include a dirty look, an unkind comment, or an attempt to In order to discourage employees from instigating conflict, get a person in trouble with his or her supervisor. maintain a reputation for addressing conflict when it arises, and Employee gossip. treating conflict as a problem to be resolved, not as a means to uncover employee failure. Healthy Conflict is Needed For example, if an employee complains to you about another employee, try to determine the employee’s intent. If the intent is A certain level of conflict is healthy for an organization. An to fix a problem, hear the employee out. Then use leading organization needs some conflict to challenge its existing strategy questions and a fishbone diagram to find the root cause of the and practices, to help ensure they stay fresh and effective. problem so it can be corrected. Root cause analysis and fishbone diagrams are explained in detail starting on page 146. Fear of Conflict If the intent of the employee seems to be merely to make Many managers and executives fear and avoid conflict. When trouble for the other employee, then consider bringing the other facing a conflict situation, instead of confronting it and resolving employee into the conversation to hear the complaint. If you it, they may try to avoid it or compromise themselves and the have a reputation of bringing trivial complaints into the open, company in an effort to make it go away. instigators will be less likely to bring them to you.
    • 68 Power, Politics & Conflict Managing Conflict 69 After the first employee has voiced his or her complaints, give You have noticed this, and it bothers you because you fear it the second employee a chance for rebuttal. Again, use leading could increase the number of receiving errors. You haven’t pushed questions and a fishbone diagram to find the root cause of the this issue yet because the receiving department has been working complaint. If the complaint lacks merit, it will be exposed when on some other improvements having greater priority. doing a root cause analysis. If the complaint has merit, guide the two parties towards a resolution using leading questions. One day, the receiving manager and the production manager are having an argument over an error made by the receiving Energy department. Drawer handles received from a supplier were not processed properly, so the production manager did not know Conflict can generate a lot of energy. This energy can sometimes they had arrived. As a result, the production manager lost be channeled towards productive change. production time while waiting for the already received drawer Conflict is like two hammers knocking up against each other. handles. At this point, you step into the argument. If your pinky finger happens to get caught between them, you’re The production manager complains that the clerk is not doing gonna be hurting. If you can put a tennis ball between them, the his job which is making the production manager’s job more hammers will bounce away from each other — without harm, difficult. but without accomplishing anything. If you take your hammer Your strategy is to draw upon both parties to discover the away and place a nail in the path of the other hammer, you can root cause of the production manager’s complaint. Using leading use the kinetic energy to drive the nail. questions, you begin asking about the receiving clerk’s job duties. Your goal should be to diffuse or resolve conflict in order to It soon becomes clear to all present, that the receiving clerk minimize the damage it can inflict on you and the company. In has conflicting duties, and that his job needs to be restructured some situations you can use the conflict to accomplish something so he can always be near the receiving dock. With a little productive. Here is an example of using the energy of conflict to brainstorming, ten minutes later, everybody agrees on a solution improve the company: to the problem, and the receiving clerk’s job is appropriately Imagine that you are the president of a company that restructured. manufactures furniture. The receiving clerk has diverse responsibilities that sometimes cause the clerk to be away from Emotional Response the receiving dock when suppliers deliver parts. When this People react to conflict in a variety of ways, ranging from total happens, other employees working near the receiving dock accept hostility to complete submission. Both extremes show a lack of the delivery and leave it on the receiving dock for the receiving self-control. clerk to process later.
    • 70 Power, Politics & Conflict Managing Conflict 71 In a conflict situation, your anger and ego may compel you to episode, you may suffer overwhelming anger and/or fear. Feeling resist and fight the other party. You’d like to put them in their powerless will feed that anger and fear. place, or ‘dance on their grave’. Not only is this attitude potentially You actually have a lot of power in most conflict situations. destructive for both parties, it undermines your personal power, Remembering this fact can help you keep the anger and fear in even if you win the battle. control. Self-control — the power to temporarily restrain and The opposite reaction would be a response of submission assess your emotions — allows you to manage conflict rather out of fear, allowing the other party to control you. Either way, than letting it control you. an emotional reaction is usually not productive and can sap your If you need to, find a way to vent your feelings before engaging power. the other party. To give a personal example, I will draft an e-mail message to the other party. To avoid accidentally sending the People who manage conflict will try to respond in a way that gets message, I draft it on a word processor, not the e-mail editor. them as close as possible to a desirable outcome. Developing Then, if I choose to send it, I can cut and paste it to the e-mail the habit of taking control of and guiding conflict requires time editor. and effort, but is well worth the effort when you consider the The draft acts as a pressure release valve, letting me speak benefits you will get in return. my mind without restraint. After writing the draft, I will take a break or work on something else. A little later, I read over the Taking Control of message, then ask myself if it will accomplish what I want it to. If necessary, I will then edit and send the message, or speak directly Hostility Conflict with the other party. In some poorly-managed companies, hostility is common. This can stem from employees treating one another disrespectfully, Diffusing the Hostility of the Other Party confusion about job responsibilities, or unresolved conflict. Reacting to hostility with more hostility can create an out-of- The next thing you may need to do is diffuse the hostile emotions control and destructive situation in which both parties will suffer of the other party and take control of the conflict. The best way losses. to handle this is with humility — the opposite of hostility. Controlled humility can be an effective means of gaining and Diffusing Your Hostility keeping control of a conflict. To take control of hostility conflict, the first step is to diffuse any The best defense against petty hostility may be to step aside and hostile emotions you may be feeling. When in a heated conflict ignore it, or to diffuse it with a smile or even a “Thank you.”
    • 72 Power, Politics & Conflict Managing Conflict 73 If the hostility is more serious and the other person is venting, let Humility the other party express his or her feelings. Listen without People often equate humility with surrender and defeat. Humility interrupting, and patiently give them time to finish. Respond by is actually a very powerful weapon for confronting hostility and summarizing what they have said, “So you are upset because I gaining control of conflict. When the other party expects a hostile sent the memo without your input?” Do this until there is agreement response from you, your tactical use of humility can pull the other of why the other party is upset. Give some benefit of doubt and party off-balance emotionally, weakening their stance. try to see it from their point of view. Many times you will not be able to resolve conflict unless the If the other party is not venting, you may wish to discover other party feels they have won. In those situations you need to what’s on his or her mind by simply asking something like, “Is strike a balance by finding a solution that gets results for you, yet there a problem?” If they refuse to say what is on their mind, or still allows the other party to believe they got what they wanted. deny that anything is wrong, it may be that they fear conflict. This requires humility on your part. After diffusing any hostility, try to find common ground. The Humility can also be used to change an adversary into a performance measurements discussed in Chapter 8 should help strategic partner. “You are right, I shouldn’t have sent the memo you with this process. State your position in terms of your desire out without your input, but what can we do to encourage to improve the performance measurements, rather than making it employees to find ways to reduce our inventory?” Here you can a personal issue. For example, “I issued the memo because I use leading questions to guide them to give you the answer you believed it would encourage employees to find ways to reduce need. our inventory.” If, on the other hand, you conclude that it’s you who’s actually Responding to conflict with hostility is often equated with heroism in the wrong or could have chosen better actions, apologize for and ultimate victory because it sometimes allows people to win your actions. Admitting your errors and agreeing with the other battles on their terms. Hostility, in most cases, is unlikely to end party will help to diffuse the conflict. If for the sake of your ego, the war and can be extremely destructive for all parties. To win you decide to stand your ground and not admit that you were a war, one must win the critical battles. These battles are won wrong, the conflict may continue to fester and be a burden for via controlled emotions and clear thinking. you. We occasionally witness some of the world’s most powerful people defeat themselves because they respond to conflict with hostility.
    • 74 Power, Politics & Conflict Managing Conflict 75 Using Hostility as a Response counterproductive. You can avoid this mistake by removing There are times when controlled hostility is an appropriate personality from the issue at hand. response to hostility. When you have tried responding with humility For example, if the person is not doing a task that is one of but the other party continues to antagonize you, and you believe his or her regular job duties, you can say to them, “The task is that you have a strong position, escalating the conflict with some not getting done.” rather than saying, “You are not doing your hostility of your own may compel a resolution. job.” Or in some cases you may be able to say something like, When the other party realizes that you are not afraid to defend “If the task was being done it would benefit us in this way.” This yourself, he or she may back off. If your display of hostility puts focus on what you want — getting the task done — rather causes the conflict to escalate, and you keep your emotions in than on the other’s personal shortcomings. check while using the conflict management techniques discussed in this chapter, you will likely have the advantage and be able to Conflict With a Subordinate maintain control of the conflict. When you find yourself in conflict with a subordinate, focus on If you need to use hostility, use a measured amount, just his or her job description. Try to keep your relationship with the enough to nudge the conflict out of orbit. Too much hostility will subordinate as clearly defined as possible via a written job make it more difficult for you to maintain control of the conflict. description. A glaring look, a retort akin to, “Back off!” or a witty remark are examples of measured responses. Some common causes of conflict with a subordinate: Some Conflict Scenarios Subordinate is not meeting your expectations. When a subordinate is not meeting your expectations, clearly Here are some examples of organizational conflict, with some define in writing your expectations and how he or she is not examples of ways to respond to the situation mentioned. Each meeting them. Examine your expectations to determine if conflict incident you will encounter at work will be unique, and they are reasonable and important. you will need to develop a repertoire of responses. The most When the subordinate fails to meet your expectations, important things to remember are: avoid an emotional response, discuss your expectations with the subordinate in a timely and focus on managing the conflict to pursue a desirable outcome. manner, while the issue is still fresh, to make it easier for he or she to understand how their actions did not meet your When trying to resolve a conflict situation with another employee, expectations. Determine whether they have the resources attacking the self-esteem of the other employee is usually needed to meet your expectations.
    • 76 Power, Politics & Conflict Managing Conflict 77 At some point you may have tried, and failed, several times If the subordinate has more working knowledge than you, to get an employee’s behavior to change. This can be giving the subordinate a power advantage, you can increase frustrating, but patience can have its rewards. Don’t give up your power foundation by increasing your working on an employee prematurely. If what you are expecting would knowledge. This takes time and patience. Keep in mind be a challenge for most people in the employee’s position, that a chronically hostile employee can be replaced if the try aligning your expectations with the employee’s personal employee fails to modify his or her behavior, and that it will goals by creating an incentive plan that will give the employee be easier to replace an employee when you or another what he or she wants when they give you what you expect. employee knows how to do the employee’s job. Violating company policy. Your subordinate spends excessive time using the If a subordinate is violating an important company policy, Internet for personal reasons. determine whether or not the policy is in writing and, if so, A subordinate who spends excessive personal time on the whether they were aware of it when they transgressed. If Internet, while getting his or her work done in a satisfactory the policy is not in written form, it should be. manner, needs additional responsibilities or improvement If the policy is both available in written form and known goals to fill up the work day. by the employee, counsel the employee to ensure he or she If, however, the subordinate’s work is substandard, use understands what the policy entails, and then have the the actions discussed earlier to direct the employee to meet employee sign off on a copy of the policy. Place this copy in your expectations. his or her employee file. If the employee continues to violate Improvement of the employee’s work performance the policy, you will likely need this documentation to further should be the focus, not discipline or control. If the employee discipline or terminate the employee. is already giving you exceptional performance, you may want to monitor the situation and defer taking action until you find Your subordinate has been with the company longer that his or her performance is slipping due to personal time than you and is hostile towards you. on the Internet. If the subordinate has been with the company several years longer than you have, ask yourself why you were chosen to When considering discipline of a subordinate, make an effort to be his or her supervisor. Hopefully there are sound reasons. determine whether you are treating the subordinate fairly. Step You may have better leadership skills, you may have broader back from the issue and try to appraise the situation objectively. experience, or you may have a better relationship with the Look for any prejudices that may be clouding your ability to be people who made the decision to put you in the position.
    • 78 Power, Politics & Conflict Managing Conflict 79 fair. Getting feedback from another manager who is familiar with Conflict With a Peer the person may help you clarify your judgment. If a peer is interfering with your ability to do your job because he or she isn’t doing their job, humbly let them know that you are Conflict Between Your Subordinates not able to get your work done because you are not getting what If two of your subordinates are treating each other in an obviously you need. disrespectful manner or are being disruptive, you need to resolve Let’s say that one of your duties is to give the general manager it. When conflict flares up in your presence, try to diffuse or a weekly report that includes production data from the previous resolve it on the spot. Simply asking the feuding parties, “What’s week. The report is due every Monday. The production manager, the problem?”, may be a good way to begin resolving it. If a who is suppose to give you the production data, doesn’t give conflict is smoldering, it may be best to wait and monitor it until it you the data until sometime after Monday, making you late in flares up and becomes obvious; at that point, neither party will finishing your weekly report. You approach the production be able to deny that a problem exists. manager Monday afternoon and say, “The general manager wants the weekly report sent to him every Monday. I am not able to One way to diffuse potentially disruptive conflict between two finish the report because I don’t have the production data yet.” employees, is to bring the parties together in private. Keeping in If the production manager has a legitimate reason why he mind the employees’ job descriptions, try to determine where can’t give you the production data on Monday, make the general the problem lies. Ask this as an open-ended question such as, manager aware of this constraint. The general manager then has “What’s the problem?” To diffuse any anger, give them both to decide whether to allow the report to be done later than time to vent and state their side of the issue. This way, they will Monday, or to focus effort on finding a way for the production have an opportunity to air their grievances, and you can better manager to produce the production data on Mondays. understand the root cause of the conflict. If the production manager agrees to give you the production Once they’ve had the chance to let off some steam, ask them data by noon every Monday, but often fails to do so, you can how they would resolve the problem. Starting with their either prompt him every Monday afternoon to give you the data, suggestions, work on a solution that coheres with their job duties or you can avoid trying to compensate for his lack of performance, and responsibilities. You can use leading questions to guide them by submitting the report late. This will bring notice to the situation, towards a solution that meets your expectations. and when you are asked by the general manager why the report is often late, you’ll have a natural forum to reveal the production manager’s negligence.
    • 80 Power, Politics & Conflict Managing Conflict 81 Don’t think of this as an opportunity to get someone in trouble Conflict With Your Supervisor with his superiors, but as a way of addressing a problem that you Avoid, or quickly resolve, any conflict with your supervisor. Any otherwise were not able to resolve. unsettled conflict with any of your superiors creates a no-win situation for you. If a peer is being hostile, use the methods discussed earlier for To have a good working relationship with your supervisor, taking control of hostility conflict. If the conflict is unlikely to impact he or she must believe that you are supportive of their position; the company, avoid involving your supervisor to resolve it. If otherwise, they may perceive you as a threat. If your supervisor you demonstrate that you cannot resolve your own conflicts, your knows that you can be counted on for support, you will have supervisor will likely have less respect for you. more freedom to do your job the way you wish. This increases The proper time to bring the conflict to your supervisor’s your power and somewhat constrains your supervisor from asking attention comes when the other party is obviously unreasonable, you to do things you believe are unethical. you have already attempted to resolve it, and it is severe enough that it threatens to disrupt company business or keeps you from Sometimes a supervisor is excessively antagonistic. If you can’t doing your job. Bear in mind, however, that your supervisor stand the heat, you may wish to brush up your resume. On the may side with the other party. other hand, remember that your power within a company can increase with time, and today’s unbearable situation may well Conflict Between Two Peers improve as your power increases. You will witness a lot of interpersonal conflict between other employees. A lot of this will be petty and will not impact your Your Supervisor Seems Unhappy With Your Work position or power — if you stay clear of it. If your supervisor seems unhappy with your work, you may not When there is a conflict between two employees over whom be meeting his or her expectations in some areas. Try to determine you have no authority, avoid taking sides — even if you feel one specific ways you might improve, and don’t be afraid to simply party is being unreasonable. Be very careful about getting ask your supervisor whether your work performance is meeting involved; even if you wish to be neutral, you still risk being drawn his or her needs. Not only is this good customer service, you will into the conflict yourself. Getting involved in someone else’s likely gain your supervisor’s respect for your courage in asking. conflict saps your energy and power, and it could make it difficult If your supervisor denies that something is wrong, he or she may to work with one or both of the parties. The best resolution fear conflict and be afraid to express their dissatisfaction. usually remains with the parties themselves, or with their supervisors.
    • 82 Power, Politics & Conflict Managing Conflict 83 As you are learning your job duties or are given new tasks, try to Let your supervisor know that you are documenting his or her get feedback from your supervisor to determine if you are doing request. Write down your supervisor’s instructions in their your duties to his or her satisfaction. For example you can ask presence, speaking as you write: “Per supervisor, post orders A, questions like: “Is this what you need?”, “Is this how you need B, and C as sales for this month.” Do this in an objective, it?”, or “Do you need me to do it differently?” professional manner, as though simply taking notes for future reference. When your supervisor sees that you are creating a Your Supervisor Wants You to do Something Unethical paper trail, he or she may retract the request. Some day your supervisor may ask you to do something that In any event, it’s a good habit to take notes when receiving clashes with your ethical principles. You can reduce the chance instructions. Writing down your supervisor’s instructions conveys of this happening if you keep in mind the following tactics. that you are listening. Plus, it will make it easier for you to follow the instructions later on. Good relationship with supervisor Leading questions If your supervisor knows that you are a good employee who is Voice your concern about potential repercussions. Disguising supportive, your supervisor will be less likely to risk losing you your actual intent with a tone of cooperation, and perhaps a little by pressuring you to do something unethical. naiveté, ask something like, “You want me to report, as sales, orders that won’t ship until next month? Won’t that make next Good power foundation month look bad? What do I tell the auditors if they ask about the People who try to get others to do their dirty work for them tend orders?” to prey on the weak. If they sense that you have a strong power foundation, they will be less likely to ask you to do their misdeeds When push comes to shove for them. When I worked in accounting, nearly all of the company presidents I worked under suggested that I do something unethical, such as Good documentation inflate reported income. I was able to fend off most of these Always document in detail any request by your supervisor to do requests by using the actions described above. something potentially unethical; then, if an auditor or other manager If your supervisor insists that you do something unethical, asks about it, you’ll be able to provide the exact details of the you will need to choose a plan of action. Two of your options request. Employees with a reputation for documenting the are: requests made of them are less likely to be asked to participate in another’s shady activities.
    • 84 Power, Politics & Conflict Managing Conflict 85 Do what your supervisor requests, then document the treatment of employees, and create a more rational setting by request. If questions arise later, you’ll be able to demonstrate using the management tools discussed in Part III of this book. that you were simply following orders. Remember to treat others as you wish to be treated. Give them Refuse to do the unethical act, and explain why in terms of the benefit of doubt, and routinely examine your thinking for hidden their interests. If the supervisor still insists, consider taking prejudices. We all develop preconceptions of the people we the matter to someone higher in the company. Discreetly encounter. Unexamined preconceptions readily become ask what you should do. If the higher authority also wants prejudices. These, in turn, prevent us from seeing clearly. An you to do the unethical act, clearly document that request as effective leader makes an effort to discover his or her prejudices, well. If you still refuse to do it, you risk being terminated, to prevent them from distorting their view of reality. and it may be a good time to update your resume and begin looking for another job. Choose Your Battles Carefully Always think twice before going over your supervisor’s You will encounter a lot of conflict and hostility throughout your head to his or her superiors. There is a good chance they life and career. Most of it will be petty and unimportant, and can will not be interested in your revelations and your working be resolved by simply ignoring it and accepting its insignificance. relationship with your supervisor will likely become Forever battling over tiny conflicts will sap your valuable time contentious. and energy. Justice If you encounter a conflict situation that causes you emotional distress and you are unsure how to resolve it, find someone that When you believe that you are a victim of injustice, or witness you trust and discuss it with them. This will help you to view the injustice inflicted on someone else, you may feel compelled to conflict from a less emotional, more rational perspective, and redress it. Correcting injustice can be difficult, especially when you will likely find that it isn’t as life-threatening as you previously the perpetrator has more power than you do. If this is the case, believed, which will make it easier for you to find a way to resolve you will need to find a way to overcome that power imbalance. it. Bear in mind as well, that each of us has a different concept of what justice is. This chapter provides several illustrations of workplace conflict If you wish to create a more fair-minded work environment, and gives some examples on how to resolve or diffuse workplace you must first increase your power, using the concepts discussed conflict, or even how to put conflict to work. Each situation you in this book. When you have built up your power foundation, encounter will be unique, and you will need to decide for yourself you can use your authority and influence to promote impartial
    • 86 Power, Politics & Conflict Managing Conflict 87 the best way to diffuse or resolve it. The main point to remember is that you must take control of conflict; otherwise, conflict will take control of you. Most petty conflict may be safely ignored. When conflict can impact your job, resolve it or diffuse it to a point where it is inconsequential. To increase your workplace power, maintain a reputation of not being afraid to confront and manage the conflict you encounter. Confronting conflict is one-half of the battle. Controlling your emotions is the other half. It isn’t always easy to do these two things, but if you discipline yourself to do them, the odds will be stacked in your favor.
    • 88 Power, Politics & Conflict Part III Operations Management Whether you are managing a department, a company or your own business, understanding the management tools to be discussed in Chapters 8 and 9 will allow you to confidently increase productivity in an ongoing manner. Some of this material you may have already studied if you have taken management courses or read management books. When you begin working in a company, look for ways these tools could be applied in your own area of responsibility, as well as other areas of the company, and be ready to use them when the opportunity arises. 89
    • 90 Power, Politics & Conflict Operations Management 91 Management Theory These tools are best used one step at a time. Identify the areas Management theory is like a set of tools in a mechanic’s toolbox. within the company where improvement will have the biggest The tools can significantly increase productivity but only if they impact, and focus on these areas. Get the low hanging fruit first, are used properly. then move on to the next level, and repeat. You need to know what tool will work best in each situation. Think of rock climbing. Whether you’re trying to scale a peak You need to know how to correctly use the tool for the or improve company productivity, the same principle applies. situation you’ve encountered. Improper use of a tool can Completing one step at a time may seem slow, but in the long- make a situation worse or cause injury. run, it will take you farther than trying to take several steps at once. Trying to take several steps at the same time, results in Learning how to properly use a tool requires some instruction or backsliding and wasted company resources because each step guidance, and hands-on experience. This book will give you is not completed properly. As a general rule, when companies practical guidance, but to get the required experience, you will attempt to make too many improvements at the same time, they need to practice using the tools in real-world situations. usually end up going backwards, not forward. To make a management theory tool handy, it’s essential to have a robust understanding of how to use it. Chapters 8 and 9 give straightforward explanations of how the tools work and when they should be used. Chapter 8 discusses basic performance measurements that tell employees what generally needs to change in order to keep the company moving in the direction of ongoing productivity improvement. Chapter 9 discusses tools for pinpointing the specific processes or practices to change in order to yield the most improvement with the least amount of time and effort.
    • Business Resource Model 93 CHAPTER 7 • Value Adding Processes Outputs • Information • Products • Services Business Resource Model Intelligence Knowledge • Equipment Energy Assets • Materials Labor Business Resource Model Information Time Effective business management entails understanding what a Customers business is, in its basic form. Figure 7-1 is a flow chart that Figure 7-1 • Managers People Suppliers • Workers shows a basic business model in terms of resources. One description of a for-profit business is “An entity, formed by owners, that acquires resources and manages those resources to generate cash dividends.” Dividends Time is omnipresent. Information is continually being collected, Owner’s Cash Borrowed Cash from innumerable sources, since the time of our conception. • Supplier Terms Owners Capital (Leverage) Capital is the hub of the model and is typically provided by the • Bonds • Bank Investments owners, banks, bond holders and supplier terms. Capital is used to purchase people, energy and assets, and in many cases, to provide capital to customers in the form of accounts receivable. Profit Cash Receivable ss o Cash L Accounts People provide intelligence, labor and knowledge. These resources, in turn, are used to acquire the proper energy and assets, as well as develop and drive the processes. 92
    • 94 Power, Politics & Conflict Assets and energy, guided by processes, produce outputs. CHAPTER 8 Outputs are exchanged with customers for accounts receivable. When accounts receivable terms expire, customers exchange cash for the accounts receivable. If the exchange results in a cash profit, capital has been increased. A cash loss means capital was lost. Owners expect that the exchanges with customers will be profitable, that capital will increase, and that the increased capital Department Performance will eventually be used to pay dividends. Measurements & For companies that do not offer credit terms and only accept cash from their customers, the ‘Accounts Receivable’ link can Ongoing Improvement be omitted. For a non-profit enterprise, the ‘Dividend’ link can be ignored, and donations included as a potential source of capital. The model’s health is only as strong as its links. A weakness in To keep the various departments or cells, within a company, any link results in weakness downstream of that link. For example, moving in a desirable direction, each needs to have its own set of a company that does not hire people with the proper knowledge and skills will have weakened processes and assets. The result process performance measurements and improvement goals. Each department should post their own performance is poor outputs, decreased customer satisfaction and smaller cash profits. measurements and goals for all employees to see, and update them at least monthly, if not daily or weekly. People are the driving force of any business. If the people resource Publishing the performance measurements of the departments is healthy and robust, the other resources will likely follow suit. creates a healthy level of internal competition. This keeps Part II discussed management of the people resource. Part III employees focused on improvement goals, which is needed to applies to the processes and outputs. create and maintain a culture of ongoing improvement. To avoid questions of prejudice or fairness, measurements need to be quantifiable and objective. Reporting should be done on a regular schedule, clearly and simply conveyed, so every employee will know which 95
    • 96 Power, Politics & Conflict Performance Measurements 97 departments are improving and which are not. Assigning a section Simply doing the six things listed above will increase income, of wall or the Internet for posting every department’s cash flow, sales and return on investment, as well as make the performance, is a simple and effective way to keep employees processes easier to manage. updated. Stable Measurements Basic Process Measurements Ongoing improvement of the six process measurements should Five basic process measurements can be used to measure the become a fundamental component of the company culture. process performance of each department. For departments that Measurements and goals that are stable and continuously have inventory, there is a sixth measurement. reinforced will, over time, become part of the company culture. When measurements become integral to the way a company does 1. Cycle time business, employees will focus on them and instinctively move 2. On-time performance towards improving them. 3. Variability On the other hand, many companies set measurements and 4. Operating costs goals in a reactive manner, frequently changing them. When this 5. Injuries happens, employees are unsure about what is important to 6. Inventory management month to month, and are not able to focus on the goals long enough to get sustainable results. These companies Ongoing Improvement tend to become less productive with time. In general, you should expect all departments to do the following six things on an ongoing basis: Smarter Processes Ongoing improvement of the six measurements is achieved by 1. Reduce the cycle times of processes. making company processes smarter. Development of smarter 2. Increase the on-time performance of processes. processes draws on the experience and creative powers of 3. Reduce the variability of processes. company employees. In fact, a critical, yet often ignored asset 4. Reduce the cost of processes. of a company, resides in knowledge — the working knowledge 5. Reduce injuries. of employees, combined with ingenuity and creativity. 6. Reduce inventory.
    • 98 Power, Politics & Conflict Performance Measurements 99 Harnessing employee knowledge and capabilities for developing successful. An effective leader keeps employees motivated smarter processes can be achieved through the following until a plan has been fully implemented. practices: 6. Monitor the performance measurements to see if they 1. The employees understand the process measurements. improved as expected. Learn from successes and failures. They know what is being measuring and how the measurements are made. An effective way to ensure that Encouraging employee participation when improving company this happens is to encourage employee participation in processes gives employees a stake in the improvement process. developing the measurements. This not only motivates employees, it also takes some of the monotony out of the work day — another benefit of effective 2. Ask employees to conceive of ways to improve the processes leadership. in terms of the measurements. The employees who work with the same processes every day will spontaneously develop Ongoing Improvement Trend ideas for improving the processes. Ideally, one should see improvement in all of the process 3. Motivate employees to present their ideas. Effective leaders measurements. To focus more attention on the more critical will create an environment where employees are comfortable performance measurements, set specific improvement goals. sharing their ideas. Department meetings can be used to Linking those goals with a reward will further motivate employees brainstorm and collectively discuss ways to improve the to focus on them. processes. Don’t expect to see dramatic improvement in each 4. Use leadership to channel employee ideas into effective plans measurement every month. Do expect to see an ongoing trend for change. Predict how the performance measurements and of improvement for each measurement. income will improve after the change plan is fully implemented. Provide the resources necessary to implement the change Ongoing improvement doesn’t follow a linear path. Harvesting plan. the low-hanging fruit first, produces the biggest improvement in the shortest amount of time. After getting the low-hanging fruit, 5. Implement the change plan. As it was the people working the amount of improvement over the same period of time will with the processes who invented the change, they will be decrease. At some point you may need to acquire and use some self-motivated to make it work. A change plan dictated by form of technology to get additional improvement. management requires additional employee motivation to be
    • 100 Power, Politics & Conflict Performance Measurements 101 Figure 8-1 Cycle Time Ongoing Improvement Curve Time is the most basic and most rigid business resource. Increasing productivity means increasing output per resource hour. Intoduction of All departments should work on reducing the cycle time of the Technology processes they oversee. Level of Process Productivity Low Hanging For manufacturing, this means reducing the elapsed time Fruit between the start and the end of the production process for one unit of output. For service processes, it means reducing the time taken to complete a service order. For document processes, it means reducing the elapsed time Time between the beginning and the end of the document process. For information processes, it means reducing the time it takes to process data and generate information, such as Figure 8-1 shows the general relationship of process improvement reducing the time it takes to produce management reports. to time, in a culture of ongoing improvement. Reducing the cycle time of a process will reduce the amount of Opportunity Time associated in-process stuff. This may include inventory, service Improving company processes will increase income because it orders, paperwork, data or accounts receivable. One way to allows the company to operate in a more cost efficient manner, measure cycle time is to measure in-process stuff. When cycle yet the big, long-term increases in income will come from times are cut in half, the in-process stuff will also be cut in half. increasing sales. Smarter processes will not only increase Decreasing in-process stuff frees up management time. For customer satisfaction, they will also widen the window of a production process, inventory will be reduced, generating cash opportunity for managers. As the processes improve, managers flow and reducing expense. will spend less time managing and troubleshooting the processes, Reducing the cycle times of processes has a big impact on the freeing up their time to pursue opportunities for increased sales. efficient use of company resources, and return on investment (ROI). Shorter cycle times also improve customer satisfaction
    • 102 Power, Politics & Conflict Performance Measurements 103 by making it easier for your customers to manage their business. Another alternative — develop a piece of automated equipment More on this later. that attaches the drawer handle and glides at the same time and is operated by one person. This would reduce both the cycle Cycle time can be broken down into three categories: time and the amount of labor by approximately two-thirds. 1. Processing time Decision-making processes can be shortened by placing 2. Queue time knowledge and decision-making authority at the points where 3. Downtime the need for decisions originate. For example, if a process frequently comes to a halt each Processing Time time a specific event occurs, because an employee must ask his Processing time is the time when stuff is getting processed, being supervisor about how to proceed, train the employee to make modified or adding value. In the case of a service, this is the time the correct decision, and give the employee authority to make it takes to perform the service. To reduce process time, the the decision. processes need to be made smarter. Eliminate unnecessary processes. Combining processes so that they can be done simultaneously, Sometimes a company will maintain needless processes simply will reduce processing time. For example, in a furniture company, because they have been doing them for as long as anyone can when assembling a desk drawer, there is a station where one remember. A process that isn’t always done, or is done in a person attaches two drawer glides and one drawer handle. shoddy manner, may not need to be done at all; or possibly part The station is redesigned so that one person puts on a drawer of the process can be eliminated. glide, while simultaneously another worker puts on the second Minimize hassle — those activities that take up time without glide; and a third person puts on the handle. Combining these adding value. Hassle includes putting out fires, production processes reduces the cycle time of attaching the drawer glides processes that don’t add value, management reports that have and handle by approximately two-thirds. become obsolete, and long or frequent meetings that accomplish The challenge, in this case, is to design a station where three little or nothing. people can work comfortably and efficiently at the same time. With some creativity and innovation, this may be achieved without Queue Time great expense. In this case, combining multiple processes reduces Queue time is the time stuff sits idle waiting to be processed. For cycle time and in-process inventory but does not reduce the production departments, queue time is the time inventory sits and amount of labor used in assembling a drawer.
    • 104 Power, Politics & Conflict Performance Measurements 105 waits between processes. For document processing, it is the Maintenance time — also can often be reduced using time documents sit and wait to be processed. For service ingenuity and specialized tools. departments, it is the time service orders wait to be worked on. Unscheduled repair time — can be reduced by making For accounts receivable, it is the length of time it takes to get maintenance processes smarter. payment from customers. Often the easiest and cheapest way to reduce cycle times and in-process inventory is to reduce queue time. To reduce Getting Started – Reducing Cycle Time queue time, invent smarter processes that reduce transfer batch Measure the amount of in-process inventory and start a size and eliminate bottlenecks. histogram chart showing, in units or dollars, the amount of in-process inventory at the end of each month. (Refer to For example, in a furniture company, one process station Figure 8-2 on page 106.) assembles a chair base. After each base is assembled, it is placed Measure total order cycle time. Total order cycle time is on a cart until there are 10 of them. The cart is then moved to the the amount of time it takes to complete a production order next process station, where seats are attached to bases. At any or deliver an order to a customer after the customer places given time, between 0 and 10 bases sit on the cart waiting for an order. This is needed to measure the net impact of reducing seats. the cycle time of individual processes. As the cycle times of If the stations were moved next to each other, or a conveyer individual processes are reduced, you should expect to see put in place between the two stations, a completed base could a corresponding reduction in the total order cycle time. If move directly to the next station, where a seat would be attached. there is not a reduction of total order cycle time, then the This simple change reduces total cycle time by the amount of cycle time reduction of one process has been offset by an time that bases are sitting and waiting on the cart. It also reduces increase in the cycle time of some other process. This is a in-process inventory by the number of bases on the cart waiting common phenomenon. to be attached. To measure order cycle time, put a date and time stamp on the order, either manually or electronically, when the order Downtime is created. When the order is completed, put another date Downtime is the time when processes are not in motion. Some and time stamp on the order. Using the start and completion common types of downtime: times, calculate the number of days, hours, minutes or seconds taken to complete the order. Setup time — is often one of the easiest things to reduce, using a little ingenuity and specialized tools.
    • 106 Power, Politics & Conflict Performance Measurements 107 Figure 8-2 Seek out the low-hanging fruit. Look for the longest setup In-Process Inventory Histogram times, queue times, process times, or maintenance times. If 2008 $100,000 it isn’t obvious what processes have the longest cycle times, study the processes and do a flow chart showing the individual $80,000 steps and the time spent at each step. (Refer to Figure 8-4 Inventory at Cost Goal = on page 108.) $60,000 $60,000 Look for piles of in-process stuff. If the pile of stuff is there $40,000 awaiting transfer as part of a batch, improve the process to $20,000 reduce the batch transfer size. If the pile of stuff is there because the following process step is a bottleneck, improve $- the process step to eliminate the jam. Jan Feb M ar A pr M ay Jun Jul A ug Sep Oct No v Dec Look for process steps that can be combined and performed simultaneously. Figure 8-3 Causes of Unscheduled Repairs Pareto Chart 2008 Prepare a Pareto analysis of the causes of unscheduled Number of Unscheduled Repairs 120 down time. (Refer to Figure 8-3 on page 106.) Do a root 100 cause analysis for each of the causes of unscheduled 81 downtime. Focus on correcting the most common causes of 80 63 unscheduled downtime. 60 Pareto analysis and root cause analysis are explained in 40 Chapter 9 starting on page 146. 22 18 15 20 Since the employees who work with the processes every 0 day should have the best working knowledge of the Material Jam Broken Drill Motor Failure Belt Failure Other processes, they should participate in preparing the flowcharts, Bits Pareto analyses, and root cause analyses.
    • Figure 8-4 108 Chair Assembly Process Before Process Improvements Transfer Total Transfer Batch Cycle Time Batch Pile of Materials 167 minutes Pile of Materials Bottleneck Station 1 Transfer Station 2 Bottleneck Station 3 Transfer Station 4 Batch Pile Batch Assemble Attach seat Stack chairs Attach chair Stack chairs Stack bases Packing chair base to base in front of hardware on pallet on pallet Station 3 until 10 until 10 sets Cycle Time Cycle Time Cycle Time Cycle Time Average Average 4 minutes 4 minutes 5 minutes 4 minutes Average Queue Time Queue Time Amount of Queue Time Amount of 60 minutes Amount of 50 minutes Amount of Inventory 40 minutes Inventory Inventory Inventory Average Average $10 $30 $35 $40 Average amount of amount of amount of Inventory Inventory Inventory $360 Power, Politics & Conflict $350 $100 Pile of materials Total waiting on In-Process bottleneck Inventory Capacity = 96 chairs per 8 hour shift Pile builds up during the day. $925 Stations 3 & 4 work 2 hours of overtime each day to catch up. Figure 8-5 Chair Assembly Process After Process Improvements Total Improve process Set up conveyers so Station 3 can Set up conveyer Cycle Time between stations attach hardware between stations 28 minutes 1, 2, & 3 in 4 minutes 3&4 Station 1 Conveyer Station 2 Conveyer Station 3 Conveyer Station 4 Move base Move chair to Move chair Assemble Attach seat Attach chair to Station 2 Station 3 to Station 4 Packing chair base to base hardware Average Average Average Cycle Time Queue Time Cycle Time Queue Time Cycle Time Queue Time Cycle Time 4 minutes 4 minutes 4 minutes 4 minutes 4 minutes 4 minutes 4 minutes Amount of Average Amount of Average Amount of Average Amount of Inventory amount of Inventory amount of Inventory amount of Inventory $10 Inventory $30 Inventory $35 Inventory $40 $10 $30 $35 Total In-Process Inventory Performance Measurements $190 Capacity = 120 chairs per 8 hour shift 109
    • 110 Power, Politics & Conflict Performance Measurements 111 Solicit and collect ideas from employees for getting at It isn’t always necessary to measure both cycle time and in- the low-hanging fruit. Use leadership and brainstorming to process inventory. One measures the other. In some cases, it’s channel ideas into effective change plans. Implement each easier to measure the cycle time for a process; in other cases, it’s change plan, and reward employees for the improvement. easier to measure in-process inventory. Repeat this process until ongoing cycle time improvement A production department with a lot of different processes becomes a part of the company culture. may find it easier to measure total in-process inventory. For individual processes it may be easier to measure the process Figures 8-4 and 8-5 show how simple changes to a process can cycle time. Choose whatever measurement is the easiest to use have a big impact on cycle time and in-process inventory. The in a given situation. scenario presented in the two flow charts shows how to cut cycle time and inventory of a chair production process by 79%, using four simple changes. The four changes consist of installing three Raw Material Inventory conveyers and reducing the cycle time of Station 3. This is a Raw material inventory is unprocessed stuff waiting to be simplified example, but it illustrates the big impact small changes processed. Generally, four factors determine the amount of raw can have — if they are the right ones. material that needs to be kept in inventory: 1. Purchase/Delivery Batch Size Inventory Levels Any department that uses inventory should be expected to reduce The larger the delivery batch size of purchased raw material, the amount of inventory within its control. Reducing inventory the larger the average amount of raw material inventory on makes it easier to manage and control the processes. It also hand. For example if a supplier delivers 1,000 units of frees up cash and increases ROI. For many companies, inventory inventory each time a delivery is made, and delivers when constrains a lot of cash. Companies with a lot of inventory should the on-hand inventory is zero, the average inventory on hand make inventory reduction a leading priority. will be 500 units. If you negotiate with the supplier to deliver 500 units each delivery, the average inventory will drop to In-Process Inventory 250 units. In-process inventory and production cycle times go hand in hand. Suppliers will typically give incentives for increased When cycle times are reduced by one half, all else being equal, delivery batch sizes, like a lower price, because the inventory the in-process inventory will be cut in half as well. All production carrying cost for the supplier and freight costs may be less departments should find ways to reduce inventory levels by when a supplier’s customers accept larger deliveries. With reducing cycle times, as previously discussed. some innovative thinking and collaboration with it’s
    • 112 Power, Politics & Conflict Performance Measurements 113 customers, a supplier may be able to reduce delivery batch 3. Usage Rate size without increasing costs. Reducing process batch size Usage rate is the amount of raw material that will be used and seeking alternative ways of shipping may allow a supplier over a period of time. The reorder point is the amount of to reduce delivery batch size without increasing costs. raw material that will be used from the time it is reordered until the latest possible time it will be delivered by the supplier. 2. Supplier Cycle Time Variability Buffer When sales and production levels are consistent, then The greater the variability of supplier cycle time, the greater historical usage rates can be used to calculate reorder points. the amount of safety buffer needed to ensure that there is If they aren’t consistent, then the customer order backlog or always inventory on hand. For example, if one supplier a sales forecast can be used to project the usage rate between historically takes 5 days to 30 days to deliver an order, one the time raw material is ordered and the latest possible needs to use 30 days to calculate the inventory level that delivery date. would trigger a replenishment order of the raw material, also When supplier cycle time is reduced, it takes less effort called the reorder point. In other words, one would need to to predict usage between the time an order is placed and the reorder the material from the supplier when the amount of time the order is delivered. The predictions will be more inventory on hand equals the amount of inventory consumed accurate since they project less time into the future. in 30 days. When the supplier delivers an order in 5 days, the 25 4. Management Error Buffer days of extra inventory on hand is the unused safety buffer. Raw material inventory can be kept at a minimum by diligently When the same supplier takes 30 days to deliver the order, tracking supplier cycle times and cycle time variability, as the safety buffer drops to zero. well as methodically predicting usage when waiting for When a supplier consistently delivers orders in 10 days, delivery of an order. If the purchasing department doesn’t 10 days can be used to determine the reorder point, and carefully track and use this data, there will be greater error in little or no safety buffer is needed. the reorder point calculations. When a business has a lot of inventory from a lot of This management error will require an additional safety different vendors, the safety buffer can add up to a lot of buffer to ensure needed raw materials are always on hand. inventory. Since the management error buffer is usually based on intuition, it will be influenced by past experiences of running out of inventory.
    • 114 Power, Politics & Conflict Performance Measurements 115 The maximum raw material inventory level for an item, equals the serve your needs. They may even be able to reduce the purchase batch size plus a portion of the safety buffers. The delivery batch size without raising the price. minimum inventory level for the same item will be a portion of the 2. Explain how your company has benefited by reducing your safety buffers, except in cases when even the safety buffers are own cycle times, batch sizes and variability. Offer to help depleted and there is no inventory. your suppliers accomplish the same thing. Getting Started – Reducing Raw Inventory Present day technology greatly facilitates collaboration with Safely reducing raw material inventory involves reducing the suppliers. There are programs that utilize the Internet to purchase batch size and the need for safety buffers. This requires automatically reorder materials from your suppliers. Some better performance by the suppliers as well as better in-house programs can give suppliers access to your production schedule, management of the inventory. which allows your suppliers to improve production scheduling The purchasing department should first focus on reducing raw for the materials you will need. material inventory for the high-dollar inventory items. Create a The use of technology can shorten purchase cycle times and list of raw material inventory items, sorted by total dollar value reduce transaction costs. Because of its importance in these on hand. Starting with the items with the highest dollar value, areas, a purchasing manager needs to be familiar with available improve the accuracy of reorder points by tracking the vendor technology, and use it when opportunities arise. cycle times and developing accurate ways to predict usage. It was just explained how your company will benefit when Reducing the purchase batch size and the supplier cycle time suppliers reduce their batch sizes, cycle times and variability. The variability buffer requires collaboration with your suppliers to same benefits will apply to your own customers when your improve their processes. This involves reducing their process company reduces its batch sizes, cycle times and variability. batch sizes, process cycle times, and cycle time variability. As a first step toward collaboration, invite the management of important Finished Goods Inventory suppliers to visit your facility. Finished goods inventory is the stuff waiting to be sold or delivered to a customer. During their visit: Retailers that purchase their finished goods from a supplier 1. Show how you use their products. With a better may refer to the above section on raw materials. For companies understanding of your processes and how you use their that manufacture their own finished goods, finished goods products, they’ll have knowledge that can be used to better
    • 116 Power, Politics & Conflict Performance Measurements 117 inventory levels are determined by the same four factors that Predicting Usage of Finished Goods determine raw material inventory levels, except those factors are In a customer-driven company, the sales and marketing controlled in-house. department has the responsibility of predicting customer usage, managing the finished goods inventory, and initiating production Process Batch Size orders to produce finished goods. The sales and marketing Reducing in-house process batch size reduces finished goods department should work closely with customers to improve inventory. For example, say that your company ships, on customer usage projections. average, 10 executive chairs each day, and in the past the production department would produce 50 chairs once every Producing to Customer Order week. The finished inventory level ranged between 0 to 50 chairs, Many companies produce finished product as customers order an average of 25 finished chairs on hand. it and ship it as soon as it’s produced, leaving them with little or The production schedule is changed to produce 10 executive no finished goods inventory. This is the ideal. It may be feasible chairs every day. The new inventory level ranges between 0 to for your company to produce to a customer’s order by reducing 10 chairs at any time, an average of 5 chairs in inventory at any production cycle times, reducing batch size, and collaborating time. Reducing the process batch size from 50 to 10, reduces with customers. the average finished inventory from 25 to 5. Getting Started – Reducing Finished Goods A common argument against producing smaller batches is that it Create a list of finished goods inventory items, sorted by increases the number of setups, when each batch requires a setup. total dollar value on hand. For the items with the highest Increasing the number of setups means more time and money dollar values, challenge the production departments to reduce wasted on a non-value adding process, increasing costs and batch sizes and cycle times, without increasing costs or decreasing capacity. decreasing capacity. True, smaller batch size can result in more setups; then the challenge becomes finding ways to reduce setup time. Compare If reducing batch size increases the number of setups, find the time it takes the average driver to change a flat tire on a car ways to reduce setup time. Reducing setup time not only — 10 to 15 minutes — with the few seconds taken by a pit stop allows for smaller process batches, it also reduces cycle time, crew. Setup time can often be reduced to a fraction of the time and increases capacity. These are a few reasons why setup it currently takes, often without major investment. All you may time is often a low-hanging fruit. need is some innovative thinking and specialized tools.
    • 118 Power, Politics & Conflict Performance Measurements 119 To improve production scheduling, increase collaboration Figure 8-6 with the largest customers to improve usage projections. Customer Orders On-Time Performance Histogram 2008 The ultimate goal is to reduce cycle times and batch sizes, 100% while increasing customer collaboration to the point where Goal Percent of On-Time Orders 93% 93% 94% 94% there is no longer a need for finished goods inventory. 95% = 95% 91% 91 92% % 90% 89% 89% 90% 90% On-Time Performance 88% 85% On-time performance measures the percentage of transactions that are completed correctly, within the scheduled cycle time. 80% For production, this means completing production orders 75% correctly and completely, on schedule. Any order that is missing some items, that is done wrong or is late, will not be considered 70% on-time. For service departments, on-time performance is the Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec percentage of customer orders completed correctly, on schedule. For document processing, it is the percentage of transactions Figure 8-7 that are completed correctly, within the scheduled time. Causes of Late Customer Orders Pareto Chart On-time performance is one measure of variability. On-time 2008 performance is mentioned separately because of its importance. 200 Number of Late Orders YTD 180 At a minimum, on-time performance for customer orders should 160 be tracked. 140 120 120 You can improve on-time performance by making cycle times 100 75 and outputs for a process more consistent. Detrimental events 80 60 often cause process inconsistency. These are unplanned events 40 30 25 that increase the cycle time of a process or make the outputs 20 17 unacceptable. Some examples include running out of raw 0 materials, mechanical failure, or a key employee calling in sick. Missing Unacceptable Incorrect Machinery Other Reducing detrimental events is often the easiest way to begin Materials Quality Paperw ork Breakdow n making a process more consistent.
    • 120 Power, Politics & Conflict Performance Measurements 121 Getting Started - On-Time Performance easier to manage. When variability is reduced, managers spend Begin tracking the on-time performance for customer orders less time managing the uncertainty, and can spend more time taking using a histogram. (Refer to Figure 8-6 on page 119.) An advantage of opportunities to increase sales. on-time failure exists whenever a customer order is late, not complete, or contains errors. Calculate on-time performance The external environment introduces elements of uncertainty that as the percentage of orders that are completed on time and the company may have little control over. In most cases a are completed correctly. company that seeks to reduce variability should first concentrate on something it can clearly affect — uncertainty arising from within Create a Pareto analysis that shows the causes of on-time the company. failures. (Refer to Figure 8-7 on page 119.) A root cause analysis will identify the real sources of on-time failures, so Processes should be done consistently. Individual processes often they can truly be corrected. vary depending on which employee is running the process, their mood at the time, and unscheduled events such as equipment failure. All these factors introduce variability in the cycle time of Variability the process and in the output of the process. These in turn increase A company should try to reduce variability in all of its processes. the variability of downstream processes. This also applies to Variability is a measure of the range of process inputs, including document or information processing. time, and process outputs. For example, if a process sometimes takes only 8 minutes to complete and sometimes takes as long as Processes with the greatest variability create the most exceptions 10 minutes, the variability will be 2 minutes. If the output is and headaches, and require the most micro-management. These sometimes 119.5 inches long and sometimes 120.5 inches, the processes need to be made smarter. variability is 1 inch. When a process is often skipped or done in a shoddy manner, A company usually has many processes. The small variability there’s a good chance that the process, or portions of it, can be of individual processes accumulates, which can add up to a large eliminated. amount of variability for the whole company. When a process is improved to reduce cycle time or batch size, it will affect the variability of the process. In some situations Along with customer complaints, the uncertainty that variability it may be best to focus first on reducing the cycle time and batch creates makes managing the company that much more difficult. size of a process prior to focusing on reducing the variability of Less variability improves customer satisfaction, while it reduces the process, or vice versa. costs and the need for inventory, in addition, it makes processes
    • 122 Power, Politics & Conflict Performance Measurements 123 Statistical Process Control (SPC) For example, let’s say a customer comes in to the sales office to SPC is a scientific approach to reducing variability. It can be buy a part. Normally, a clerk will input the order into the computer used to reduce variability in processes where the variability is not and print a pick ticket. The ticket then goes to an inventory clerk obvious to the naked eye. It can also be used to reduce variability who pulls the inventory and gives it to the order desk person. to insignificant amounts. This makes it an important tool for The order desk person then gives the customer the part, and the reducing variability in processes. customer signs the pick ticket. The details of SPC are beyond the scope of this book, but a This time, however, because the customer is in a hurry and production or service manager should be expected to understand the order desk person happens to be busy with other stuff, the SPC, able to identify opportunities to use it, and then able to put order desk person walks into the inventory area, grabs the product it to work. and gives it to the customer. The order desk person intends to input the order later on. Exceptions Instead, he gets distracted and forgets to input the order. As a Micromanaging exceptional transactions — those that cannot be result, the book inventory doesn’t get adjusted and the customer handled efficiently by the standard processes — can take up is never billed. The overstatement on the book inventory much of a manager’s time and energy. increases the risk of inventory shortages; since the customer is The example of using the energy generated by conflict, given never billed, the company loses money on the transaction. on page 68, is also an example of a flawed process that creates exceptions. When an employee, other than the receiving clerk, Outside Sources accepts a supplier delivery, an exception has arisen, which is a Sources outside the organization can cause exceptions. Special source of variability. This source of variability can be eliminated customer requests, or suppliers with unusual practices, may need by having all supplier deliveries accepted by a person who has special handling. One way to reduce these types of exceptions the skills and knowledge to process them promptly and correctly. is to change company processes to efficiently accommodate the exceptions. Alternatively, collaboration with the outside sources Shortcuts may produce a way to eliminate the exceptions. When employees take shortcuts, exceptions can be expected. Taking shortcuts may save time initially, but will cause more time Getting Started – Reducing Variability to be expended on a transaction at a later time, while increasing Identify the processes that seem to have the most problems variability. and need the most intervention or micro-management.
    • 124 Power, Politics & Conflict Performance Measurements 125 Use a Pareto analysis and root cause analysis to track the The purchasing department is typically responsible for reducing causes of process variability and exceptions. Improve raw material and supply costs. Collaborating with suppliers, as processes, with a focus on removing the most common causes discussed earlier on page 114, can help reduce the cost of raw of variability and exceptions. materials as well as reduce raw material inventory levels. Have the production or service manager trained to understand Shopping for other suppliers is one way to reduce raw material and use Statistical Process Control. costs. When shopping for a new supplier, it’s tempting to choose the one with the lowest price, but it’s important to consider the Department Costs quality of service that the supplier will provide. All departments should be expected to improve efficiency by The value of a supplier’s cycle time, cycle time variability reducing the direct costs and overhead costs within their control. and batch size needs to be taken into account. Bear in mind that a supplier who operates with short cycle times, small cycle time Direct/Variable Costs variability and small batch size, may also have lower operating Direct costs are the costs that vary directly with sales or costs, and therefore may be able to offer the best price. production. Some examples of direct costs are raw material cost, direct labor cost, and supplies used in production or in performing Getting Started – Reducing Direct Costs services. Companies with a variety of products or services may find it To track direct costs, measure the cost per unit of output — challenging to measure direct costs. Each company will need this will vary from product to product. Since every company to find the best way of measuring direct costs, in order to makes different products and has different processes, each needs measure improvement. This will require detailed working to develop its own ways of measuring direct costs per unit of knowledge of company processes, along with some ingenuity. output. Developing useful direct cost measurements requires detailed working knowledge of the company processes. Make a list of raw materials sorted by dollar amount used Bills of material are typically used to calculate the direct during a period of time, such as a month or year. Select the material costs. Time studies are often used to determine direct top raw materials and have the purchasing department focus labor costs of a process. on shrinking the unit costs of these items. Responsibility for reducing direct labor costs usually falls on Some of the suggestions mentioned earlier for reducing cycle production and service departments. Activities that reduce cycle time and variability can reduce direct labor cost as well. time often reduce direct labor costs.
    • 126 Power, Politics & Conflict Performance Measurements 127 Overhead Costs 20,287 7,258 14,026 26,473 1,227 356 4,508 984 7,459 160 2,773 85,511 Dec Overhead costs are operating costs that do not vary with production volume — in the short term. They represent the 20,287 7,185 14,026 26,473 3,873 2,512 994 9,222 169 1,729 86,470 Nov - necessary costs of providing production capacity. Some examples are rent, utilities, manager salaries, maintenance, injuries, 18,532 7,185 14,026 26,473 324 1,181 10,233 865 6,201 173 2,053 87,246 Oct depreciation and insurance. Management should seek ways to lower overhead costs or keep overhead costs level when 18,532 6,964 14,026 20,599 277 2,734 776 8,784 217 1,879 74,788 Sep - production volume increases. Senior managers are typically responsible for negotiating 18,532 6,964 14,026 20,599 169 165 8,740 608 7,807 231 1,733 79,574 Aug overhead costs such as rent, salaries and insurance. Department managers are often responsible for overhead costs such as Production Dept. Overhead Costs 18,532 6,308 14,026 20,599 2,455 10,009 663 5,135 226 1,794 79,747 Fine Furniture Company maintenance, injuries and indirect supplies. Jul - 18,532 6,308 14,026 20,599 1,667 440 109 634 7,088 215 1,647 71,265 Large increases in capacity may require a substantial investment Jun Figure 8-8 in plant and equipment. This results in increased monthly overhead 18,532 6,235 14,545 20,599 918 561 5,049 794 6,844 176 1,423 75,676 costs and ties up a lot of cash. May Before making large investments in plant and equipment to 18,532 6,235 14,587 20,599 1,611 1,277 4,789 863 8,446 171 2,202 79,312 increase capacity, make sure that you have fully exploited your Apr existing capacity by making the processes smarter. Many companies needlessly make large investments to increase capacity 18,532 6,235 14,026 20,599 937 351 1,158 1,043 6,354 201 2,324 71,760 Mar when they could have gotten by with little investment, simply by developing smarter practices. 18,532 6,894 984 6,235 14,026 29,691 270 6,248 190 1,864 84,934 Feb - In Chapter 9, on page 149, there is a discussion of bottleneck management. This can be an effective way to increase capacity 175 20,599 18,532 6,235 2,637 15,531 1,006 174 1,599 14,026 6,335 86,849 Jan with minimal investment. Total Prod Overhead Getting Started – Reducing Overhead Costs Worker's Comp Ins. Liability Insurance Utilities-Electricity Outside Services Repairs & Maint. Utilities-Water Depreciation Each month, have the accounting department prepare a rolling Utilities-Gas Holiday Pay Telephone 12-month history of each department’s overhead costs, Rent
    • 128 Power, Politics & Conflict Performance Measurements 129 broken down by cost type. (Refer to Figure 8-8 on page Getting Started – Reducing Injuries 127.) This breakdown allows each department manager to Establish the goal of zero injuries for the company. monitor the different costs within their control. Post a histogram chart showing the number of injuries for Create an incentive program to reward department managers the current year and one or more previous years. (Refer to or department employees for reducing their department Figure 8-9 below.) overhead costs. Post the number of days or labor hours without a lost-time injury, and update it daily. Injuries All departments should improve their safety performance. Below A Pareto analysis of the causes of injuries can identify the are three common measurements for tracking safety performance: most common causes of injuries so they can be corrected. (Refer to Figure 8-10 on page 130.) Days or hours worked without a lost-time injury. Having company celebrations after each full year without a Total number of OSHA recordable injuries per year. lost-time injury is a commonly used incentive. Giving a reward Cost of injury claims. This includes medical and legal costs. to all employees in a department that had no recordable injuries for a quarter or year can serve as a constant motivator Most injuries typically occur in production or service departments; for employees to work safely. thus, a lot of companies focus only on reducing injuries in these departments. The truth is, all departments have a potential for Figure 8-9 injury, so each should be motivated to work safely. OSHA Recordable Injuries Histogram 2004 - 2008 40 Many CEOs state that employee safety is the company’s top 33 35 32 priority but fail to support their words with action. Demonstrate 30 Number of Injuries 30 27 that safety is a top priority by taking a personal interest in safety 25 20 and demonstrating concern for anyone with an injury. 20 Injured employees who feel that management doesn’t care 15 10 about their well being are more likely to seek an attorney to pursue 5 an injury claim. This will cause the cost of the injury to skyrocket. 0 2004 2005 2006 2007 2008 YTD
    • 130 Power, Politics & Conflict Performance Measurements 131 Figure 8-10 process outputs meet those needs and desires, is the first Recordable Injuries Pareto Chart step to increasing sales in a sustainable manner. YTD 2008 Reducing order cycle times, reducing variability and 10 Number of Injuries YTD improving on-time performance, will increase customer 8 7 satisfaction and result in increased sales. 6 5 4 Figure 8-11 3 3 2 Monthly Sales Histogram 2 2007 vs 2008 0 $ 3,000,000 Foreign Lacerations Back Injuries Splinters Other $ 2,500,000 Object in Ey e Gross Sales $ 2,000,000 Other Department $1,500,000 $1,000,000 Measurements $ 500,000 In addition to the six basic measurements, each department may $0 have other key performance measurements. Jan Feb M ar A pr M ay Jun Jul A ug Sep Oct No v Dec Sales & Marketing Department 2007 2008 Monthly and Annual Sales None of the performance measurements discussed so far would have much purpose unless there are sales of the process Total Contribution Margin outputs. Income generation begins with sales. In some companies, sales people are driven to increase sales In general, the goal is to create a trend of increasing sales, volume without considering how much profit is being while taking into consideration seasonal or other market generated by the sales. In some cases a product may cost fluctuations. Histograms of monthly and annual sales will more than the sales price. When this is the case, it’s possible show whether this is occurring. (Refer to Figure 8-11.) to increase sales volume and yet have lower profits. Being customer driven by understanding in detail your Measurement of gross sales needs to be accompanied customer’s needs and desires, and then making sure your by a measurement of the total contribution margin.
    • 132 Power, Politics & Conflict Performance Measurements 133 Contribution margin measures the amount of profit generated Product Contribution Margins by gross sales. To compute contribution margin, take gross In addition to measuring the total contribution margin each sales and subtract all the direct costs. month, break down the total contribution margin by product. Calculating the contribution margin of each product allows Sometimes marketing managers will try to increase gross sales you to separate successful products from those that are losing volume via marketing investments. For example, they may money. Once you know which products generate the most place an advertisement in a trade journal. The increase in profit, you can focus resources on increasing sales of them. contribution margin resulting from the ad should exceed the For products that lose money, seek ways to make them cost of placing the ad, although it may be difficult to determine profitable, or consider dropping them. (See product S905 in which sales are a direct result of the advertising. Figure 8-13 on page 134.) One way to assess the overall, long term performance Many companies do not know how much their products of a sales and marketing department is by measuring the total cost to make or which generate the most income. This gives contribution margin less sales and marketing costs. This a competitive edge to companies that do know the direct measures the sales and marketing department’s net costs and contribution margins of their products. contribution to profits. (Refer to Figure 8-12.) A product contribution margin analysis should be done at least monthly. In the analysis, list the volume of each product Figure 8-12 Annual Sales Dept. Contribution Histogram or service sold in sales dollars, the direct costs of each 2004 - 2008 product, and the resulting contribution margin. Contribution Margin less Sales Costs $ 4,000,000 $ 3,500,000 Credit & Collections $ 3,000,000 Days Sales Outstanding (DSOs) $ 2,500,000 DSOs measure the cycle time for accounts receivable. DSOs $ 2,000,000 can be calculated by taking the amount of uncollected $1,500,000 accounts receivable at the end of the month, divided by the $1,000,000 total sales for the month and multiplied by the number of $ 500,000 days in the month. $0 DSOs = Accounts Receivable $ / Sales $ for Month x Days in Month 2004 2005 2006 2007 2008
    • Figure 8-13 134 Fine Furniture Company Product Contribution Margin Analysis December 2008 Qty Material Labor Other Direct Total Direct Contibution Product Description Sold Gross Sales Costs Costs Costs Costs Margin % X400 Executive Chair 650 130,000 61,100 29,900 6,500 97,500 32,500 25% X450 Executive Chair 381 95,250 47,625 23,813 4,763 76,200 19,050 20% X500 Executive Chair 349 104,700 51,303 25,128 5,235 81,666 23,034 22% T800 Executive Desk 476 357,000 178,500 85,680 24,990 289,170 67,830 19% T900 Executive Desk 328 311,600 162,032 81,016 21,812 264,860 46,740 15% T1000 Executive Desk 238 285,600 139,944 68,544 19,992 228,480 57,120 20% R801 Executive Return 433 108,250 51,960 21,650 7,578 81,188 27,063 25% R901 Executive Return 280 84,000 42,000 18,480 5,880 66,360 17,640 21% R1001 Executive Return 217 86,800 40,796 17,360 6,076 64,232 22,568 26% Power, Politics & Conflict S805 Executive Secretary 433 151,550 83,353 42,434 10,609 136,395 15,155 10% S905 Executive Secretary 280 112,000 66,080 36,960 10,080 113,120 (1,120) -1% S1005 Executive Secretary 217 108,500 58,590 30,380 7,595 96,565 11,935 11% F805 Executive File 433 129,900 66,249 23,382 6,495 96,126 33,774 26% F905 Executive File 280 98,000 51,940 22,540 4,900 79,380 18,620 19% F1005 Executive File 217 86,800 44,268 16,492 4,340 65,100 21,700 25% Total 2,249,950 1,145,740 543,759 146,844 1,836,342 413,609 18% Days Outstanding 1 1 0 5 0 5 20 25 30 35 40 23 24 27 24 26 Customer Satisfaction 25 Jan Feb Mar Apr May Jun 2008 25 Figure 8-14 23 22 21 Accounts Receivable DSO's Histogram 22 Service Departments or Service Companies flow and reduce expense. (Refer to Figure 8-14.) 22 Jul Aug Sep Oct Nov Dec Performance Measurements maintaining frequent contact with delinquent customers. Goal =20 Reducing DSOs frees up cash and lessens the risk of not 135 For service-type businesses or departments, measure reduction should be a priority, as a way to increase cash amount of cash. For those companies, accounts receivable two ways to do this: Tracking the number of customer customer satisfaction with the service. There are at least accomplished by properly checking the credit history of For many companies, accounts receivable uses up a large customers before giving them credit terms, as well as collecting some of the accounts receivable. This can be
    • 136 Power, Politics & Conflict Performance Measurements 137 complaints using a Pareto analysis and doing customer Accounting & IT surveys. Information Cycle Time Bottom Line Company Performance Accounting and IT control much of the data used for tracking the performance measurements and creating financial Financial Statements statements. These departments should reduce the cycle time The final measurement of management’s performance comes involved in preparing the data, while increasing its accuracy. in the form of financial statements. Most managers without Managers benefit from quicker information, which allows them an accounting background do not know how to decipher the to respond more rapidly to problems or opportunities. three basic financial statements: income statement, balance sheet and cash flow statement, yet these documents yield a Supplier Performance lot of important information and are a source of power. Suppliers should be assigned performance measurements that Each line item of a financial statement summarizes certain are tracked and reported back to the suppliers. The primary types of transactions, and every company reports transactions performance measurements for suppliers are on-time differently. Understanding the line items, requires some effort. performance, cycle time and delivery batch size. Based on these If you have access to the company financial statements, measurements, suppliers should be expected to improve their schedule time to have the company accountant explain the performance. content of each line item. Start with the most important, or the most problematic, Examples of income statements, balance sheets and cash suppliers. Collaborate with vendors to develop improved flow statements, can be found on the Internet by doing a processes. Look for process improvements that will benefit both search on any public company, via a web site that lists stock your company and the supplier. For example, better exchange prices. All publicly traded companies are required to make of information about your projected usage of supplier materials their financial statements available to the public. can reduce your inventory levels as well as their inventory levels. Many CEOs inflate their income statements to deceive others Give recognition to suppliers who show improvement or into believing that their performance is better than actual. As exceptional performance. a result, the statements become misleading as a management Some suppliers may get defensive when the performance tool since they do not reflect reality. Moving sales from measurements are introduced to them. Being empathetic of this future months into the current month, deferring expenses to will assist you in getting your suppliers to accept the measurements the balance sheet, overstating asset values and understating and understand their value. liabilities are commonly used ways to artificially inflate income.
    • 138 Power, Politics & Conflict Performance Measurements 139 Getting Started-Performance Measurements performance and injury measurements, to highlight the most These are basic measurements used to direct and evaluate the common detrimental events. process performance of employees, departments and the With time, add more measurements. In a production company as a whole. When you need to squeeze out additional environment, eventually add measurements for raw material improvement, many others details can be measured. Every inventory, finished goods inventory and supplier performance. company should be using at least some of these basic In a service environment, add measurements for customer performance measurements in each department, yet few do. satisfaction. Do not add too many measurements too quickly. Companies that do use them have a competitive edge. Wait for the company culture to assimilate existing measurements before introducing more. The time period being measured will vary depending on the type of motivation management needs to create. Processes with a lot Employee Participation and Ownership of problems, that need to be improved rapidly, may require It’s not always easy to measure this stuff in the real world, and it weekly or daily measurements. Monthly or annual measurements will be different for every business. You will likely need the help may be adequate for things that are slow to change, or have low of managers and employees to develop the measurements and activity. the processes to track them. As mentioned earlier, it’s often difficult to implement change in a company. Establishing performance measurements as a part It’s best if department managers feel ownership of the of the company culture takes time and tenacity. How much time measurements, and not feel the measurements are being imposed depends on how long you have been with the company, the power on them. To give department managers some ownership of the you have accumulated, and your leadership skills. measurements, ask them for suggestions on measuring whatever it is you want to measure. If it’s on-time performance, ask Start with the most important measurements of broad company something like, “What would be the best way to track the performance. Keep them simple, so all employees can understand percentage of customer orders that are shipped on time and what they mean and their importance. complete?” They will likely have some good ideas, which you On-time performance for customer orders, OSHA can use to create a smart process for tracking on-time recordable injuries, order lead time or in-process inventory, DSOs performance. and contribution margins, are good measurements to start with. These encompass a large scope of the business and can identify To give department managers ownership, they should calculate, a lot of low-hanging fruit. Include a Pareto analysis with on-time track, and report their own performance measurements. CEOs
    • 140 Power, Politics & Conflict Performance Measurements 141 will then depend on the managers for accurate performance Dodging Bankruptcy reports. However, department managers may be able to Companies with serious liquidity problems, including those that manipulate the measurements and cover up problems. Therefore, are running short of cash because of rapid sales growth, should a process should be initiated to objectively verify these self- focus on reducing inventories, accounts receivable, or anything reported measurements. The company accountant should be that ties up cash. They should also focus on reducing process able to assist with producing and verifying the measurements. lead times and costs where possible. Use of Technology To reduce inventory, batch size and cycle times should be decreased where possible. Where a culture of ongoing improvement is yet to be established, a lot of low-hanging fruit can usually be plucked without much To reduce accounts receivable, tighten credit policy, offer investment. Perpetuating the improvement trend will typically terms discounts for early payment, and call customers as soon require an investment in technology. Technology can range from as their accounts are past due. something simple and primitive, like a staple-gun, to something To reduce cycle times, look for low hanging fruit very expensive and leading edge, such as equipment for opportunities such as bottleneck elimination, queue time manufacturing nano-scale computer chips. reduction and setup time reduction. Technology can be very expensive to purchase and implement. To reduce department costs, look for opportunities to For technology to be effective, it must match the needs of the streamline processes to reduce direct labor cost. Examine company. It may take a lot of time and effort to research the overhead costs and eliminate any that are not necessary. technology to ensure a good match. Without a good match, the Renegotiate costs that are set by a contract, such as rent. technology may increase expense without improving the process. To motivate employees to focus on these improvements, Technology salespeople sometimes oversell and misrepresent communicate to them the severity of the situation and your their product. When asked whether the technology can do a plans to correct it. Let them know that their cooperation is specific task, they may respond with an automatic “Why yes.” needed to protect the company and their jobs. Before purchasing expensive technology, make absolutely certain that it can do what you need it to do. I’ve seen a lot of money spent buying technology that did not perform as expected, or in some cases, made people’s jobs harder, reducing productivity.
    • 142 Power, Politics & Conflict Performance Measurements 143 Basic Performance Measurements Basic Performance Measurements Measurement How to Improve Measurement How to Improve Cycle Time • Track on-time failures using a Pareto analysis. • Combine Processes. On-Time Performance • Use root cause analysis to find the root • Streamline decision making processes. Processing Time causes of failures. • Eliminate unnecessary processes. • Use technology to speed up processes • Use SPC when opportunities arise. • Reduce transfer batch size. Queue Time Variability • Remove exceptions by preventing • Bottleneck management. shortcuts and improving processes. • Reduce setup time using specialized Down Time tooling and smarter setup processes. Department Costs • Smarter maintenance processes. • Reduce unit cost of high dollar raw Inventory Levels materials. Direct Costs • Reducing cycle time and variability of In-Process Inventory • Reduce process cycle times. processes will likely reduce direct labor costs. • Reduce supplier batch size using collaboration. • Incentive program to reward department Overhead Costs • Reduce supplier cycle time variability managers for cost reduction. Raw Material Inventory using collaboration. • Reduce management error buffer by • Post histogram and Pareto charts of better tracking supplier performance injuries. and raw material usage rates. • Reward improvement using incentive Injuries programs. • Reduce process batch size. • Celebrate milestones. Finished Goods Inventory • Improve usage predictions by • Genuine management concern. collaborating with customers.
    • 144 Power, Politics & Conflict CHAPTER 9 Pinpointing Improvement Opportunities The previous chapter discussed performance measurements and the importance of improving company processes in terms of the performance measurements. It also mentioned tools that are used to identify low-hanging fruit and other opportunities for improvement. This chapter discusses those tools in greater detail. Each year, managers are confronted by hundreds of problems and opportunities for improvement, with a corresponding impact that can range from small to large. Managers who try to respond to each problem that arises, quickly become overwhelmed. When they react to a new problem they may leave a previous problem uncorrected. As a result, few problems ever get properly corrected. An effective manager will identify the improvement opportunities with the greatest potential impact and correctly identify the things that need to be changed. The tools discussed in this chapter 145
    • 146 Power, Politics & Conflict Pinpointing Opportunities 147 pinpoint those opportunities with the biggest potential impact, Figure 9-1 and thus, should be the priority of management. These tools also Causes of Late Customer Orders Pareto Chart isolate the specific things that need to change, so resources are 2008 200 Number of Late Orders YTD used effectively. 180 160 Pareto Analysis 140 120 120 A Pareto analysis identifies and ranks the most common 100 75 detrimental events, to determine which should be corrected first, 80 60 for the biggest improvement in the shortest time. After correcting 40 30 25 the most common detrimental event, the next most common event 20 17 can be dealt with, and so on. A root cause analysis of each event 0 should be done to identify all the root causes of the events. When Missing Unacceptable Incorrect Machinery Other you find the root causes, each one needs to be corrected. Materials Quality Paperw ork Breakdow n When the most common detrimental events are obvious, the Pareto analysis can be done mentally. Otherwise, it’s best to formally track and chart the events, so all employees know which To find the root causes of a problem, simply ask, “Why did the are most common. problem occur?” When you’ve answered that question, again Figure 9-1 shows a simple Pareto analysis chart. The chart ask, “Why did that happen?” Repeat this process until you get clearly communicates the most common cause of late customer to all of the root problems. Once you have found all the root orders — material shortages. Charts like this can be easily causes, focus efforts on removing them. prepared using a spreadsheet program. The fishbone diagram on page 148 illustrates this process. This diagram locates the root causes of late customer orders. Root Cause Analysis and The encircled items are the root causes. To solve the problem of Fishbone Diagram late customer orders, the root causes need to be corrected. Properly correcting a problem and preventing it from reoccurring The diagrams are useful for locating all the root causes of a requires that you eliminate all of the root causes. Managers and complex problem that has multiple root causes, and when there workers spend a lot of time responding to or working around is a need to communicate to others the root causes of a problem, problems as they arise, without making the effort to search for or when brainstorming on a problem as a group. their root causes.
    • 148 Power, Politics & Conflict Pinpointing Opportunities 149 Histogram Analysis The objective of ongoing improvement is an ongoing trend of the orders later than scheduled, or the order paperwork To truly solve the problem of Late Customer Because of material shortages, or production produces Circled items are the root causes of Late Customer Late Customer Orders, all of the root causes need to be Why are customer orders sometimes shipped late? performance measurement improvement. Histograms can be used Because materials are not ordered on time, or the vendor Orders Because they are sometimes in a hurry, and take shortcuts, and forget to post the to visually communicate whether a measurement is improving as desired, or not. Because the order desk doesn’t always post the sales of product. corrected and removed. delivers the material later than scheduled. The histogram shown in Figure 9-3, on page 150, displays a Why do we have material shortages? twelve month history of monthly measurements. The period of Because the book inventory is not correct. Why are materials not ordered on time? time between measurements and the number of measurements displayed will vary depending on the purpose of the histogram Root Cause Analysis - Fishbone Diagram is incorrect. Why is the book inventory not correct? Orders. Why doesn’t the order desk always post sales? and how rapidly improvement is expected. There needs to be s ge Materials not ordered ta or enough measurements displayed so that a trend is obvious. Sh c t on time re l ia or If you expect more rapid improvement, you will need to er c in at y M r to inv en te La reduce the time between the measurements. For the basic Equipment problems sales transaction later on. ok n tio Bo measurements described in Chapter 8, monthly or weekly not posted by order desk c u Inventory transactions Figure 9-2 od Pr n s measurements are usually adequate. In situations where you need te a k of bre rapid improvement, daily measurements may be better. If there materials late Vendor ships wn rill do g d an is a performance measurement improvement goal, the goal can Scheduling problems ng G ki be shown on the histogram as a benchmark. Gang drill is old and ta sk uts k de tc or w er or Histograms that use a line instead of bars to trace the worn out rd s h per er s O Pa rd up e r r o ep measurements are sometimes called run charts. Figure 9-4, on Data input errors rd e ke om s O st ay rre ct cu lw ith t a page 150 shows an example of a run chart. Not enough production co w an’ g In in C be k er Bottleneck/Constraint capacity cl s ry s nt rele r e ca O rd e er Management Order entry performance an pl at Increased sales are required for significant long term increases in not measured k ec en Bo ttl income. Bottlenecks, or constraints, determine capacity, sales pace and income creation. At any given time, only one bottleneck keeps the company from producing more sales and increasing income. The bottleneck may be located in a production process
    • 150 Power, Politics & Conflict Pinpointing Opportunities 151 Figure 9-3 or in a paperwork process. Process bottlenecks will add to Customer Orders On-Time Performance Histogram cycle time and increase in-process inventory. Sometimes the 2008 bottleneck is sales related, and demand is less than production 100% capacity. Percent of On-Time Orders 93% 93% 94% 94% Goal 95% = 95% 91% 91 92% % To find the bottleneck, look for piles of stuff. If the bottleneck 89% 89% 90% 90% 90% 88% is a production process, there will be a large order backlog. To 85% find the process bottleneck, look for a pile of inventory in front 80% of the bottleneck. The bottleneck will have a pile in front of it since it cannot keep pace with the upstream processes. If the 75% bottleneck is a paperwork process, look for a pile of paperwork 70% just before the bottleneck. For a sales-related bottleneck, look Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec for a lot of unsold finished product, or idle capacity. After you identify a bottleneck, focus company resources, including employee ingenuity, on eliminating it. When one Figure 9-4 bottleneck is removed, something else will become the new Customer Orders On-Time Performance Run Chart bottleneck, so you will need to repeat the process as each new 2008 bottleneck arises. 98% Percent of On-Time Orders 96% Companies with production capacity constraints often attempt 94% to increase capacity by increasing the capacity of all or several of 92% the production processes. This can consume a lot of cash and other company resources. Often the fastest and cheapest way 90% to increase capacity and sales is by simply identifying and removing 88% bottlenecks, one at a time. Figures 8-4 and 8-5, on pages 108 86% and 109, demonstrate how to increase total production capacity 84% by removing a single bottleneck. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Bottlenecks should drive the scheduling of processes. Production orders or service orders should be initiated at a pace no faster
    • 152 Power, Politics & Conflict Pinpointing Opportunities 153 than the capacity of the bottleneck, or else orders will pile up in Discounted Cash Flows front of the bottleneck, increasing in-process inventory, cycle time Discounted cash flows analysis is an essential tool for evaluating or finished inventory. the net economic value of an investment under consideration. This tool is useful when evaluating investments such as equipment Cost-Benefit Analysis purchases. A manager who wishes to act on a potential opportunity should Any decent financial calculator or spreadsheet program can analyze the action’s impact on income and cash flow. A for- do the calculations for you, after you estimate the effects that the profit company exists to generate cash dividends for its owners. investment will have on cash flow. Estimating the many effects All companies, including non-profits, require cash flow to survive. an investment will have on cash flow can be an arduous task and Many managers live on hope or “pie in the sky”, and ignore is beyond the scope of this book. The company accountant basic economics when making decisions or contemplating an should be able to help with this. opportunity. They allow emotions to dictate their actions, and will perform activities that give them a warm-fuzzy feeling, hoping Customer Driven Culture the activities will improve income. They often don’t expend the Know your customer’s needs and expectations in detail. This time and effort to do an objective cost versus benefit analysis. will help you to improve company processes and create more They may fear doing an analysis up front because it could indicate satisfying outputs. Greater customer satisfaction will result in that the action won’t improve income as hoped for, and they will greater demand for your outputs. lose that warm-fuzzy feeling. If they do have an analysis done, they may tweak the analysis until it projects desirable results. Track customer complaints using a Pareto analysis to identify which type of complaints are the most common. Using a fishbone When considering a change action, make an effort to objectively diagram, identify the root causes of the most common customer estimate its impact on sales volume, contribution margin, operating complaints. Correct the root causes. expense, income and cash flow. For narrow actions you may be Collaborate with your customers to fine-tune your able to do this quickly, without much effort. For broader actions understanding of their problems and needs. Your customers should it will take more time and effort as well as the assistance of define what quality is. Use customer surveys to get some of this department managers. data and avoid assumptions. What management believes is an output problem may not be a problem for the customer, and vice versa.
    • 154 Power, Politics & Conflict Pinpointing Opportunities 155 Worker Participation When there is a problem with a process and you need to find a solution to the problem, or if you are seeking for ways to improve Res ar y ar y ults Sec ults Prim ond a process, ask for the assistance of the employees who work Res Increased Sales Satisfaction with the process on a daily basis. Customer Increased Collaboration with The employees who work with the processes each day will Variability Reduced Customers have the best knowledge of the processes. Pay attention when Dept Performance Measurements Employees they report problems; give an ear to their complaints or ideas for Directed Figure 9-5 Culture of Ongoing Improvement improvement. Increased Manager Opportunity Time time performance Learn how to separate trivial complaints from opportunities Increased On- for improvement. When managers ignore worker problems or Reduced Finished complaints, workers learn to not report problems. This can lead Goods Inventory Smarter Processes to bigger problems later on, as well as missed opportunities. Employees Motivated Effective CEO Effective Dept Managers Reduced Batch Other Logical Charts Size A fishbone diagram is a logical chart used for identifying the root Process Inventory Reduced In- causes of a problem. Logical charts can also be used to graphically break down processes, flows of information, as well as causes Increased Income Reduced Costs and effects. They help to create a better understanding of how Reduced Cycle Collaboration with Times various elements interrelate. They’re useful for determining how Motivation Suppliers Reduced Accounts to improve complex processes as well as communicating complex Receivable ideas. Increased Cash Increased ROI Effe rship Material Inventory Figure 9-5, on page 155, is another example of a logical chart. ctive Reduced Raw Flow de Lea The chart shows the concepts discussed in Parts II and III of this m an Utiliz igence Intell urce book and how they interrelate. e Hu Reso y Se esults dar Fin sults ial con anc R Re The chart reads like this: An effective CEO uses motivation to get the department managers in motion. The CEO also uses performance measurements to steer all employees, including the
    • 156 Power, Politics & Conflict Pinpointing Opportunities 157 department managers, in the direction of ongoing improvement. Tools for Pinpointing Effective department managers motivate employees to create Improvement Opportunities smarter processes based on the performance measurements. The department mangers also collaborate with suppliers and customers Tool Use to develop smarter processes. Identify greatest improvement Pareto Analysis opportunities. The smarter processes result in reduced raw material inventory, reduced cycle times, smaller batch sizes, increased on-time Root Cause Analysis Identify what needs to change to get improvement. performance and reduced variability; these improvements result in reduced accounts receivable, reduced in-process inventory, Identify what needs to change to Bottleneck Management increase sales & income generation. reduced finished goods inventory, increased customer satisfaction and increased manager opportunity time. Will planned change increase Increased customer satisfaction results in increased sales. All Cost-Benefit Analysis income? the improvements reduce costs and increase cash flow, resulting Does planned investment have a in increased income and increased return on investment (ROI). Discounted Cash Flows positive economic value? Identify opportunities for increasing While the chart does not show every single concept discussed, it Customer Driven Culture demand for products. does present the bulk of them, and graphically summarizes Parts II and III of this book on a single page. Worker Participation Discover process improvement opportunities. I like to keep this chart tacked up on the wall of my office. Although it is rather busy, at a glance, it defines effective leadership, and how effective leadership and management eventually results in ongoing improvement of income and ROI.
    • 158 Power, Politics & Conflict CHAPTER 10 CEO After several years of work experience, you may find yourself in the position of CEO of a company — maybe even your own company. A CEO needs to focus on and manage the big picture, and have good people to manage the details. A CEO’s most important job is leadership; assembling a proficient team and empowering them to manage the bulk of the work, while steering the company in the right direction. Assemble Team A CEO’s most decisive task is assembling a team of managers with the four qualities discussed on page 46. As a CEO, you should build a team of managers that behave like adults, are honest, have the necessary skills and experience, and can manage conflict. It may take a lot of time and effort to find managers with these four qualities, or to create them, but it’s well worth the effort. 159
    • 160 Power, Politics & Conflict CEO 161 With the right managers in place, come to agreement on their Pinpointing Opportunities goals and incentive plans, then turn ‘em loose. Effective managers A CEO typically faces hundreds of problems and opportunities. reach goals with little or no intervention. They deal with the lower As a result, many get bogged down, become overwhelmed, and level problems and issues so you can focus on the big picture. expend their limited time getting minimal results. By sorting out the issues to be given top priority, a CEO can Support and Motivate Team get the biggest and quickest improvements with the least effort. As a CEO, it’s your duty to ensure that your managers have the The performance measurements and management tools described resources they need to meet their performance measurement goals in Chapters 8 and 9 are used to pinpoint those opportunities that and your expectations. You also need to keep them motivated will yield the greatest improvements in productivity and income. and moving in the right direction. Certified Audits Give Direction to All Employees Many companies are required to go through the certified audit In fact, all employees should be moving in the same general process every year. Public companies must also comply with direction. I prefer the use of performance measurements to the Sarbanes-Oxley Act of 2002, commonly referred to as SOx. steer an organization in a desired direction. Performance Prior to SOx, the audit process mainly examined the surface measurements represent concrete things that the employees work of a company’s financial statements. It wasn’t uncommon for with on a daily basis and can directly impact. companies to falsely inflate profits by hiding expenses or Some companies use a mission statement to promote a unified overstating revenue. Since the clients being audited hire and pay direction. If a company mission statement is to be used, it should the audit firms, they would be accorded some flexibility in the emphasize the importance of being customer driven, and promote certification process. an ongoing effort to work smarter in order to ensure the As a result of SOx, audits are more rigorous for publicly organization’s long-term existence. owned companies. This has reduced the amount of fraud in Unfortunately, mission statements aren’t often used effectively. publicly held companies, yet many companies continue to publish They often use ambiguous terms, are not adhered to, and readily deceptive financial statements. Since privately held companies become political toys instead of performance tools. are not required to comply with SOx, the audits continue to be narrower in scope, and financial statement fraud is common. Some accounting firms perform audits in an inefficient manner inflating billable hours. Excessive audit and consulting fees can suck capital out of a company without adding value. It’s usually
    • 162 Power, Politics & Conflict CEO 163 a waste of time to complain about the audit process to the board insecure in their positions because they lack confidence in what of directors or owners. Typically the board would rather not stir they’re doing, and fear others will detect it. up conflict with the firm, which can toss up hurdles to an unqualified audit opinion. Jerk Management The best approach toward auditors is affability and patience. To hide what they lack and to give the impression of effective Treating the field auditor as an adversary is rarely in your best management, these leaders may do things that appear proactive interest. — on the surface. When one activity fails to give the expected results, they’ll try a different activity, jerking the company in one Your goal should be to get through the audit as fast as possible, direction, then another and so on. minimizing cost and hassle. You can best achieve this when your One month they may have the production department do a accounting practices serve the requirements of the audit. half-baked redesign of the production line. When that doesn’t After going through one audit, modify accounting practices quite work out, or they lose interest, they may abandon that project to ensure the data the auditors request is readily available for the and start another one. This time, they may have the sales next audit. Expect your accounting department to reduce the department hastily create a promotional video about the company audit billable hours (cycle time) each year. and its products. Or, they may read an article about best practices, and the following week, hire an expensive contractor Common Ineffective to begin training the employees in best practices. Management Practices Some of the projects are never completed. Others are This book often makes references to ineffective management completed but do not improve the productivity of the company. practices so you can recognize these practices, and not accept them as sensible or effective, even though they may be common Unfortunately, jerk management is common in U.S. companies. practices. This will help you to understand why many of the It consumes and wastes a large amount of company resources actions taken by managers do not result in desirable outcomes. and undermines domestic productivity. It will also help you to cope with having to work with ineffective managers. Reactive Goals A common jerk management practice is to frequently change Many CEOs and other senior managers lack the leadership skills, department goals. One month the goal may be increasing working knowledge and understanding of management tools production; next month, reducing injuries; the following month, needed to be an effective manager. These managers often feel
    • 164 Power, Politics & Conflict CEO 165 reducing operating costs. In addition, management will often discovery is inevitable, which sometimes results in the CEO’s press for rapid improvement that is unrealistic or unsustainable. termination. Unstable department goals do not allow employees sufficient time to focus on the goals. As a result, the goals won’t be taken In many cases, the company accountant would rather not seriously and employee morale can be negatively impacted. As knowingly inflate reported income, but may inflate income mentioned in Chapter 8, company goals need to be stable so because the CEO pressured he or she to do so. With some they can take root in the company culture, enabling employees exceptions, company accountants usually don’t benefit from to focus on them long enough to get lasting results. inflating income, and cooking the books makes their jobs more difficult and unproductive. Manipulating Income Accountants who refuse to inflate income, risk losing their An important performance measurement for a CEO is the jobs. If they haven’t documented in detail the CEO’s request to company’s income statement. The annual budget/strategic plan inflate income, they may take the fall for the CEO. If an accountant will usually establish income goals for each month. Insecure does inflate reported income one month at the request of the CEOs often have an excessive focus on short-term performance, CEO, the next time the CEO feels the need to inflate income, the and will self-impose a lot of pressure to meet the monthly income accountant will be expected to cooperate. goals. Failing to reach those monthly income goals through normal When I worked in accounting, I used the tactics discussed on operations, an insecure or greedy CEO may then falsely inflate page 82 to discourage my supervisors from inflating income. If reported income. This usually involves a few easily done they chose to do it anyway, I would clearly document their accounting tricks: borrowing sales from future months and moving instructions and include the documentation with the month-end them into the current month, deferring expenses to the balance supporting documents. sheet, overstating asset values or understating liabilities. The more When audited, I was able to show that I was following specific sophisticated may invoke an off-balance-sheet partnership to instructions from my supervisor. In all cases when the execute these types of deceptions. misrepresentations of income were discovered, someone else got the heat, and I remained in the clear. The one time I did not When CEOs falsely inflate income, they are borrowing from the document my supervisor’s request to not divulge an income future and putting their companies into a financial hole. If a CEO misrepresentation I discovered, I took the blame, even though inflates income one month, he or she will likely need to keep the misrepresentation occurred before I joined the company. inflating income, month after month, to avoid discovery. Yet
    • 166 Power, Politics & Conflict CEO 167 The times I contested my supervisor and went over his head to Large companies have massive inertia. Even small companies try and prevent him from falsely inflating income, our superiors can have a lot of inertia. Leading a company is like steering a had little interest in my revelations, and from then on my working large cruise ship. It requires, among other things, a steady and relationship with my supervisor was antagonistic. knowing hand on the wheel. Trying to get a company to leap to a new destination is like trying to get a cruise ship to skip to its When CEOs focus their efforts on manipulating the income results destination. Not only are you expending a lot of resources to do to make the numbers look good, they lose the ability to improve something that will probably fail, you will likely damage the ship. the business. Initiatives can be very costly in terms of cash, employee time The purpose of financial statements is to provide an and employee moral. They often do more harm than good. understanding of reality to be used in managing the business. Initiatives have been known to bankrupt large, established, and When the financial statements do not reflect reality they become once profitable companies. misleading, pointing management in the wrong direction, and preventing the CEO from getting a managerial grip on the business. Buying Another Company In addition, it takes time and effort to manipulate financial A common initiative is the purchase of another company as a statements while covering one’s tracks, leaving less time to means to grow the company. This is often costly, difficult to manage the business. implement, and can bankrupt the company. A big source of inertia in any company is the company culture. Initiatives The more employees there are and the older the company is, the One costly tactic of ineffective CEOs is sometimes called an greater the inertia of the company culture. It’s difficult to rapidly initiative. This is a major change program that will supposedly change a company’s culture without inflicting damage to the boost the company to a new level. They often involve a lot of company. fanfare, money and employee time. When two companies merge, management may attempt to The CEO may give the program a catchy and grandiose name, hastily merge the two cultures into a single culture. This rarely like “New Beginnings”, “Flying to the Future”, or “Centralized works. Usually, one culture wins out and the people from the Computing Initiative”, to convince employees of the program’s other culture either adapt, leave or are terminated. Along the importance. I have difficulty recalling any initiative that clearly way, a lot of time and money has been needlessly wasted. improved a company’s profitability. The employees with the greatest working knowledge are usually a critical asset of the acquired company, yet they are often
    • 168 Power, Politics & Conflict CEO 169 the first to leave the merged entity or be terminated by its new Purchasing another company may make bottom-line sense if the owner. company being bought owns strategic intellectual property, like a patent or trade secret; or, if it is a competitor in distress, and Robust companies grow by ongoing improvement and increasing you can buy its operating resources and customer base at a market share, sometimes driving competitors out of the market. desirable discount. Stagnant companies need to buy other companies in order to grow and increase market share. Buying out a competitor, instead When merging two operations, attempting to quickly create a of beating the competitor in the marketplace, reduces the incentive single culture from two distinct cultures is difficult and costly to to work smarter. do. It’s usually best to allow the two cultures to merge gradually over time. Bear in mind that diversity is often a strength and isn’t Sometimes a company will buy another company in order to necessarily a weakness. enter into a new business lines. As mentioned before, an effective manager has detailed understanding and working knowledge of Trading Companies the customers, the market and the product. Buying a business Some investors purchase companies to trade them like any other line doesn’t necessarily give a CEO the working knowledge needed to effectively lead the new business line. commodity. These investors are often not interested in improving If you want to get into a new product line, start at the bottom, the real economic value of the company, but instead focus on get the necessary working knowledge from experience, and then improving the perceived value of the company, or sucking the grow the business. This strategy doesn’t sound very sexy. It capital out of the company. takes patience and commitment, qualities which don’t appeal to To increase the perceived value, they may increase short term those CEOs who are more concerned about appearance than profits by laying off employees, reducing product quality or substance. inflating reported income. This may increase short term profits but often at the expense of long term profitability. When the The benefits of buying out another company often don’t outweigh investors believe they have peaked the perceived value, they will the costs. When considering the purchase of another company, attempt to sell the company to an unknowing buyer or take the do an objective discounted cash flow projection to help determine company public. whether this is a sensible strategy and has true economic value To suck the capital out of a company, they may leverage the for the owners. company with debt. The payment requirements of the debt may eventually force the company into bankruptcy.
    • 170 Power, Politics & Conflict CEO 171 Technology Initiatives of company culture. The worst-case scenario should be Another common initiative is the purchase and implementation of considered. Initiatives usually take longer and cost more than new technology. While technology can dramatically increase originally estimated. productivity, there needs to be a good fit between the technology in the form purchased, its planned use and the organization. Using Ongoing Improvement Effective CEOs rarely use initiatives. Improving a company Often the managers who decide to purchase new technology through ongoing improvement by keeping employees continually have little understanding of it. They may read an article about the focused on improving cycle time, on-time performance, variability, technology, see it at a trade show, or learn about it from a sales costs and inventory levels will, in the long run, increase the value person. If the technology is not adequately researched, there’s a of the company much more than using the short term tactics good chance that the technology purchased won’t increase discussed above. productivity as expected. Unfortunately, sensible management and ongoing improvement Many managers do not have the patience to properly research doesn’t sound exciting or make business news. Buying companies the technology to determine whether it’s a good fit. Some believe and announcing initiatives have a sexy ring and can give a CEO a that, if necessary, they can contort the company to fit the proactive appearance in the short term. technology. When a company’s culture must be twisted to accommodate the technology, it can inflict a lot of unexpected costs on the organization. If the technology isn’t a good fit, it may actually make the employees’ work more difficult and hurt productivity. Yet, when the employees who will actually use the technology or those in the company who understand the technology voice their concerns, they may be ignored or chastised for resisting change. When Extreme Change is Necessary Sometimes radical change to a company is the only option. When this is contemplated, management needs to methodically project the changes to income and costs in an objective manner, without ignoring the cost of employee time to implement it, and the inertia
    • 172 Power, Politics & Conflict CHAPTER 11 Real World Scenario Ethics Exercise Overstating Operating Income The following presents a real world scenario that managers often encounter. If you aspire to one day advance to a senior management position, this is something you may have to deal with. Preparing yourself to handle such a situation may save you some grief should it happen to you. Imagine that you are now the president of a medium-sized company. Your company is a division of a larger parent company. Your company/division manufactures high-end office furniture. You have worked for the company for several years, have done good work, and get along well with the other employees. Up until recently, you were in charge of the production, shipping and purchasing departments. 173
    • 174 Power, Politics & Conflict Overstating Income 175 Two months ago the previous president left the company, attain plan, and that it hasn’t been able to meet plan all year suddenly, with little explanation. After a brief search and some because the plan was excessively optimistic. The CEO responds deliberation by the CEO of the parent company, you were offered by stating that sales for the month must meet the plan. the job of president. Since you have been reliable, have done good work, and you get along fine with the CEO, he felt Faking the Financial Results comfortable offering you the position. You’re taken aback by this unreasonable request. The CEO’s You have felt for some time that the division needed some voice assumes a reassuring tone, and he offers to help you find a changes to make it more productive, so you gladly accepted the way to meet plan. After some discussion, you realize he is position. As president, you believe you will have the power and suggesting that you record, as sales, customer orders that are authority to make those changes. not complete and haven’t shipped yet. Sales are normally recorded after a customer’s order is You have been in the position now for one month. You have complete and the order has been shipped to the customer. spent that time looking for someone to take over as production Recording sales on orders, before they are completed, artificially manager and putting out numerous fires. inflates the amount of sales reported for the month and also inflates the net profit reported by the division for the month. Not only is Annual Strategic Plan & Income Goals this fraud, this will make it even harder to meet plan in the following A few months prior to the start of each fiscal year, a strategic month. plan is prepared that establishes monthly sales and income goals for the coming fiscal year. The CEO begins asking about the orders that will be near completion at the end of the month, how close to completion It is now a few days before the end of the month. Your sales are they are, and how much sales dollars they represent. He then below the plan, which is no surprise to you. Your division hints at including, in the current month’s sales, seventeen orders performance has fallen short of plan all year because the sales that will be within two days of completion at the end of the month; and income goals established in the strategic plan, prepared the effectively taking two days of sales from next month, and moving year before, were unrealistically high. them into the current month. This will cause your reported sales numbers for the month to exceed the planned sales amount. It’s late in the afternoon on a long and busy day when you get a call from the CEO. The CEO asks if the division sales for the You feel exhausted and cornered. What are your options? What current month will reach the amount dictated by the strategic might be the short term and long term repercussions of your plan. You explain to him that the sales for the division will not actions?
    • 176 Power, Politics & Conflict APPENDIX Disclaimer The information in this book is based on more than twenty years of personal managerial experience, observation and study. Do not accept the information in this book at face value. Challenge and test what has been asserted. You will have plenty of opportunities to do so. For example, when you are in conflict situations and respond emotionally, take note of the final results. Try responding to conflict using the tools discussed in this book, and compare those results to the results of responding with emotion. Observe the actions of other managers and take note of the results. Learn from their victories and failures. If you find this book to be of value, please recommend it to a friend. Suggested Reading Catch-22 Joseph Heller Matthew, Mark, Luke & John 177
    • 178 Power, Politics & Conflict Index A accounting Conflict 3, 65 Certified audits 161 Between peers 80 unethical behavior Between subordinates 78 inflating income 164, 173 causes of 66 preventing 165 definition of 65 Emotional response 69 B Energy of 68 Behavior types 41 Hostility conflict 70 Bottleneck management 149 Humility 73 Business resource model 92 Instigators 67 definition of business 92 Reaction to 45, 69 With a peer 79 C With a subordinate 75 With supervisor 81 CEO 159 unethical requests 82 Ineffective practices 162 Contribution margin 131, 133 Inflating income 164 Cycle time 101 Initiatives 166 Downtime 104 Jerk management 163 Getting started 105 leadership 159 Processing time 102 roles of 159 Queue time 103 unethical behavior 164, 175 Using ongoing improvement D 171 Change 3, 53 Days sales outstanding 133 Leading questions 59 Department costs 124 Opportunities for change 59 Direct costs 124 Planting seeds 62 Getting started 125, 126 resistance to 53 Overhead costs 126 Discounted cash flows 153 179
    • 180 Power, Politics & Conflict Index 181 E J P T Ethics Jerk management 163 Pareto analysis 146 Time management 29 Ethical behavior Justice 84 Performance measurements 95 excessive demands from definition of 39 Accounting 137 supervisor 29 Ethics exercise 173 L Credit & collections 133 Cycle time 101 U F Leadership 2, 35 definition of 35 Financial statements 136 unethical behavior Financial statements 136 Motivating employees 48 Getting started 138 CEO 164, 175 Fishbone diagram 146 Discipline 48 Use of technology 140 responding to 82 Employee goals 50 Inventory 110 G Peer pressure 49 IT 137 V Rewards 48 Sales & marketing 130 Getting hired 13 Service companies 135 Variability 120 Dress 16 Qualities of a leader 37 Exceptions 122 Roles of a leader 36 Supplier performance 137 Drug screening 16 Politics 1 Getting started 123 key criteria 13 M definition of 1 SPC 122 Selling yourself 15 Power Volunteers 52 Management theory 2, 90 definition of 19 H Management tools 90 in the workplace 19 Histogram analysis 149 Performance measurements 95 Dress and appearance 22 power of time 20 I O Working knowledge 20 On-time performance 118 Processes Improvement opportunities 145 basic measurements 96 Injuries 128 Getting started 120 Getting started 129 Ongoing improvement 171 trend 99 R Injustice 84 Inventory levels 110 Opportunities for improvement Root cause analysis 146 Finished goods 115 145 Getting started 114, 117 Identifying 145 S In-process inventory 110 Opportunity time 100 Organizations 9 Selling yourself 30 Raw material inventory 111 Getting hired 13 Complexity of 10 definition of 9 leading questions 15, 59, 83 Political nature of 11
    • • Business Owners • Managers • Employees & Students For Employees: Increase your workplace Power & Confidence. Increase your Value to Employers. Increase your Job Security and Compensation. For Managers and Business Owners: Confidently improve Profits and Cash Flow. Create a culture of Ongoing Improvement. Simple, yet effective, Management Tools. Getting Hired • Four criteria employers use when evaluating a job applicant. • Subtle techniques for selling yourself. Power • Why you need power on the job. • The secrets of increasing your workplace power. Conflict Management • How to control conflict instead of letting it control you. • The most important source of power in an organization. Change • Why changing an organization is often difficult. • Overcoming barriers to change. U.S. $15.00 CAN $18.00 Tree Free Press La Verne, California