- “I am tired of leading alone”
- “I am tired of managing separate parts of the company”
- “I’m tired of pushing, I want to pick up the pace“
- “I do not want to see yesterday’s statistical indicators, I want to see the future”
- “I want to feel the pulse of the activity and see engagement”
- “I want us all to speak the language of value to the client”
Every current or former head of a company understands whose frustration is depicted in this list.
I dedicate this blog to everyone who is experiencing similar frustration and has the inner passion to search for alternative ways to manage a company. If you are unfamiliar with such frustration, you can skip this.
I have also had to found and manage a production company, albeit a small one, with less than 60 people. I can still clearly remember the sleepless nights during the first year when there were no orders for the next quarter, the bank refused funding while we needed to ship production to clients, to buy materials and to pay out salaries as well. You understand that you are alone in this and that you have to discover the formula of stability.
Later sleepless nights were replaced by nights filled with ideas. I used to keep a notepad and a pen on my night table. I would wake up inspired and tired from implementing ideas in my head, go to work, present my ideas and see everyone’s surprised faces looking back at me. I respect everyone who manages to single-handedly found a company and jobs.
Let’s search for a way to manage a company so that it would slowly start managing itself, allowing you to focus more on strategy and future management.
Let’s imagine for a moment our body as separate parts. Would you ever think to measure the temperature of your arm and leg separately in order to understand why your body behaves like it does? Or take blood from your arm and your leg to compare where the blood is better?
The body is a biological organism—a system with interconnected parts.
When we have a headache, it affects our breathing. When the back hurts, it slows down our movement.
Your hand, separated from your body, cannot write. Your brain, separated from the body, cannot think.
The body is a holistic system.
Company is also a holistic system, consisting of parts that affect each other’s behaviour and characteristics.
A single part of the system affects other parts and the system as a whole, so all parts of the system depend on each other.
O dabar pažiūrėkime, kaip tradicinės vadybos rėmuose valdome įmonę.
HOW DOES TRADITIONAL MANAGEMENT OF A COMPANY WORK?
Every function has its budget, goals and the traditional key performance indicators: Q, E, C, D*. In other words, the company is managed as separate functions. Even if strategic goals should unite, separate functions remain responsible for quality, timely shipping or marketing.
HOW ARE STRATEGIC GOALS AND INDICATORS CASCADED IN SUCH A COMPANY?
Top-down approach, the principle of “increase” where every function has its share of “increase” on which it reports, gets or doesn’t get a bonus, etc. Vertical strategy cascading takes place, resulting in vertical measures that separately measure the efficiency of each function.
WHAT IS THE RESPONSE WHEN GOALS ARE NOT MET OR EXCEEDED?
Exceeding the goals is good while not meeting goals is bad. We will do anything to meet our goals, even at the expense of another department or the company as a whole. We have to always slightly overspend so that we can always increase the budget for the next year: if, God forbid, I do not overspend, the budget for the next year will be smaller.
HOW IS LEAN INTRODUCED IN A TRADITIONALLY MANAGED COMPANY?
Tools are introduced in separate functions of the company. The goal is clear: reducing expenses by shortening the production time. Production improves its processes every day, the “White House” continues blaming the production for high costs and demanding a faster response to customers’ orders.
Improving end-to-end processes is a great progress, however, the process returns to former waste after a few euphoric months since everyone keeps taking care of their tasks and there is no single person who monitors the entire process. And who else should supervise the whole consisting of separate parts if not the head of the company?
Traditional management does not support creating value for the client, thus introducing LEAN without changing the management can lead to more waste than value for the company as a whole.
Traditional management divides the company as a whole by assigning different goals and indicators to each function and isolating these functions from the meaning of company's existence, further and further away from the value created for the client.
The word holistic is derived from Greek where holos means “whole”.
Holistic management binds the company as a whole horizontally by directing each function towards creating value for the client in the entire value chain.
“Vertical measures do not answer us how the company operates as a system” E. Deming.
“The task for managers is to link each employee’s actions to creating value for the client. For this reason managers have to develop a different, holistic, management” E. Deming.
“In traditional management we will do anything to achieve the goals and indicators assigned to us, even if it ruins the company as a whole” E. Deming.
HOW DOES TRADITIONAL MANAGEMENT DIFFER FROM HOLISTIC LEAN MANAGEMENT?
Imagine that you are flying on a plane and the crew is operating it by using separate control panels, without a common goal and performance indicators. How would you feel?
How can traditional performance indicators E, C, D, Q that measure each function separately and are found in every industry lead to competitiveness?
How to ensure our management infrastructure supports creating value not for a single function at the expense of another, but for the company as a whole?
HOW TO MOVE FROM THE TRADITIONAL TO HOLISTIC LEAN MANAGEMENT?
If you want transformation that creates value and sustainable results, measures should reflect the relationship between functions and processes by showing the customer’s journey. The customer’s journey throughout the company is horizontal after all.
Traditional company management divides the organisation into functions, i. e. it is a significantly SILO-BASED organisation. Each function has its goals and vertical performance measures. In order to manage the company as a whole, it is necessary to integrate flow measures, helping to study the customers journey end-to-end.
WHAT ARE HORIZONTAL AND VERTICAL PERFORMANCE INDICATORS?
There are two types of performance indicators: vertical and horizontal.
Vertical indicators: these measures exist within the limits of a single function and connect the strategy to all levels of the function.
Horizontal (transformational) indicators: these measures show the dependence between functions and (or) processes in a single or several value chains of the company.
WHERE TO START?
Traditional company management divides the organisation into functions, i. e. it is a significantly colonial organisation. Each function has its goals and vertical performance indicators. In order to manage the company as a whole, it is necessary to integrate horizontal indicators, map out the client’s journey throughout separate functions and strive for constant value growth for the client. Not every company can afford having a value stream manager for its products or services.
Only by joining the strategy between different functions horizontally it can be cascaded vertically. Unfortunately, it rarely happens correctly because companies don’t know how to do that.
Most importantly, this leads to a common attitude—attitude directed at creating value. And you will have more time to create your company’s future.
LAURA GERRITS-GEDVILE, HOLISTIC COACH, FOUNDER OF UAB IMPROVEMENT