Mind-set for Zero Basing Departmental Operations
By Graeme Ratten
Funny thing with departments and organisations; they come into existence to perform a particular function, and then almost immediately start to become less efficient. Layers of management are added, more demands are placed on the front line people to do extra tasks. Procedures become longer, safeguards are introduced, lots of rework starts, duplication is inevitable, and service delivery suffers. Overall organisational productivity reduces, and the plot is generally lost.
Of course people get used to the way they do things – that’s only natural. The fun starts when changes are required – armies of change management specialists make a living dragging people kicking and screaming through a few modifications (which may or may not make sense, or last).
I spent quite a few years head-butting big companies into purging all of the baggage and lost time out of their organisations. As an outsider it was usually possible to spot improvement possibilities of 30%, however most companies would struggle to realise 10% within 6 months.
I remember one client in Italy (I’d better not mention their name) who processed a lot of oil into petroleum with refineries dotted around the Mediterranean. The CEO sat in his green suede-lined office in Milan, and posed the following conundrum; “the Mafia is the most efficient organisation in the world, and they have 3 management levels. Why do I have 11?”
Three weeks later, after something of a risky and exciting period peering into the workings of oil refineries in Sardinia, it turned out that the answer was simple – the Directors had lost the plot. Oh and at least 7 of the management levels were a fabulous collection of Mafia uncles, nephews, cousins, brothers, sons, and so on. The CEO back in Milan eagerly accepted our offer to go and have a word with the Mafia boys in Sardinia, and ask them if they would mind backing-off a bit.
That was the easy part, nobody lost any fingers, and apart from the old phrase, “you come to Sicily, you live only one day” which an anonymous cab driver delivered to me late one night, feathers were largely left unruffled.
The harder bit was getting the Directors to mend their tendencies and their ways.
The sketch which finally got them to jump up and down and get on with doing the right thing was this:
This is what you are perpetuating, how you think and act, CEO at the top, performance delivery at the bottom:
Invert your typical organisation chart, and change your mind-set to this:
It can be a bit of a shock when you figure out that for every person who deals directly with customers (or the service) there are 8 others ‘supporting’ them. That might be appropriate in some circumstances, but not in a lot of others. Think about the difference between ‘direct’ and ‘indirect’ activities. ‘Direct’ being the actual things which deliver the service, move the business forward, and so on. Indirect is everything else. What fun it would be to take a budget, and split the costs out between genuine ‘direct’ activities and all the rest.
I’m not a fan of benchmarking, it’s largely meaningless either because it’s as complicated as hell, or way too broad to make any sense. Guidelines on the other hand can be an interesting talking point, so if the cost of your indirect activities is massively greater than your direct activities… flip your org chart upside-down and some rather large clues may appear.
The most extreme example of a clean / lean organisation I ever came across was a company outside Barcelona, who manufactured ladies hosiery. They used to employ 900 people, of which some 300 were in mid-management / support roles, and just about managed to turn a profit. In came a new CEO, and things changed… he took out nearly 300 people – nearly all of the mid-managers and ’supporters’. What he put in place was very very effective – he appointed a new type of front line manager – highly trained, very well paid (the same as a senior manager in the previous regime), and with a lot of autonomy and decision power. The result was a management structure where the span of control was 25. Productivity on the front line went through the roof, followed by profitability. The CEO himself had 25 direct reports all of whom attended a 30 minute daily review meeting with him – simply to report variances against targets which they had been unable to resolve themselves.
That won’t work in a Local Authority, but the mindset will. Given the challenge of knocking an average of 25% out of the budget, and keeping or improving service delivery levels, clear thinking is key:
- Know the difference between direct and indirect activities.
- Categorise each of activities you or your managers do into;
- Needed
- Nice to have
- Not needed
- Everything you do should be aimed at supporting frontline service delivery.
- Count your management levels and think about the Mafia.
Graeme Ratten
01491 413 858 graeme@opportunities.co.uk
Graeme has worked with over 200 organisations world-wide improving productivity and effectiveness through implementing behaviour change underpinned with management control systems. His experience includes cigarette manufacturers in Russia, rolling steel mills in Mexico, logistics in the Netherlands, the national mint in Spain, slaughter houses in Germany, printers in Canada, and hospitals in Ireland.