In the defense contracting world budgeting is typically done under a rigorous “earned value management system” (EVMS) that usually includes keeping aside 10% of the budget for use as a “management reserve”. This can then be doled out in bits and pieces as needed to fund changes in what needs to be done (“scope” in the project-organized world) and solutions for problems that arise during the course of business. It also allows people within the organization to cope with unexpected changes without feeling like they are endangering the project or organization when they have to ask for more funding. They all still have to do what they can to stay within budget, but it gives the appearance that upper management accepts that unexpected changes happen and are going to be reasonable in helping people dealing with them. That’s not how budgets are typically presented in the rest of the business world, however. Read the rest of this entry »
Hypocrisy can be real or apparent. Hypocrisy occurs when a member of management contradicts or ignores management direction without consequence. It can be appearance rather than reality when communications between management and employees are lacking, though this is just as damaging as if it was really occurring. Poor communications leave employees to speculate about what management is thinking, planning, and doing, and why they are being given the directions they’re receiving. If these things (who, what, when, how, and especially why) are not communicated clearly and routinely, workers will start guessing and passing around perceptions and ideas as to what management is planning or doing, and it is easy for the speculations to become pessimistic and negative. The fact that a management team allows an information gap to exist between itself and employees will be the first strike against it, and one or more managers ignoring or flaunting the directions the management team is giving employees will sour the company culture in potentially disastrous ways that can undermine change initiatives as well as ongoing operations. Read the rest of this entry »
This is a rewrite of an unpublished article I wrote in 1994, when many businesses had recognized the importance of their internal culture and its impact on their business. I believe the principles still hold, though the understanding of culture and how to create lasting business success seems to have slipped in the intervening years, at least in the United States.
Where were we going in the TQM era?
The intent of the Total Quality Management (TQM) cultural change effort of the late 20th century was to achieve maximum organizational effectiveness, meaning maximally effective people. To be highly effective, people must be deeply committed. This requires that people care about their work, employer, coworkers, etc., for they will only be committed if they care about what they are doing and whom they are doing it for. Fortunately, people have a natural tendency to care about their work. The sense of accomplishment available through work gives people reason to feel better about themselves, and makes caring and contributing possible and even pleasurable. The positive self-image that arises in this kind of environment is a far more powerful motivator than any externally applied influence and results in far higher quality of work. By comparison, fear is also a powerful motivator, but its effects are detrimental to the quality of work produced in many ways, and they all increase cost without a matching increase in value. But how are business systems involved? Read the rest of this entry »
Standardization of internal business processes, like any other tool (and a concept or procedure can be viewed as a tool), can be a double-edged sword. It can have many benefits if used properly, or can be harmful if poorly designed or misapplied. One of the great challenges for any organization, especially large ones within which many divisions produce different products for different markets, is knowing when and where to standardize processes, structure, and tools. This entry is intended to address standardization in the most difficult circumstances: large corporations with many, diverse divisions. To clarify, horizontal divisions might consist of a marketing group who define customer needs, a design group who dream up products to meet those needs, an engineering group who design the parts of the products and make sure they fit together, a production group who assemble the products in quantity, a logistics group that transports products to customer locations, and a sales group to complete the transactions with customers. Vertical divisions could exist to address parallel product or customer types, or unrelated products that shared other synergies such as a common resource or common technologies. So what do you need to know to use standards effectively? Read the rest of this entry »