Get the Structure Right First!
During a recent seminar, an executive asked what share of business problems “come from (organization) structure, from human-resource practices and from top-management decision making”? My answer startled him: structure, 50 percent; systems (my addition), 35 percent; people (that face I see in shaving-mirror each morning is a “person,” not a “human resource”), 15 percent; top-management decision making, zero.
Our chiefs are hardly flawless decision makers. And the notion that “people are everything” is incontestable. I nonetheless contend that top managers make lousy decisions and people fail to shine largely because burdensome structures and misaligned systems get in the way.
Consider Union Pacific Railroad, whose recent revival may be America’s top, unsung corporate success story. When Chairman Mike Walsh arrived at UPRR from Cummins Engine in 1986, he not only looked at market potential (discovering that trucks had captured all recent gains in ground transportation revenue), but also staged 100 meetings around the country with all stripes of UPRR workers. Walsh concluded that the railroad’s opportunity was boundless if it could respond to emerging customer needs for timely delivery; he also became convinced that “we couldn’t get from there to here with our current structure.” Forget experiments: Walsh instead decided to “push the needle all the way over … to do everything, on an across-the-board basis.”
In 120 days, the massive operations bureaucracy was reduced to rubble. Eight layers of management between the Executive Vice President for Operations and the local Yardmaster were cut to three. Staff positions were vaporized by the hundred. Daily operations were handed over to 30 “Top Guns” (Superintendents), commanding units compact enough for the boss to know all employees and customers. Similar bombs burst in sales, marketing, and finance. Today, with doubled productivity and profits to show for his trouble, Walsh insists that only an “all at once” approach works. While acknowledging the risk of putting everything up for grabs, he argues that organizations are “capable of taking on more than their leaders give them credit for.”
Changing the structure was just prelude. Revised decision-support systems were essential to aid newly empowered field employees and integrate decision making between functions at the lowest levels. (The most trivial integration had previously occurred in the chairman’s office.) First Walsh created a “supply/demand team” to coordinate marketing/sales and operations activities several levels down. Fully exploiting UPRR’s matchless, computerized Transportation Control System was another key step. UPRR people, in fact, are now at work on some 106 cross-functional processes, aiming to manage the company in a much snappier fashion.
But mostly the attack targets old, stupid procedures. Walsh shakes his head when he recalls discovering a fellow running a $22-million operation who “couldn’t spend more than $2,000 without the written approval of Omaha (headquarters). And it took eight weeks for that!” Then there’s the likes of Track Inspector Dean Walker, who describes the old approach to dealing with bad track at a customer site: “(I’d) tell the Yardmaster and the discussion would meander up the operations hierarchy (seven levels) to the General Manager, who would tell the Assistant Vice President of Sales and the communication would trickle down the sales organization.” Today, Walker simply goes straight to the customer, who almost always fixes the problem on the spot; if not, Walker informs his Top Gun who routinely supports his man-on-the-scene.
In “Reengineering Work: Don’t Automate, Obliterate” (Harvard Business Review, July-August 1990), consultant Michael Hammer extols such dramatic rewiring. Merely “speeding up (today’s) processes cannot address the fundamental … deficiencies,” he writes; systems previously geared “toward efficiency and control” must now support “innovation and speed, service and quality.” Hammer echoes Walsh, insisting that systems “reengineering cannot be … accomplished in small and cautious steps. It’s an all-or-nothing proposition.” Hammer’s examples of wholesale systems realignment, from Ford to Mutual Benefit Life, mimic the UPRR experience.
There’s more, of course, to the railroad’s saga. People practices were thoroughly revised; and Walsh personally set a grueling pace in demonstrating the outfit’s new commitment to its workers, despite imperative downsizing that cost thousands of jobs. At least as important, when it comes to that “decisionmaking” variable, Walsh instilled a sense of trust and openness—and a bias for action (he labels it “give and go management”) at the pinnacle of the once-paralyzed, suspicious organization.
Mike Walsh might not agree with my assigning a “zero” score to the role of top-management decision making in moving firms beyond their previously constipated ways. He’d also doubtless assign more than 15 points to the people dimension. For that matter, so would I. But in response to the seminar participant’s question, I wanted to provoke thought: I do devoutly believe that firms stand little chance for renewal unless they bite the structure and systems bullets—all the way through, and fast.
(C)1990 TPG Communications.
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