How to manage your organisation as a whole

According to principle of non-linear thinking, it is far more effective to manage something as a whole.

But how does one manage a huge organization as a whole? Earlier, man devised a fragmentation approach. He broke the organizational 'whole' into components, calling them functions and departments, 'strengthen' each of these components, and hope that together they will produce the whole. We have seen many ‘unintended’ but ‘logical’ consequences of this approach in our organizations. One of them was that the departments conflicted with each other to such an extent that ‘politics’ was discovered.

Another was the constant pushing required for each department ( often called as motivation in the management language), because no department could see what it was contributing to the whole. The worst was that the ‘quality’ parameters were determined not by the real customer, but by internal department rules. Unintended consequences of this approach have been so many, that many management theories were invented to ‘contain’ them.

Later, man also discovered another alternative to this ‘fragmentation’ approach. Let us call this ‘wholistic’ approach.

In this approach, different ‘components’ are linked together to form one link – raw material to finished goods (and even to customer in some cases). Instead of having ‘inventory’ buffers to take care of the ‘stoppages’ in the manufacturing process, these inventory buffers are removed so that when the manufacturing process stops, everyone in the link knows that the ‘whole’ has stopped. Different components (including quality) come together to solve the ‘problem’ so that the flow in the link is ‘reestablished’. Each component (department/function) can now see the whole and therefore knew what is required to ‘maintain the flow in the whole’.

As soon as the manufacturing process ‘stabilises’ in a new flow, the inventory buffers and other buffers are further removed. The newly created instability in the flow ‘pulls’ different functions to come together and ‘solve’ another problem. No external push or motivation is required to ‘energise’ them. The flab/slack is removed from the manufacturing process in this manner until the entire process becomes ‘lean’, with all waste removed. All the support functions – quality, HR, finance, purchase – know their roles clearly in this flow. The objectives of customer satisfaction, productivity, cost and safety can be traded off dynamically, not sequentially. The organization is now managed as a whole.

If you have already heard of this approach, you are right. This is called lean approach. All the tools and techniques have been devised for you to implement this lean approach. Earlier they were devised for manufacturing process. Now they are well documented for service processes in banks or order taking. They have been tested and implemented in many organizations across the world.

Despite this knowledge, what stops an organization to implement this approach of managing their organization as a whole? Is it ignorance of the management theories? Or is it man’s desire to ‘control’ all the time because of which managements cannot relinquish control to the front line staff?

I wonder what are the causes. Do you know any?

Stress drives ones behaviour to nuts

I read a TOI article on Wednesday August 9, 2006. It was captioned ' Stress in Iraq driving US soldier’s nuts'.

It explained the stress that soldiers were going through in Iraq. One of the soldier reported ' the unit was full in despair." Another soldier said ' It drives you nuts. You feel like every step you might get blown up. You are just walking a death walk'. Soldiers often drank whisky and took painkillers to relieve the stress of not knowing whether the day would be their last. These soldiers reportedly went to a house, killed a girl’s parents and then raped her.

Psychologists have reported many ‘situations’ where one behaves beyond what is considered to be normal. Stanford experiment where ‘normal people’ told to become ‘guards’ used ‘dangerous and inhuman punishments’ on the ‘prisoners’ is well known. It is well accepted that normal human beings, can behave very differently, if the ‘context’ is appropriate. For instance, normal ‘honest’ citizens are known to ‘hide’ their ‘incomes’ to save income tax. They alter the very definition of honesty to suit their behavior.

Surprisingly, despite the huge amount of evidence, human beings still refuse to ‘accept’ the power of a ‘situation’ ( context) that can change one’s behavior. For instance, when told about this US soldiers, they refuse to agree that, in a similar context, they may also behave in a similar way.

However, I have found countless situations in organizations where individuals do behave ‘abnormally’ in a situation. Sales people are often seen to make claims about their products which are blatantly untrue by speaking a ‘white lie’. Or production departments often book ‘sales’ to show high quarterly sales that will look good in a balance sheet. Or HR executives often go back on promises they make while recruiting by citing that they did not promise anything in ‘written’. Or bosses often make grand promises, even when they know that they cannot keep their promises.


All these are normal individuals who behave ‘differently’ in a given situation. Although it may look ‘unethical’, the behaviour is absolutely understandable when one accepts the power of ‘context’. However when Enron behaviour happened, all organizational executives sound ‘shock’ and claim that they will never behave in the same fashion. But I am sure, that in the same situation, we all (almost all of us) would behave in a similar manner.

Are managers paid for anticipation or responsiveness?

I was seeing a match of India versus Pakistan. Virendra Sehwag hit a slash. It went through a second slip. Inzmam, the Pakistan captain, put a second slip immediately. In the next over, Sehwag hit a uppish shot through covers. Inzmam put a man in short cover. Had Inzmam been a manager he would have got a good performance award because he was responding quickly to the situation? But because he was a sportsman, the commentators handed him a pink slip for 'responding late to the situation'.

I had gone to meet a plant HR manager, a group company of a multinational. When i asked him if he has a problem of lower demand, he said they have none, because 'sales' is managed by the multinational firm. He told me that they have no problem of attrition, because engineers are paid well. When i asked him that there is a problem of quality, or at least quality at higher cost, he said there are none, because quality processes of mother company are replicated in this plant. He was patting his back that everything is running smoothly. Unfortunately managers are not trained to notice 'how unattended problems slowly accumulate' to show their presence on one fine day. And because they respond after the problem is visible, the response is too late to rectify the situation in time.

I remember visiting a call centre three years back. The VP was showing me the excellent facility of lunch and cafeteria provided to the employees, pick up provided to them from the house, the training imparted to them on regular basis, the excellent salary package provided to them as the 'reason' that they cannot have any problem. But only after meeting a call centre representative i could see the 'problems simmering' when he told me that ' what he hears in 8 hours of job is just complaints and complaints' and then he has to hear his supervisor give him a verbal lashing that he failed to 'meet the average call duration time below the target'.

How long this call centre 'system' would have 'accumulated the problems' until they became visible? Any manager with a little bit of 'non-linear thinking' ability ( also called as systems thinking) would have guessed that the problems will appear sooner or later? Today the problems in call centre have been allowed to accumulate to such an extent that the entire delivery model of call centre is being overhauled. If you have read the Jim Womack book on 'Lean solutions for services' you will realise what i am talking about.

The same is true of any company, any organisation. Not that managers should look for 'problems'. Not that every problem should be 'attended to' or 'fixed'. Not that every 'unfixed problem' festers and becomes larger.

Unfortunately managers never learn the very basics of how problem symptoms appear, how to anticipate the problem situations in advance, which problems to address before they grow beyond a limit, which problems symptoms to ignore completely.

Managers are just unaware of the mathematics of problem accumulation and resolution. Even though managers could be good intuitive system thinkers, they rarely learn systems thinking consciously. Without having the capability to view the whole system at a time, and not just fragmented function, they can never learn to anticipate problems. They can just respond like Inzmam. One ball later, one month later, or even one year later.

A systems needs impartial observer to rectify problem situations

I had gone to meet a call centre VP. He was facing lot of issues with his call centre representatives. The issues were common. High attrition rate was one of the biggest problems. As I talked to one of the CCR’s (Call centre representatives), I was surprised at the amazing insight he shared with me. He told me that all the problems that his group is facing is due to billing errors of a mobile company. The errors occur due to the mistakes in the ‘billing process’. According to him, 80% of the billing mistakes were due to this. He wanted to talk to the mobile company, to resolve the problem at a root level. When he tried to talk this problem to his boss, he was told that ‘Call centre is earning money because of the calls. If he solves the problem, there will be no calls for them.”

This is a typical ‘systemic’ problem. Problem in a downstream process happen due to the upstream issues. Problems in downstream call centre occur due to the billing errors upstream. The same happens in any organization system: whether it is service centers of repair, or delivery centers of companies, or quality cell in a company.

These problem symptoms cannot be solved by doing anything in that department or function. In the above case of a call centre, the call centre would avoid resolving the problem symptom because it affects their revenue.

But if the call centre was part of the mobile company, the problem still cannot be resolved. For a college student, the solution looks simple: call both the department heads and tell them to solve the problem. But for anyone working in a company for a long period , this problem cannot be resolved easily, because the systemic issues get ‘escalated’ with time. Departments are at logger head with each other because each is serving a different purpose. The two departments may also have historical baggage of ‘conflict’. The bosses in the two departments may also have aggravated the ‘divergence’ further by emotional outbursts. Further, if the root cause of a problem symptom in one department is in another department, there is no incentive to ‘resolve it’ for the other department.

For a system, even though the problem symptom and its root cause are apparent, such live systems require an impartial problem solver. Not only the problem solver be really ‘impartial’, but he should also be ‘perceived’ as impartial by the concerned stakeholders. A consultant fits this bill well. Managers often joke that ‘Consultants, even if they prescribe the same solution as the managers-at-work, are listened to because they are paid’. That is not completely true. They are listened to, because stakeholders see them as ‘impartial’. Infact some of the consulting assignments fail because one of the department ‘feels’ that the consultant has been brought in by other department. The ‘process’ of selecting a consultant is therefore as important as selecting an impartial consultant.

The ‘systemic’ nature of an organization makes it also necessary that the managers in the organization use the ‘impartial’ perception of a consultant smartly. Of course, the systemic nature of an organization also compels managers to use consultants in a particular way. Consultants are useful in certain situations, they have to utilized in a specific manner, and their expertise, to be useful, has to be channelised in a specific manner. If managers fail to understand this, they can only spend tons of money on consulting, with nothing to show.

A system can be controlled innovatively

Systems thinking has a wonderful concept called 'variety' to help managers 'control' their divisions or departments without inviting the dysfunctional consequences of overcontrolling. Ashby's book on variety is the bible on this concept. The book name is W. Ross Ashby (1956): An Introduction to Cybernetics, (Chapman & Hall, London).

We use different ways of attenuating and hope that it will work. For instance, police assume that criminals are more likely to repeat 'crime'. In short, by reducing the systems variety and enhancing systems variety to manage it , we try to match the environment's variety with the systems variety. When we succeed in matching the two, we can manage that environement well.

Typical western executives are prone to increase the variety of senior managers and executives by instituting control systems, governance systems as compared to increasing the variety of bottom workers and front end officials. Increasing popularity of ERP can be explained to the need of western executives to increase variety at the senior levels . On the other hand, eastern executives use worker participation methods ( and enhance vareity at bottom levels) to increase the variety of a system.

Let us take example of how police can increase the variety of a system. Police can use ‘technology’ to increase their variety or they can use ‘community’ to increase their variety.

An article of Trichy police, Page number 47, in Business World of 3 July 2006 explains how police can enhance their variety by involving community. Some of the ideas quoted in the article are

• Engaging community in street lighting and other issues to gain the community’s trust and confidence in police
• Inviting community to become part of the policing system, through use of suggestion boxes and complaint system
• Using NGO's like self help group of women to counsel women ( who are divorcees, who are wives of difficult men like drunkards and small criminals ) to help them start new businesses
• Using NGO's to address the specific professional issues of fisherman to help them avoid criminal activities
• Running an ex-convict rehabilitation program with NGO to ensure that criminals do not 'return' to crime

Both methods of enhancing variety have their positives and negatives. What methods can managers use in their departments, divisions and units?

Systems thinking is the only known tool to understand organisation

Systems thinking is thinking about a 'whole' , and not about individual elements. Systems thinking has a long pedigree. Unfortunately, it has remained in the academic world. We will use this blog to discover the different facets of systems thinking useful for corporate executives.

Systems thinking is non-linear thinking. It is using the variables of feedback, time, delay together to understand what is happening or has happened. And then finding a best leverage to either remedy the situation or move into an intended direction.

Linear thinking is about x causes y. Cause and effect are directly related both in time and space. For instance, better sales performance causes better sales. Using this thinking, whenever 'sales' goes down, we try to improve 'sales performance' by training sales officers, motivating them through rewards and so on. This produces the result for a time being. But sooner than later, the variables stop impacting.

The feedback loop kicks up. For instance, rewards may stop 'motivating' the sales officers. Or the 'marketing' strategy may have become a bottleneck. Or the competitor may have changed the 'game'. This feedback loop may kick after a gap of time. Understanding the effects of such feedback loops along with time and spatial gaps unravels the underlying 'structure' in the 'system'. It therefore enables an executive to devise better strategies and take effective actions.

Systems thinking is therefore useful for creating outputs in work, in relationships, in taking better decisions because it helps us understand the 'as-is' world without distorting it. We shall use this space here to understand how to use systemic thinking for understanding and therefore managing large companies. We will use this space to understand how to use non-linear thinking to generate huge outputs with less effort, time and cost.