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The Layoff Dilemma
When reengineering is done well, jobs can be eliminated. This presents a real dilemma for management, because after the first layoff, there will be insurmountable resistance to further improvements. From James F. Cox, APICS E&R president, "Once an organization uses this (layoff) cost-cutting practice, any further improvement activities will fail."8
Harley Davidson, in its legendary turnaround, promised no layoffs resulting from its dramatic switch to JIT. To use the otherwise idled workers, Harley took on outside jobs for their factory.
The job security problem is very real and must be solved to the satisfaction of the employees, or you will get no progress. The optimistic scenario is that the new lean and mean organization will garner more sales, thus using the redundant employees. New products or enhancements to current product lines is another way to increase business and keep all employees productive. From Fortune, "Done wrong, it can pitch your company into a black hole. To get out, try to avoid layoffs, help survivors cope, and never forget the G-word: growth."6 And," The chain-saw days are over' says Honeywell's Michael Bonsignore. "We're shifting to growth.' "
Job security is the one problem that is not treated very well in the literature nor by conference and after-dinner speakers. We need to work on this.
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Step 2—Reengineer the Enterprise
Reengineering the processes, correctly done, erodes the traditional Prussian, command-and-control functional organization. One popular metaphor of the Prussian Army approach is to call it the pyramid organization, where each function has its own hierarchy, leading to the top manager of that function. These pyramids usually are dedicated to optimizing their own activities, and they develop rules and regulations to that end. As companies age, and more and more rules and regulations accumulate, and the bureaucracy burgeons. This often leads to conflicts between pyramids and the "politicking" nobody likes. An optimizing the pyramids never optimizes the company, which gets less and less flexible, and loses its focus on enterprise-wide excellence in favor of departmental efficiency.
Increasingly, as we focus on our processes from start to finish, the pyramid organization will be less and less viable. The pyramid approach is increasingly being recognized as an anachronism and gradually is being eliminated.
The New Organization
The new organization will be built around processes. There will be a process manager to whom will report all the activities needed to accomplish each process. From the example of the customer order fulfillment cycle above, the new organization would have a manager in charge of this process, and have reporting to her/him all of the steps in the process, including sales and marketing, order entry, credit, planning, manufacturing, shipping, billing, and post-sale customer service. This is somewhat like the focused factory, that we have been hearing about in the last few years.
From Cox, "I'm calling for a business revolution that examines the assumptions of our business philosophies." "A first step is to tear down the walls that separate companies into functional silos (including production, accounting, and marketing) and often promote conflict and split organizations into competing entities."8
Eventually the traditional functional pyramids will shrink down to staff positions. There will still be some jobs that are enterprise-wide, such as reporting financial results to the outside world. Accounting and engineering standards are two more enterprise-wide activities that can be managed by these functional staff specialists. Another way to
achieve enterprise-wide coordination is to invoke committees, drawing members from the process chains. And in an environment of empowerment, such committees could be powerful, dynamic, and effective.
World Class Mean and Lean
Doing restructuring properly takes more time and much more effort than the chain saw technique. But this is the only way to gain real enterprise-wide efficiency. In the next decade, we will see a new revolution, similar to the MRP Crusade of two decades ago.
This revolution will draw on MRP II-JIT ideas to help guide the reengineering of the total enterprise, moving to a process organization, away from the classic Prussian ones. Hang on to your hats, and get the CIRM!
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