Basics
The lectures up to this point deal with the management
functions of staffing, motivating and communicating. These functions are the
portion of effective leadership that derives from the fundamentals of Theory Z
and are the people related functions. Executing these functions effectively are
necessary to achieving highly motivated workers. Now I turn to processes. Effective
organizations require both highly motivated and well trained people and
effective processes. Even the most highly motivated people with superior skills
cannot be successful if they are encumbered with processes that produce
defective products or services. In addition, even the best processes encounter
problems from time to time due to changes in input materials, worker actions,
business environment or machine related problems that are often subtle and hard
to identify. Therefore the effective leader must have the skills needed to
improve processes that produce defective outputs and the skills to fix and
maintain good processes when unforeseen changes cause problems.
Processes involve the management function of control. Control
is a complex management function and is specialized to the organization type.
Whereas most of the fundamental principles of control are the same for
different types of organization the implementation is vastly different for
manufacturing, service or project organizations. Also specialization is
necessary for nonprofit organizations compared to profit based organizations
and within the many types of service organizations, e.g. health care vs.
education.
A comprehensive treatment of the control function is beyond the
scope of this course. This course treats four aspects of control that apply to
all organizations. These are risk management, theory of constraints, process improvement
and leading the team. Early in this course effective leadership was defined to
be derived from combining the principles of Theory Z and Process Improvement.
The theory of constraints can be considered part of process improvement
although it was developed separately and is treated separately here. I do not
know the formal history of risk management but it is certainly a critical part
of the control function and a necessary skill for effective leaders so it is
included here. Leading the team is of course the fundamental job of the
organization’s manager and I’ll end with a brief description of a process that
has proven effective for many organizations.
An important tool related to control that is essential in
today’s environment is Taguchi methods for design of experiments. These are
statistical methods that require a well-trained person to use effectively. Low
and mid-level managers should have sufficient training to be able to identify
when Taguchi methods might apply to problems in their organizations. Every
enterprise should have access to a person with extensive training in these
methods. It can be the same person experienced in statistics as necessary for
oversight of process improvement activities discussed in later lectures. It is
important to allow only well trained individuals to design and monitor Taguchi
experiments. Properly used Taguchi methods save time, money and result in
higher quality designs and products. However, used by inadequately trained
personnel these methods can lead to costly mistakes.
I do not treat Taguchi design of experiments further in this
book because of the extensive training necessary to be of value. Based on my
experience with these methods I recommend that students seek training from
trainers familiar with the students’ type of organization. Seeing examples of
the methods use on problems familiar to students help them recognize where the
methods can be useful in their organizations. Students in engineering
organizations can benefit from reading Don P. Clausing’s book “Total Quality
Development: A Step-By-Step Guide to World Class Concurrent Engineering” and
Madhav S. Phadke’s book “Quality Engineering Using Robust Design”. Students in
manufacturing, research in any science, and perhaps all students, may benefit from
Genichi Taguchi and Yoshiko Yokoyama’s “Taguchi Methods: Design of
Experiments”, although I have not personally read this book. I regret that I
cannot recommend specific training sources for students in marketing,
advertising, bio-technologies and other fields involving statistics but I
suspect some research would find such sources.
In studying Taguchi’s methods do not confuse Taguchi’s strategy
for quality engineering with his design of experiments methods. Only
engineering managers need to be familiar with Taguchi’s strategy for quality
engineering, which has the three stages of system design, parameter design and
tolerance design. Taguchi’s design of experiment methods have much wider
utility. Reading Wikipedia’s discussion of Taguchi methods provides students
with a good starting point for more in-depth study of methods pertaining to
their work.
The primary emphasis of the remainder of this course is on
process improvement. Before beginning these subjects I provide some background
relating to control in order to convince the student that control must be
tailored to the type of organization.
Background on control
I assume that the student is part of an enterprise that has
effective cost and schedule controls in place and that the student understands
these methods. Presumably these are standard methods of control for
manufacturing, services or projects as appropriate for the student’s
organization. If these assumptions are incorrect and/or the student doesn’t
know how control differs for manufacturing, services and projects then
self-study is needed. I recommend Part II, Chapters 4-10 of “Production and
Operations Management” by James B. Dilworth.
Unless the student is in the financial organization of the
enterprise study in management accounting is recommended. Management accounting
differs from the accounting used in financial departments, which is often
tailored to tax laws and accounting standards. These tax and associated
accounting standards are fine for their intended purpose but they do not
provide a simple and clear picture of the costs of operating an organization or
enterprise. This often leads to managers doing stupid and incorrect things in
attempts to manipulate overheads in hopes of reducing costs. To easily
understand and manage costs correctly the methods of management accounting that
focus on cash inflows, cash outflows and true product costs are preferable. A
book I have found helpful is “Managerial Accounting- Concepts for Planning,
Control, and Decision Making” by Ray H. Garrison.
Control methods must match the organization type; applying
methods appropriate to manufacturing to projects results in drastic decreases
in effectiveness and vice versa. A few comments help to explain why control
methods must match the organization type.
A manufacturing organization might have a split of costs of 80%
material and 20 % labor whereas a project might have 80% labor and 20%
material. In this example materials costs drive manufacturing costs and
effective manufacturing control minimizes inventory and work in progress while
maximizing through put per day or per hour. Labor cost drives overall cost in
the project example and effective project control requires maintaining plenty
of spare parts and even spare assemblies so that schedule delays due to lack of
parts are avoided. The cost of a few extra spares is small compared to the
“marching army” costs of labor idled while waiting for parts to be delivered if
a part fails or is damaged. Note that both organizations are maximizing the
productive work per time period but the most effective method of handling
material depends on the material/labor cost split. Most service organization’s
costs are almost all labor so that the details of how material costs are
handled have little impact on the organization’s success. Restaurants are an
exception in which the cost of food ingredients is a significant portion of
overall costs and must be managed carefully to achieve business success.
Note also that research and development (R &D) is a project
so control for R & D in a manufacturing organization should be different
than that for production; a requirement sometimes lost on poorly trained
manufacturing managers. Similarly, purchasing personnel trained for a
manufacturing organization typically don’t understand control for R & D and
try to impose constraints appropriate only to manufacturing, e.g. no sole
source procurements.
Mangers of R&D activities in manufacturing organizations
should expect problems with purchasing and stand up to purchasing people. In a
manufacturing organization that I managed at one stage in my career the
purchasing manager insisted that the sole source procurements the R & D
people wanted were illegal until I had a government auditor personally explain
to him that he was wrong.
A similar problem can happen when the quality department in a
manufacturing organization is also involved in R&D or project work in the
same organization. They may have rules calling for source inspection that are
appropriate for production material but not for special parts needed for
R&D or projects, e.g. parts that cannot be handled except in a special
environment.
There are sometimes sound business reasons for combining two
types of organization in the same business unit, e.g., manufacturing and
projects or manufacturing and services. If one type is much larger than the
other type in such combinations then the management tends to be from the larger
type. Unless these managers are familiar with the different control needed for
each type of organizations they can cause a lot of inefficiencies. If you find
yourself managing in a mixed organization make sure you learn the proper
control techniques for each.
Exercises: There are no exercises for this introductory
lecture.
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