The need for organizational alignment ensures that all individuals understand the overall direction of the company, and is focused on their contribution to the strategy on a day-to-day basis. In part 2 we identified the elements that ensure organizational alignment and discussed performance measures and a deployment system. In this final portion we will cover the need for a closed-loop system and a structured review system.
Closed-loop System
Once measures have been identified at each level, then steps need to be taken to impact or change performance if it is moving in an unfavorable direction. This is done in the following ways:
- Measures selected should be displayed on a trend chart. The use of the chart is to show the behavior over time. In fact, the trend chart reflects what the system is able to produce. It is important to review the performance by analyzing the trend charts. For example, if the operations department is concerned about effective equipment utilization, then a trend chart could be used to evaluate downtime of the equipment in the facility in weekly increments
- Pareto charts should be developed. This will identify the magnitude of the components that drive or impact the trend. In many cases, the performance identified on the trend chart may be too broad to impact. The Pareto chart is developed cumulatively and shows the biggest systemic contributor to the performance indicator. If the Pareto chart is developed on a weekly basis, then the response to the largest item might drive short-term thinking and a fire-fighting approach to problem resolution. The Pareto chart associated with the trend chart for equipment downtime may have categories such as change over time, number of equipment failures, and material availability as the basic drivers of equipment downtime.
- A structured problem solving activity is essential as it focuses on the primary issues identified on the Pareto chart and tries to determine the root case –the main reason why the problem is occurring. The intent at this point is to evaluate the system and identify any systemic issues that could be causing the problem to occur. The problem solving activity is, therefore, aimed at not only identifying the constraint, but determining appropriate systemic solutions and instituting them so the problem would not recur. For example, if equipment changeover is the primary cause for equipment downtime, then the problem solving activity may need to be focused around reducing the time required to change tools.
- Monitor Effectiveness. In many cases, it is often easy to think that problems have been ‘fixed’ however, what actually happens is that short term actions are put in place which may have long term unintended consequences. This occurs because the system issues have not been addressed. The importance of monitoring the effectiveness of corrective actions is to ensure that initiatives are sustained and do not cause problems in other areas.
- Performance measures should be reviewed on a continuous basis to identify opportunities for continuous improvement.
The closed-loop system needs to be used at every level of the company, and encourages the process of problem identification as well as effective problem resolution.
The Review System
An important component of maintaining organizational alignment is the ability to develop and use a structured and consistent review system at each level. The frequency of the reviews will vary depending on what level of the organization doing the review, and whether there are critical issues that need primary focus. For example, if a plant has a high reject rate, or may have a poor on time delivery performance, it may be necessary to review performance weekly.
In general, the review process at the management level should take place every two weeks or once per month. At the department level, reviews should be done once per week, while on the frontline it should take place daily.
The strategy for problem solving on the frontline may be slightly different from those at higher levels of the company. At the frontline, the review process is identifying anomalies, i.e. special causes of variation. For example, a dimension on a part might be out of the required specification because of tool-wear. The individuals on the frontline may have the ability to immediately respond to tool wear. At other levels of the company, one might more easily identify basic causes of tool wear such as types of tools selected, and method of using the tools. This might require the need to perform tool studies to identify how long the tool should last and to use this information to change tools before they become a serious problem.
Through the review system, individuals or departments are continually held accountable for performance and the actions that are being taken to make the necessary changes. In addition, the review system provides the vehicle where the organization can continuously evaluate its performance and make changes towards continuous improvement. Periodically the company should question the need to track certain measures and add or delete measures in response to changing needs of the environment.
Through the review system, the company is able to understand activities at all levels of the company and to evaluate the extent to which they are aligned. It also prevents several groups working on the same problem because there is now a process through which the organization is kept informed on the projects that are in progress.
Summary
Organizational alignment is both vertical and horizontal. Individuals need to be both aligned to the strategy and the needs of the customer. Creating a framework that provides a means for linking the entire company provides the mind-set where everyone knows how decisions are made, and how they add to the corporate value. Also, effective communication begins to occur throughout the organization.
Communication from the boardroom to the frontline starts with a well thought-out strategy which is used to guide the selection of leading indicators, for the whole organization, which will be measured. These measures will, in turn, be used to guide the selection of leading indicators, for a department or unit, which are then measured. Finally, the department or unit measures are used to guide the selection of frontline measures. Through this linked selection process, the frontline personnel know what is required, on a daily of hourly basis, to meet the goals established by top management. Changes in direction by top management are communicated through out the organization merely by selecting new measurements and deploying them all the way to the frontline.