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Value-Add Processes and Systems

As noted above, the entire business organization can be described and deined in terms of value-add processes (see Figure 11.2). This is a logical and disciplined way to describe an organization of people who are committed to a common productive purpose. It is how work gets done, and it is also how the design of an organization should be perceived by the people who work there. So it makes sense to design an organization in terms of discrete sets of value-add processes.

Yet in many business organizations, people doing work are grouped according to the kind of work, the level of work, or the location of the work. The kind of work might be manufacturing, marketing, or research. The work might be the work of a “paint” business, an “automobile” business, or a “packaging” business. These “kind of work” arrangements usually distinguish between functions or customers. The level of work approach might group people in terms of their competence so that there are senior engineers, junior engineers, engineers-in-training, and so on. The location of work might refer to similar business groupings in each country, region, or city.

The conventional ways of describing work sound logical and are easy to understand, but they do not lend themselves to understanding an
organization, to improving it, or to changing the actions taken by the people who are grouped in these ways. “Doing engineering work” sounds like a clear concept, but it does little to help us understand the actual work being done, such as designing, constructing, and all the other things engineers do.

Role model leaders have a bias towards changing things – towards making them better and thereby generating positive results. Furthermore, in business organizations, all changes relate to productivity, quality, and stakeholder service. For example, when an organization's leaders are considering changes to the business's overall costs, it will be highly useful for them to develop an understanding of how those costs are presently being generated. What are the value-add steps in any given process? And what are the costs incurred by each of those steps? Having answered these questions, they can more eficiently and effectively consider the work of reducing costs.

When the leadership of a particular value-add process is assigned to a single individual in each process group, that person can be held accountable for the ongoing continuous improvement that has been assigned to that group.

How this complex array of processes is then put into manageable form has primarily to do with the organization's design. For an organization to be designed effectively, two further elements must be factored in: systems and structure. Basically, a well-designed organization will be built around certain processes that can be described as “core” and that are supported by various other processes (see Figure 11.2). For example, the core process of painting the side door of a Taurus would be supported by additional processes such as these:

• Delivering the paint to the paint shop

• Buying the paint for the paint shop

• Hiring painters for the paint shop

The sum of the core processes and all the various supportive processes can be called a system. In this example, we might call this integrated collection of processes the system of “painting things,” which is part of the overall task of manufacturing an automobile. And the system of “painting things” will be only one of many systems that are necessary to describe the task of producing an automobile.

The arrangement of the various systems into an organizational structure is the inal step in our systematic organization of people and assets. There are, of course, many different ways to structure a business organization. The discipline of doing so is often referred to as organizational design and is a key function and role of leadership.

Value-Add Structuring of the Business Organization

In a conventional organization there is a rigid, often pyramidal structure of managers reporting to more senior managers who report to more senior managers. Any change in structure will be dificult and will cause a cascade of change to accommodate the original one:

Reorganization to me is shufling boxes, moving boxes around. Transformation means changing the way the organization thinks, the way it responds, the way it leads. It is a lot more than just playing with boxes.1

In a conventional organization, change calls for reorganization, shufling boxes around. Change is sometimes avoided because of the onerous nature of reorganization. In a developmental business organization, change is the route to achieving high performance. In a developmental organization, structuring is an extension of the process and systems design. Change is more easily accommodated by targeting value-added steps: adding, subtracting, and redesigning individual processes or systems.

When organization design is carried out from the perspective of processes and systems, rapid changes and improvements are possible. Sets of systems can be arranged and rearranged; different sets can be created to accommodate change. There is no rigid hierarchy. Leaders provide direction as the work dictates.

Figure 11.3 describes a hypothetical organizational structure or design using the principles described in this section – that is, thinking about organizational structuring in terms of processes and systems. Let me be speciic in explaining Figure 11.3.

An engineer was given the task of designing a human resourcing organization in a small company. This engineer developed ive important systems:

A: The integrated human resourcing core leading, managing system B: The subsystem for evaluating people's work performance

C: The subsystem for identifying new hires

1 Louis V. Gerstner Jr., Who Says Elephants Can't Dance? Inside IBM's Historic Turnaround (New York: HarperCollins, 2002). Figure 11.3 Value-Add Structuring

D: The subsystem for identifying outside consultants E: The subsystem for paying people

Another point is that B and E are obviously related systems and the framework (Figure 11.3) recognizes that point.

All of the subsystems are important but the design encourages change because there are no rigid dependencies. Each system can be considered a standalone set of processes to be changed as necessary.

The reversing connections between the systems are meant to refer to all the important developmental actions, such as communication, deining strategic issues, and solving problems between work systems.

In summary, the most signiicant difference between a high-performance work system and a conventional organization is that the former focuses on value-add chains or processes, whereas the latter focuses on functions and structures. The former is effective, lexible, and easy to change; the latter is eficient, inlexible, and dificult to change. One is designed around natural work processes; the other is designed around job descriptions. One facilitates a leading approach; the other facilitates a managing approach.

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