The fact that work flows horizontally through an organization has been obscured over the years. This is caused by vertical functional silo structures, internally aligned metrics and the shift of thinking that an organization exists for itself and not its customers. By not making horizontal work flow the main focus on how the organization operates we need to add many processes to ensure the work is completed. These processes include budget planning, internal forecasts, resource requests, meetings between departments, decision escalations, project war rooms and headcount approvals. We have come to call these processes, bureaucracy. Working in this vertical orientation, with compensating internal processes, impacts our motivation, culture, cooperation, engagement and productivity. Unintentionally, we have created a work environment that slows us down, instead of pulling us along.
We have confused efficiency for effectiveness.
The root cause is that the organization’s structure is misaligned to the horizontal work flow. Why we end up with this structure is covered in “Why do we have vertical silos?” with examples of the symptoms found in the FAQs. Attempts to correct for the root cause have been made with ideas like matrix organizations where we report to two or three managers to improve collaboration. Or cross company bonuses based on customer satisfaction, productivity improvement or share price performance. But these are all band-aids.
What if we actually addressed the root cause?
The root cause is we are structured by internal functions and not by customers. We are structured vertically and not horizontally with teams that do the same thing, sales, development, marketing and service. What if we implemented a horizontal structure with teams who share the same outcome? Horizontal structure is counter to conventional wisdom. As explained in “Why is the exception, the exception and not the norm?”, conventional wisdom has emerged from the fact that we don’t understand how to manage the complexity of an organization. The horizontal alignment makes the complexity work for us. When an organization is structured based on the horizontal work flow, many things fall in to place.
The mission statement becomes tangible and not just some lofty goal. Everyone on the team is there to deliver the outcome, and are using their skills to contribute. People develop multiple skills to help out where they are needed. Measurements are based on progress towards the goal and not just how much activity we did today in our functional silo. Decisions are made based on improving the outcomes, versus the turf wars of the vertical silos. Local feedback loops are created making people accountable for their actions and decisions. The strongest feedback loop is the Customer as there is a direct connection between what the team is delivering and the value the customer gains.
A great example is the way General Bill Creech of the USA Air Force realigned the maintenance organisation of the Tactical Air Command (TAC) from being vertically functional based – mechanics, electricians, etc, to horizontally customer, or in this case, plane based.
"the one large flight line-wide maintenance organization was broken into three identical 'squadron' teams. Each was responsible for its own twenty-four aircraft, and each squadron was broken into four flights of six aircraft. Within each squadron and flight all the various disciplines worked together in small teams to get the job done. Each squadron had its own goals. Each did its own scheduling which had been done centrally before. Each made its own decisions and charted its own course. And we carried those themes of ownership and empowerment down all the way to the frontline level.
For example, each fighter aircraft was assigned a 'dedicated crew chief' who, with an assistant, was totally responsible for that specific aircraft. We painted his or her name on the side of the fighter, and they went with it everywhere.
We had gone from a vertical to a horizontal arrangement and the authority and accountability flowed in that manner. That gave focus to authority and accountability in an integrated product sense; and it removed the ambiguity about who was accountable for what. Before, the aircraft mechanics and various specialists might work on as many as six different aircraft a day, and on a different six the following day. That approach of unfocused responsibility was replaced by the integrated teams, providing ample focal points at all levels for product focus and performance assessment.
Accountability for poor performance was easy to track. It was equally easy to single out those who deserved recognition for stellar performance - both individuals and groups. Our measurements of those focal points soon began to reflect the power of motivation, pride and commitment.
The motivational aspects of the new approach can perhaps best be described by citing the insights of a young three-striper crew chief. Not long after we began, I was visiting one of TAC's many bases. As usual I was mingling with the workers at the frontline level to find out what was really going on. The first crew chief I approached smiled as he shook my hand and said, "I really like the new arrangement and the dedicated crew chief program General Creech", I said I did too, and asked him why he liked it so much. He responded, "When was the last time you washed a rental car?" That said it all. He and his colleagues now exercised real ownership.
The fighters still landed with problems from time to time, of course, as airliners do. But they were fixed and returned to service far more rapidly. For example, we improved by an astounding 270 percent the rate of fixing aircraft on the same day they landed 'broke'. We were now able to fix more than four out of five aircraft immediately. As opposed to only one out of five under the old system. That meant they were available within minutes or a few hours, as contrasted to a day or days before. We also more than doubled our ability to generate sorties in combat."
The comment by the crew chief, “When was the last time you washed a rental car?” points to the fact that the combination of empowerment with accountability creates ownership. Ownership throughout the organization is an example of having the complexity work with us.
Another example comes from the manufacturing, the Steffe Corporation;
“In 2008, [Joe] Rothschiller oversaw six functional departments, each of which supported all of the company’s product lines. As a result, decisions were often isolated from the customer. For example, the purchasing department was focused on getting the best price even when the result was large piles of unused materials that tied up cash and took up valuable space…
Once the routines in the first value steam were established, the entire organization was restructured around six value streams. Four of them – heating products, oil field, manufacturing and off-site provider – were created around product categories and generated revenue. Additionally, there were two internal value streams: support services, which consisted of corporate accounting, human resources (HR), and safety, and new product development. As the revenue producing value streams got large enough, they were given their own administrative personnel, such as an HR person or a financial analyst…
The common metrics provided a basis for continuous improvement that was shared companywide. By progressively improving flow, the company was able to grow the business 50 percent annually with minimal investment in capacity. In 2013, the company sold three times the product it sold in 2008, which had been a banner year, with the same square footage.”
By focusing on the horizontal flow Steffe Corporation became much more effective therefore were able to produce three times the output in the same sized plant.
Horizontal flow is now being used in health services were we, the patient, are seen as the work that flows through the process. Instead of having to deal with multiple departments for our MRI, blood tests, X-Ray’s Pharmaceuticals there are clinics that are designed around our disease. These clinics contain everything that is needed to make us better. Medical test results are not lost between departments. Doctors, specialists and nurses jointly discuss each case and the chances of things slipping through the cracks is dramatically reduced, mainly because there are no cracks! If you unfortunately needed medical health, where would you rather go to be seen? To a large vertical silo-ed hospital or an outcomes based clinic focused on making the patient healthy?
When we think about our own customers which type of service are we offering them?
With the horizontal flow in place it is time to look at the role of the organization's hierarchy in Vertical Leverage.