A question the TXM team often gets asked is, what is the best organisational structure for operations? As well, we see many businesses suffer from high overheads and poor effectiveness because their operational organisational structure is not fit for purpose. When we look at businesses, we often see the same mistakes being made. Here are the top five organisational structure mistakes we see and how to correct them.
-
Unclear Roles
When a business is small, roles tend to be quite fluid. Everyone does a bit of everything. This can be really useful when there is a handful of employees as it allows employees to cover one another and builds a level of understanding within the team where everyone knows what everyone had to do. However, beyond a handful of employees this approach becomes impossible to sustain. Roles need to be clearly defined and position descriptions prepared for each role. This enables employees to know where they stand, feel empowered and to enable you to hold employees accountable. It is also essential when you start trying to recruit people. For new recruits to succeed you and they need to be clear on what the job is and what the key measures of success are.
-
Inadequate Supervision
Many businesses try to save money by minimising the number of line managers and supervisors on the team. In one business we worked with recently as many as fifty staff reported directly to one supervisor. This supervisor would find themselves “triaging” issues like the admissions nurse in a hotel emergency ward. Only the most serious “cases” would get immediate attention and other operators would have to wait or fend for themselves.
In our experience the cost in safety, downtime, quality issues and lost productivity of inadequate supervision far outweighs the savings. In one business we convinced leadership to go from having one salaried team leader who managed 30 staff, to having five teams of six employees, each with a team leader. In this case the team leaders were hourly paid and each of them could help out on the line. However, they spent most of their time off line supporting the team. Productivity measured by labour hours per unit, increased by 50%, even though we had “added” four more team leaders.
Read the TXM Case Study – Redesigned Processes at Agilent
The research we have seen would indicate that the ideal team size is around 5-10 employees. For this size of team, the team leader may well be a front line employee who is “first among equals”, but they need to be given some authority to lead the team and need to be able spend most of their time off the line supporting the team. They can then just step in to keep the line going during toilet or lunch breaks or other short-term issues.
-
Tall Organisational Structures
We often come across companies that build tall organisational structures, where team leaders are supervised by a supervisor, the supervisor by a production manager, the production manager by an operations manager and (in the worst cases) the operations manager reports to a chief operating officer. In this case if the COO wants to get anything done, they need to get the co-operation of each layer below them. Likewise, any message travelling upwards needs to go through five layers of management. This is a recipe for frustration and inertia.
Usually what has happened is that as the business has grown, the owners have decided that the operations management they have in place do not have the skills and cannot be developed to meet the needs of the larger business. As a result, they hire a “high calibre” manager over the top of the incumbent manager. This is likely to frustrate both managers. The incumbent manager sees his career path blocked while the new manager will quickly realise that to get anything done, he needs to co-operation of his disappointed predecessor. Co-operation that is often not forthcoming.
Usually, this ends with the resignation or termination of the more senior manager (who the owners usually blame for the lack of improvement) and the cycle starts again. Instead of this piecemeal approach, it is better to take a ground-up approach to developing your organisation. Use value stream mapping to visualise your business at different stages of its growth. Consider the optimum structure to meet the needs of the operation at each stage of its growth. Then map the individuals you have to the roles in this structure. Aim to maintain a management span of control of 5-7. This means that each manager at each level of the organisation has 5-7 direct reports.
Using this approach and designing roles well as I discuss in the next point, most manufacturing operations will need no more than three levels management. So, for example, 100 front line operators might be organised in to 12 teams. The team leaders of these teams might report to two production managers or supervisors. The two production managers would then report to an Operations Manager who would also oversee the warehouse manager, maintenance manager, quality manager and, hopefully, a Lean coordinator!
If your current operations leader (e.g. warehouse manager, production manager, manufacturing manager) does not meet the needs of your future business, talk to them about it. Explain your reasoning and ask for their feedback and whether there is any support you can give to help them develop in the future role. Ultimately it is your decision, so if you are convinced that they are not right, don’t promote them just because they want the role and you feel loyal to them. Instead, be honest and talk to them about other roles in the organisation that might fit their skills and aspirations in the future.
We recently went through this process with a client where an operations role had outgrown the incumbent manager. The limitations of this individual and the central role he occupied was becoming a handbrake on growth. In the end the highly stressed incumbent manager willingly took a sideways move in to a more specialised role and a new operations manager was hired. The specialised functional managers who had previously been hired to support the previous manager (but were being held back by him) then were able to step up and take full responsibility for their roles under the new Operations Manager.
Read Our Article – What Makes a Great Operations Manager?
-
Poorly Designed Roles
Even if the team structure is right and the organisational structure looks right, sometimes the design of the roles themselves prevents the individuals succeeding. This is particularly the case for line managers. The primary role of a line manager such as a production manager, warehouse manager or operations manager is to lead their team and ensure that safety, quality, cost and customer requirements are met. It is primarily a leadership role that should be focused on getting the most out of every person under their care. Unfortunately, we often see these roles loaded up with administrative tasks such as production planning, raising purchase orders, organising freight, compliance paperwork or data entry. These tasks are usually essential for the ongoing operation of the business and so cannot be left for the next day.
As a result, our “leader” gets tied to their computer at their desk and has no time to get out and support their team to improve. Managers in these roles often seem overwhelmed and highly reactive despite working long hours. It is this issue that leads some businesses to bring in the “senior manager” over the top of this person. You can imagine the frustration of someone who has struggled for years trying to be the “Minister for Everything” still having to fulfill that role but now having to take orders from a new manager above them! It usually does not end well.
Many of the desk bound jobs that businesses load on their line managers are actually quite simple administrative tasks. These can be done competently by junior staff on much lower salaries than the line manager. Therefore, rather than add another line manager, it is usually better to create some specialist functional roles such as a purchasing officer to raise purchase orders, a production planner to schedule production or a factory administrator to enter production and payroll data. By doing this you allow your line manager to get out from behind their desk and show you their capability as a leader.
Of course, some line managers LIKE doing transactional work behind their desks and don’t want to have to get out and interact with their team. In this case they are probably not really suited to being a line manager. We faced this issue recently and worked with the client to solve it by converting the role to be “Supply Chain Manager” (even though it was more a Supply Chain Administrator role) and then hiring a true operations leader.
-
No One in Charge on Site
Our final organisational structure mistake is one that is particularly the province of large companies. This is a result of “functional” organisational structures at head office level. Therefore you end up with a manufacturing site where the Manufacturing Manager reports to the VP Manufacturing in head office, the Purchasing and Warehouse Managers on site report to the VP Supply Chain in head office, the Maintenance Manager on site reports to the VP Engineering in head office, the Quality Manager reports to the VP of Quality and even the Lean co-ordinator may report to the Lean Manager in head office.
No one is actually “in charge” of the whole site. In our experience this is usually a recipe for political game playing, buck passing and decision paralysis. In the worst examples this means that any issue that cannot be resolved between two functions on site has to be escalated to someone in the organisation who sits across both functions and can act as arbiter. In some organisations, the functions don’t meet until the COO or even the CEO.
As a result, relatively minor issues on a site end up getting escalated the highest level to get resolved. Senior executives end up wasting precious time resolving issues that should have been resolved at site level. Of course, with good will and good teamwork, the site functional leads can work together to solve problems. However often the structure and conflicting metrics imposed on the functional leaders work to undermine co-operation and common ground.
Therefore, each location for your business needs a clear leader. Functional managers may have a “dotted line” relationship with their head office functional leaders, but someone needs to be the leader on the site. This is not only about the efficiency of management and decision making, but also important when things go seriously wrong. In the case of a major safety or environmental incident, regulators will want to know who was in charge. They will not be impressed to find that person located in a head office hundreds of kilometres from the scene of the incident.
Summing Up
Getting your organisational structure right and the right people in the right roles, is unlikely, by itself, to ensure the success of your operations. However, a poorly designed organisation can certainly prevent you achieving your goals. Avoiding these five mistakes is a good start to help you build a high performing organisational structure for your operations.
Talk to us about how we can help streamline and fine tune your operations organisation to achieve top performance.
Author: Timothy McLean
Timothy McLean is the Managing Director of TXM Lean Solutions and is an author of Lean books.
