Sustainable process improvement: Organization 3.0 required
Submitted by Hans van Nes on Fri, 04/02/2011 - 17:00
Ever wondered why are a lot of process improvement projects never make their ROI or are only successful for a short period? I was discussing this topic with Dan French, owner of Consider Solutions, a company delivering Governance, Compliancy and Risk solutions. Dan commented that CFO's often complain about the adoption of GRC elements by the business and together we concluded that this is the same CIO's encounter around IT elements. For me all is the result of current organizational models that are not suited to handle business process chains.
Business process improvement, or as we at Results2Match are advocating it, business process innovation, will look at the complete value chain covering a business transaction. Depending on the industry, this could be anything from the complete supply chain from ingredient to end product customer purchase or the sale of an insurance policy until the last claims handling for that policy. Common denominator is the customer or market centric horizontal integration of otherwise vertical arranged business functions (such as production, sales, finance or delivery). Traditionally most companies are organized around these business functions, only to come together at board or CEO-level.
There is an obvious friction between horizontal process chain thinking and vertical organizational functions. The product development and after sales function are typically seen as secondary to the primary functions like manufacturing and sales. Financial and IT-functions even as tertiary. The tendency to appoint overseeing roles like the Chief Operating Officer, recognizes the need for executives with a broader scope. But unfortunately mostly as an arbiter above the still vertical organized levels below.
In production-type companies the trend towards a Chief Supply Chain Officer (CSO) is a step further in tilting the organizational structure. In the most advanced companies the CSO has end-to end responsibility for planning, sourcing, manufacturing, logistics and customer fulfillment. In other words: from spending cash to collecting cash. Within the supply chain the next level will rather be around parts of the chain than around business functions.
For not-product companies this should work the same, if CSO is used as the term or a true COO is introduced, is of little relevance. As long as all the supply related business functions are completely "owned" by the supply chain they don't need an extensive vertical organizational hierarchy anymore all the way to the board. So sorry dear Chief Sales, Marketing and Customer Satisfaction Officers: at best you will be director under the COO.
What remains are two types of business functions not under the realm of the supply boss:
- The ones that look at the demand side of the company, like research and development
- The ones that look after the continuity side of the company, like financial reporting and shareholder management
Depending on the size of the organization this can be within the scope of the CEO or seconded by non-supply side focused CFO, CIO, CTO, etc. Multiple independent supply chains require multiple CSO's: per brand/product line or product/market combinations.
Coming back to the discussion with Dan: since most financial and IT functions are supporting to the supply chain, they become automatically part of and managed through that chain. So no separate worlds anymore or conflicting interests. The CFO and the CIO can give their suggestions and even some standard formats to the CSO or COO but it is up to them to decide what is good for the output and the result of the chain. So if one CSO wants that "not standardized, foreign, small company" application, so be it.
Sounds logical? But why do we see, apart from product manufacturing companies still so few Organization 3.0's? Are the CXO's afraid for their jobs?
As always, comments welcomed.
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