Organizational ABCs

Abstract

Consider, if you will, a Third-Party Reverse Logistics (3PRL) firm that provides apparel and home goods processing services for multiple large retail companies across the United States. This firm (“ABC 3PRL” or simply “ABC”) was founded over 30 years ago and is still owned and operated by the same individual, Mr. Remo Williams. ABC operations cover a small physical footprint with three facilities spread across a four-mile-span in the northeast approximately one hour west of Manhattan. This proximity presents a distinct advantage for ABC because many of their customers have offices in or near Manhattan’s Garment District. ABC also maintains a close relationship with its suppliers, primarily regarding temporary labor. This portion of the workforce composes over 90 percent of the entire labor pool. The firm operated successfully (as assessed by profit and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)) until the first quarter of 2017. The owner and President, Remo, maintains close personal and professional contacts with key decision makers in the home goods and apparel industries, and this competitive advantage requires a majority of his time and effort on a daily basis. The combination of these issues, the absence of a management structure and supporting management systems, along with a multitude of additional issues, presents a host of challenges for ABC. These challenges may drive the company out of the market or out of existence altogether, but they provide ABC the opportunity to examine their business and to apply and benefit from best practices in organizational management.

Exploring Issues and Challenges from A to Z

ABC struggles with several issues, the primary of which is project management and execution. Operations are not aligned to sales initiatives, and projects (i.e., discrete customer-specific orders, typically ranging between 10,000 and 250,000 units) run unchecked, overbudget, and late on a consistent basis. The sales team does not engage in operations but maintains distance once the sales order has been released to processing. Occasionally, a sales representative will visit the processing center, but this is usually for the purpose of altering core elements of the sales order (the quantity, packing configuration, delivery date, etc.) after the order has been partially, or sometimes fully, processed.

The sales team exacerbates these issues by forming an isolated system of communication with the customers, purposefully maintaining a disconnect with operations. The rationale provided centers on maintaining personal relationships between the members of the sales team and the customer purchasing representatives. This is difficult to verify, and the negative impact of this communication system manifests, again, quite regularly, in the forms of increased costs and late deliveries. Of note, the sales team all reside in the same facility that houses the processing center. This is not a geographical problem, nor a problem with schedule (calendar) management.

ABC has not established nor enforced formal management structures and systems. Members of the management team, from the C-suite to the processing floor, operate with some autonomy but are often confused and regularly suboptimize operations through inner-company competitive maneuvers (e.g., Department A utilizing Department B resources to accomplish a task). This drives a high turnover level and a rapid turnover rate amongst the management team which causes additional issues.

The firm is decentralized beyond efficacy hence the term chaos may be too specific as a descriptor. While macro-level departmental structures are in place, this is in name only. The boundaries between departments, boundaries that include lines of authority, resource allocations, and staff reporting constructs (i.e., chains of command), are poorly defined and regularly ignored. This leads to decisions being made in isolation and acted upon across the organization in a haphazard manner.

Some of these ad-hoc or hip fire decisions seem to benefit the company. For example, a sales representative may coordinate an earlier delivery date directly with a customer after the order has been placed and after the order has been initiated in the processing center. This may be performed, and often is, in a vacuum or in the absence of any members of the operations management team. The newly agreed to and earlier date may not be achievable based on resource and cost (e.g., cost per unit) requirements. In an instance like this, the sales representative may visit the processing center to ask processing supervisors, known as line leads, to complete the project faster to meet the new, earlier delivery date. The supervisor may agree and dedicate their team of workers to this effort. This requires the staff to halt work on other projects, remove the affected inventory in the forms of raw material, work in progress, and finished goods from the processing lines and from the processing floor (attempting to prevent cross-product, order, or customer contamination), and to reconfigure the processing lines or cells to accommodate the accelerated-schedule project. This elevates the CPU and profitability projections for the project. While there may be mixed levels of celebration when a change like this is performed and executed, the ripple effect, more appropriately the cobra effect, bites the organization as a whole. The individual customer may be delighted and the sales team may even be congratulated, but at the end of the month profit goals are regularly underachieved. When this happens, the owner seems to forget about the processing schedule manipulation and lambasts the processing team for going over budget.

ABC is also devoid of decision support systems, ranging from labor planning tools and project prioritization mechanisms to Enterprise Resource Planning (ERP) and Warehouse Management Systems (WMS). Due to the high volume and rapid pace of their operations, “cocktail napkin” and other forms of impromptu planning and execution are employed that rarely deliver positive results and often increase uncertainty and the associated risks. The owner also believes that his managers should develop and utilize systems, structures, and tools (“solutions”) they need as they are required. These solutions are often developed in department-delineated silos or at the individual level, and at times from instance to instance as problems arise. Thus systems within the ABC organizational structure are fluid but uncontrolled.

Applied Lessons

This organization is not absent of coordination and control systems, but rather, suffers from the burden of unmatched and unsynchronized system perspectives within the vertical strata. Diversified opinions and methods are welcome in many organizations and may even lead to boosts in productivity or efficiency. This is not the case for ABC. The absence of any adherence to standards and the flexibility the owner has provided across the enterprise has led to destructive division in the firm and the formation of hundreds if not thousands of systems to accommodate the gap. Classic representations of rational system and natural system perspectives have evolved at the upper and lower ends of the organizational strata, and unfortunately for ABC, the two perspectives clash.

Rational System Perspective from the C-Suite

The owner of ABC expects that his firm is operating under the rational system perspective. “Defenders of a rational system view carry the torch of organisations as systematically arranged and rule governed entities” (Strohmaier, 2020). He lives a fairly regimented life and demonstrates some aspects of discipline and order. He understands the value in military operations and consistently espouses admiration for other organizations that have adapted or developed disciplined processes to better control their costs, staffing, and core value streams. But it is important to note that “rational behavior takes place within because of clearly specified limits” (Scott & Davis, 2007).

The owner has not established any procedural or operational limits within the company but does focus on one goal-oriented limit – no spend beyond budget as assessed on a monthly, weekly, daily, and sometimes hourly-basis. This is not outside of the rational system perspective. It represents a performance- or goal-driven approach. “The rational systems perspective of organizational theory that emphasizes the pursuit of specific, focal goals and the rationalization and formalization of structures for attaining these goals” (Chen & Eriksson, 2019). In this sense, rationality refers not to the selection of goals but to their implementation” (Scott & Davis, 2007). This action-oriented definition centers this perspective and the host organization on purpose, but also leaves tremendous flexibility and agility in the structural design and maintenance.

Natural System Perspective from the Floor

The natural system perspective provides a different viewpoint focused on the organization’s culture rather than the achievement specific goals. “Seen from a natural system perspective, informal norms and values play a dominant role in shaping organizational behaviour” (Egeberg & Stigen, 2021). Even more, in a natural system, the parts perform their own functions and these functions, in the end, work to better the larger group (typically an organism or an organization), but not in a highly formalized or specific system. “Other characteristics - shared by all social groups – are of greater significance” (Scott & Davis, 2007).

The processing department employees, the vast majority of which are long-term temporary workers, form these natural relationships on a regular and repeated basis based on ABC’s needs and their own. These workers often develop their own, non-standard methods and form social contracts with one another (i.e., if you scratch my back, I’ll scratch yours). This may seem to be beneficial or a positive in that it can be a definitive characteristic of a self-governed, fluid, and adaptive workforce. This is not the case for ABC. These informal relationships extend past the requirements for the business and are often dominated by the quest for personal benefits at the expense of the company versus selfless acts for the good of the whole. These informal agreements create chaos because the parameters exhibit tremendous variation and many of them are formed on a project-to-project basis. This makes the informal contracts themselves and the business operations throughout the enterprise extremely difficult to manage because they are unstable and unpredictable. The everchanging relational structure continuously drives ABC further into the unknown.

The driver may include organizational cultural issues. The culture of an organization is a complex concept because it is fed and grown to varying degrees by all members while simultaneously affecting and possibly shaping those same members. The definition of a successful or a productive culture may include positive attention towards the organization itself as well. “A natural system view defines organisations as ‘collectivities whose participants are pursuing multiple interests, both disparate and common, but who recognize the value of perpetuating the organization as an important resource’” (Hansen et al., 2021).

Open System Perspective Considerations

ABC does not demonstrate characteristics of the open system perspective within their internal operations. This type of system does seem to surface however, in a pseudo-form, in the external coordination processes between the ABC sales team and its customers and also in those processes between the ABC purchasing department and their suppliers. This viewpoint presents a visage of symbiotic dependencies similar to the operation of a simple machine (e.g., a car) and is akin to genetic algorithms and other types of machine learning techniques. This type of system “does not dissect an organization into smaller parts to study individually and then recombine it, hoping for the best result. It encourages one to consider parts as well as interconnection among the parts, as embedded in their external environment” (Jung & Vakharia, 2019). This holistic perspective integrates people, structures, processes, and the environment. ABC leadership does not consider systemic reactions nor relationships within their general operating structure. The organizational culture maintains a clear mental separation between members of management and the employees while failing to recognize the dissonant systems that have developed amongst them.

Personal Perspective

ABC is facing a host of challenges, most of which are internal and self-imposed. The owner is goal-oriented, but not goal-attainment oriented. Whether an organization is exhibiting features of rational, natural, open, or combined systems, “effective performance and relative success of different systems are a joint function of all forces, such as goal attainment” (Marmat & Jain, 2020). An improved project portfolio management system may provide some solutions. This system could provide documented and automated coordination between all departments (i.e., purchasing, sales, processing, logistics, accounting, etc.) and be developed to control processing flows, costs, and other critical operational drivers. A manual system such as a Task Board (from the Agile methodology) could provide an initial, low-cost solution.

The project portfolio coordination system may offer a solution for communication between the different systems that have evolved within ABC, but Decision Support Systems (DSSs) may be required to standardize and quantify decision making criteria, methods, and ultimately, results. “Despite the acknowledgment that decisions utilizing DSSs can be made more quickly and accurately than unaided decisions, it is often surprising that potential users do not always take advantage of DSS to support their decision-making” (Chan et al., 2017). The owner has expressed interest in such mechanisms, and has recently deployed a newly designed predictive staffing model to better control variable labor costs, the primary variable in his break-even point calculations.

With the implementation of the right solutions, ABC may also be able to define, develop, support, and manage an internal dynamic network. In a dynamic network organization, “independent business elements along the value chain form temporary alliances from among a large pool of potential partners” (Scott & Davis, 2007). This can be observed in film production and large consulting operations where multiple professionals are brought together to form a temporary “all-star team”, the best combination of talent available to get the job done. Once the film is wrapped or the consulting (or project-based) assignment completed, the members of the team, the nodes, may reform in different configurations with different players to complete a different objective. Significant cost advantages are present under this model. “A company with a saleable product design but little capital to invest, can rapidly scale up production without owning its own production facilities” (Scott & Davis, 2007).

This same network type could be grown within the walls of the ABC processing center. Different members of the executive, administrative, sales, and processing teams may be assembled into project-based teams in a matrix structure to share responsibility, information, and effort in completing the job, then divided and reassembled accordingly for the next order as required. Special effort would need to be expended to maintain the flexibility and enforce the rotation of team membership to prevent stagnation and a return to fixed and ineffective networks and teams.

It does not take a consultant long to diagnose the issues ABC faces on any given day. The effects of the problems are extremely visible, both on the processing floor and in the ledger. While a system perspective focused analysis or assessment of any organization must be conducted with extreme care and consideration to avoid oversimplification, the issues that ABC imposes upon itself are simple to diagnose and in fact, simple to solve. The redesignation or exploitation of existing networks (rational, natural, and open) may take time, but a considerate implementation of an overarching rational structure could provide the framework this type of configuration requires. The order this perspective provides may introduce an element of discipline upon which more dynamic solutions may be built.

Onward Christian Soldier

What does this mean to a Christian leader, which the owner of ABC claims to be? “Business leaders need wisdom to organize a growing business to go from ‘good to great, to built to last’” (Merida, 2015). Wisdom can come in many forms, including awareness of the systems an individual utilizes and those systems that surround them. Wisdom may come in the form of statistics or advanced, Big Data-based advanced machine learning or prescriptive modeling. No matter the type of wisdom, there is only one source – our Father God in Heaven. Even more, this wisdom is accessible to all. “If any of you lacks wisdom, let him ask God, who gives generously to all without reproach, and it will be given him” (English Standard Version Bible, 2001, James 1:5).

A Christian leader is curious and concerned about the systems around him, including their weaknesses and strengths, support systems, and more, because he understands that awareness and understanding are paramount to evangelism. Consider the Apostle Paul’s advice. “For though I am free from all, I have made myself a servant to all, that I might win more of them. To the Jews I became as a Jew, in order to win Jews” (English Standard Version Bible, 2001, 1 Corinthians 9:19-20). Better yet, consider how Jesus listens and observes. Almost everyone knows about His actions, especially His sacrifice. He is God - omniscient, omnipresent, and omnipotent – and He still listens and observes. This is precisely what the owner of ABC needs to do.

References

Chan, S. H., Song, Q., Sarker, S., & Plumlee, R. D. (2017). Decision Support System (DSS) Use and Decision Performance: DSS Motivation and Its Antecedents. Information & Management, 54(7), 934-947. https://doi-org.ezproxy.liberty.edu/10.1016/j.im.2017.01.006

Chen, Q., & Eriksson, T. (2019). The Mediating Role of Decentralization Between Strategy and Performance. Journal of Organizational Change Management, 32(4), 409-425. https://doi.org/10.1108/JOCM-05-2018-0128

Egeberg, M., & Stigen, I. M. (2021). Explaining Government Bureaucrats’ Behaviour: On the Relative Importance of Organizational Position, Demographic Background, and Political Attitudes. Public Policy and Administration, 36(1), 3-18. https://doi.org/10.1177/0952076718814901

English Standard Version Bible. (2001). ESV Online. https://esv.literalword.com/

Hansen, P., Chroni, S., Åsrum Skille, E., & Abrahamsen, F. E. (2021). Leading and Organising National Teams: Functions of Institutional Leadership. Sports Coaching Review, 10(3), 274-294. https://doi.org/10.1080/21640629.2021.1896213

Jung, Y., & Vakharia, N. (2019). Open Systems Theory for Arts and Cultural Organizations: Linking Structure and Performance. The Journal of Arts Management, Law, and Society, 49(4), 257-273. https://doi.org/10.1080/10632921.2019.1617813

Marmat, G., & Jain, P. (2020). Contingency Framework for Understanding Quality in Public and Private Hospitals of India. International Journal of Pharmaceutical and Healthcare Marketing, 14(1), 137-158. https://doi.org/10.1108/IJPHM-02-2019-0014

Merida, T. (2015). Christ-centered Exposition Exalting Jesus in 1 & 2 Kings. B&H Publishing Group. https://ebookcentral-proquest-com.ezproxy.liberty.edu/lib/liberty/reader.action?docID=4412639#

Scott, W. R., & Davis, G. F. (2007). Organizations and Organizing. Taylor and Francis. https://doi.org/10.4324/9781315663371

Strohmaier, D. (2020). Organisations as Computing Systems. Journal of Social Ontology, 6(2), 211-236. https://doi.org/10.1515/jso-2020-0052