By Zen Yaworsky, programme director, The Supply Chain Academy
One of the major dangers that many companies face is the “Dilbert Effect” and it applies particularly to one of the most vulnerable points in any business’s organisation – the supply chain.
Dilbert is a wonderful satirical cartoon about an engineering company and a workforce of middle managers, each enclosed in their own office cubicle space. When they emerge to deal with each other they are absurdly dysfunctional. Hugely popular among corporate audiences, large and small, Dilbert is very funny precisely because of its existential truth. Real life is perhaps not quite as absurd or as surreal as it appears in the Dilbert world but the author and illustrator Scott Adams – himself a man with a long career in big corporation America – is clearly touching a very real nerve.
Regardless of how a company organises its desk layout, the Dilbert “cubicles” are in people’s heads. The “cubicles” are there for all sorts of very respectable reasons. Organisational design plays a big part. For example, you don’t have to be all that big as, say, a retailer, before you start dividing your team up into buying, merchandising, finance, HR, international freight operations, international buying offices, domestic distribution and warehousing.
It makes sense, I suppose. A big company needs multiple business units, devolved authority, delegated decision making and concentrated specialisation. But the risk is that it doesn’t take too long for the Dilbert Effect to really assert itself. Each of these business units is operating to its own KPIs, is performance managed and rewarded on local measures and contributes to a cellular culture of thinking where people in one “cubicle” resent people in others.
One cubicle person might say “the other guys just don’t get it, they haven’t got a commercial bone in their bodies”, whilst the character in the next cubicle will complain “do the people next door understand the consequences of the decisions they have agreed? They don’t give a damn!”
Consider the procurement or buying function, for example. At its worst extreme, the buyer and the manufacturing supplier can work in what might look like a conspiracy. Both are measured by their own organisations on efficiency of production run and on gross margin. However, the result may be higher working capital costs, higher inventory, higher warehouse space requirements, and a greater level of markdowns, all of which will erode margin.
Aligning performance in an organisation is not a new concept; there are books upon books written on the subject of sales and operational planning. The theory of having aligned KPIs, common end objectives, collaborative information sharing, disciplined cross-functional communication and an organisational design that recognises all of this seems to be something you get as an MSc from a prestigious post-graduate university and then forget immediately as you are escorted into your Dilbert cubicle.
Many senior executives are aware of the problem but have to fight against the inherent inertia of the organisation and, frankly, sometimes the change programme required is just too daunting.
These days the economy is a frighteningly hostile environment and growing your way to success isn’t going to cut the mustard for a lot of companies. They have to look to other means.
The place to look is in the supply chain. For those companies who have got a Dilbert Effect culture then the good news is that they are sitting on their opportunity and its solution. Experience suggests that these sorts of companies can release anything between 0.5% and 3.5% of full net margin points by the simple expedient of knocking down those cubicle walls.
But there is no point in knocking down the walls if you don’t have a common language. The procurement function needs to be able to talk operations and operations need to be able to make sense of procurement; finance need to understand commercial judgement and everyone needs to understand finance.
The supply chain must become a lot better at learning and development than currently it is. The conventional wisdom to strengthen the supply chain is to invest in learning and capability development that makes buyers better buyers and operators better operators. This makes some sense but it also makes the Dilbert cubicle walls higher.
Two chaps called Hansen and von Oetinger had it on the nose when they wrote in the Harvard Business Review in 2001: “T-shaped management relies on a new kind of executive, one who breaks out of the traditional corporate hierarchy to share knowledge freely across the organisation (the horizontal part of the “T”) while remaining fiercely committed to individual business unit performance (the vertical part). The T-shaped manager must learn to live with, and ultimately thrive within, the tension created by this dual responsibility. Although this tension is most acute for heads of business units, any T-shaped manager with operating unit obligations must wrestle with it.”
So let us stop sending our supply chain players – be they procurement and buying, planning and allocation or freight and warehousing executives – on separate learning experiences. Why wouldn’t we send a warehouse manager on a course about buying, a buyer on a course about network modelling, or an allocator on a course about origin logistics?
Develop their capabilities in the same room and encourage them to consider the supply chain in its entirety and their impacts on the whole. Take this broad approach to supply chain learning and the cubicle walls will start to collapse. The value that’s locked up in supply chains will start to leak out straight onto the bottom line.
Some organisations have a better chance than others. Retailers face a particular challenge where the divisions between buying and merchandising, freight and warehousing represent deep cultural fault lines. But, the experience of working more closely together may well prove surprisingly rewarding for both parties.
At the end of the day it’s a Darwinian thing. Those that see the imperative to align their objectives and KPIs within the organisation and do something about it by investing in the capability development of their supply chain people, are the ones that will survive the kind of bleak environment that we are in now. And, as the recovery begins in the future, they will be best placed to exploit the new market opportunities and will outpace their surviving competitors.
For those of you who have never read a Dilbert cartoon here is a link. If you recognise something of your own organisation there, then don’t leave it too late, act now!