You’re probably sat reading this in an office, maybe overlooking a bustling, busy factory floor. Your staff are motivated, products are of a high quality and turnover is on target. Sure, there may be the occasional problem that needs solving, but the company is still ticking along nicely. Happy days, right?
Well, says Richard Watkins, managing director of business management consultancy, Delos Partnership, things might not be as rosy as they appear. “Even companies that, on the surface, seem very successful, may just be managing on a day-to-day basis,” he explains. “They spend a lot of their time fire-fighting, which can be great fun, but you can’t help thinking that if they could get away from doing that, they could spend more time actually driving the company forwards.”
This is a problem that affects companies that are growing at a strong rate, adds Watkins. He tells of a manufacturing leader who has forecasted an increase in turnover from £20m to £100m in five years. “That’s an outstanding prediction, but they know it’s unsustainable in their current way of working,” warns Watkins. “The company will reach a point where they have to start redesigning some of the informal processes they currently have.”
Keeping the plates spinning
This is where a business model called Integrated Business Leadership (IBL) comes in. As the name suggests, this approach focuses on integrating the various departments in a company under one leadership model. “Communication is key with IBL,” says Watkins. “We ask each of a company’s, say, production planners what their job is and how they operate. Quite often it transpires that each production planner will do very different things from one another. There is a lack of clarity about who does what and to whom, and how to do it. That’s why open communication is important – we don’t want people finding things out just by bumping into each other in the corridor.”
In any company, the person at the top of the business has to keep abreast of every department, their issues and their successes, even more than usual. Once again, of course, this is easier said than done – each department will demand different things of the managing director, says Watkins. “There will be a finance director who is trying to manage cash flow and save money; there’s a sales and marketing director who is getting business in without necessarily telling the right people what they’re doing; and in the middle of it all is the operations director, who is trying to balance what the other departments are doing.
Meanwhile, the managing director will be primarily concerned with keeping shareholders happy. For them, it’s the proverbial ‘spinning plates’ scenario. It’s up to the boss to manage all those competing factions. IBL, with its formal underlying structure helps the MD better decide the right actions to take, in line with the strategy of the business”
Communication and openness, therefore, is vital. Watkins warns of the risks of ‘siloing’ your departments, and assuming that because each is performing well on its own, the company as a whole is as well. “A manufacturing firm is a lot more than the sum of its collective parts,” he says. “Each department will think they are doing well, but they may not realise the impact they all have on the rest of the company.”
An attitude shift
At this point in proceedings, you may be thinking ‘what’s the point of all this? What is so special about IBL? We’ve been performing well and hitting targets for some time, so we don’t need to change.’ However, as highlighted in the earlier example, complacency leads to stagnation and slipping standards. It is also vital, says Watkins, to plan ahead, and alter those plans accordingly. “In this day and age, things change so rapidly that it’s vital to be able to plan better,” he says. “You can’t just say at the start of the year that your budget is £X million, and assume that’s what you’re going to achieve. Things change all the time, so that budget may even end up needing to change through the year.
“What if, for instance, Brexit negotiations go badly and we end up with a 20% tariff on our exports? Sorting that out later will be a very time-consuming process. We have seen many clients who are buying a lot of materials from China, which have a long lead-time for delivery. They get rough forecasts from their sales team, but many find that they always over-estimate what they actually end up selling. This means the supply chain director buys the stock he thinks the company needs based on over-inflated forecasts, and causing a major headache for all the other departments in the company. Under IBL they should be measuring the accuracy and bias in sales and marketing forecasts, making them accountable for this and the inventory that arises from these issues. This way they will reduce costs of storage and cash tied up in inventory”
There is, however, still a lot of reticence in some firms when it comes to opening up and laying all the cards on the table and implementing IBL with its visibility and realism. If any of the senior management is strongly against such a move, the whole system will break down. Delos recently worked with a manufacturing company, the manufacturing director of which, Watkins says “hated the idea of having transparency and honesty amongst departments. He preferred to sort out the issues in his own department without telling anyone else or getting them involved in any way. It was not until the MD understood IBL fully, and liked the openness that it gave him that he decided to put IBL in place.”
It is dangerous to work in silos, continues Watkins. “It’s vital that people know what’s going on in other departments, even if they might not like what they hear. People don’t like admitting to their problems: if you admit that something is wrong, you run the risk of being embarrassed in front of your colleagues, so you decide it’s best to try and make the issue go away by yourself. There’s also an element of territorialism. You’re in your own environment and don’t want to let anyone else in, even with the best intentions.”
Honesty is the best policy
Opening up and acknowledging challenges is another vital part of IBL. According to Watkins, another client had an annual sales target of £200m – a number that, “if they were honest, they’d admit they wouldn’t have a hope of hitting,” he says. “But if they were to tell the boss, they knew he would turn around and say ‘that’s not good enough, it has to stay at £200m’. If that’s what the boss wants to hear, then that’s what people will keep telling them. People are frightened of the consequences of honesty, and all it does is cause panic and chaos, and unneccesary costs as people try anything to hit the target and keep the boss happy, because nobody wants to own up to the fact they might not make it.”
Again, changing this culture will come down to a site-wide understanding of other departments’ roles. “If a company is under pressure to hit targets, everyone has to work together,” says Watkins. “This requires effective teamwork: knowing what others need from you, and you need from them.”
What you think another department needs from you is different to what they actually need, adds Watkins. “I recently visited a food manufacturer and spoke to their operations director about the week they’d had. He said it had been brilliant – they’d made 450 tonnes of product. I asked how much they’d needed to make. He said 300 tonnes. When I asked why the team had made so much extra, he told me that the more they make, the more productive the department looks. That additional 150 tonnes of product – 50% more than they had been scheduled to make – was just sat in the warehouse, while the MD was fretting about how the company had too much excess inventory, and the sales and marketing team were desperately trying to sell all this additional stock. The ops director thought he had done a good thing by making so much extra product, without realising the knock-on effect it had on other areas of the business. The measures need to change, since people only behave in line with the way they are measured.”
This anecdote goes to show the importance of clear lines of communication, and an honest approach to working. As the Fourth Industrial Revolution gathers pace, this will become more important than ever, concludes Watkins. “Manufacturing isn’t about making stuff for the sake of putting it in a warehouse,” he says. “Industry 4.0 is bringing with it mass-customisation and bespoke products, made almost instantly. Factories are going to need to be set up in such a way as to cope with that. It’s no good just making thousands of the same product any more – your customers are going to be even more demanding, and that is going to bring with it a whole new requirement for planning, coordination and communication, or those spinning plates will all fall down. Industry 4.0 and artificial intelligence are not the only answers. They will require leaders to be able to manage far more effectively, where the whole is much greater than the sum of its parts. People will need to communicate openly, honestly and in a structured way to be able to deal with what the future will throw at them.”
