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1.4 Solving the Right Problem

The process of organizational decision making is complex because executives have their own goals independent of the corporate goals. The challenge is to balance the individual objectives and goals with the corporate objectives and goals both in the short and long term.

Traditionally, decisions are made in a stovepipe fashion. That is, each functional area makes decisions that are best for it without regard to the needs of the other functions; for example, manufacturing is not concerned with marketing or distribution or finance. The reason for this is the reward system for each functional area focuses only on the efficiency for that system. That is, the plant manager or operations manager is rewarded for such things as utilization of assets, return on assets, throughput, quality, minimum labor cost, and scrap for the units produced. None of these factors measure marketing efficiencies or any other functions. Marketing, for example, is basically measured and rewarded for total sales and not on specific products or product mix. When each function goes its separate way and decisions are made that improve that single function, who is looking out for the company as a whole? It begs the question, "Who is running the company?" Is it running by default where the strongest personality drives the company from their functional perspective? How, then, can you develop an overall plan for the good of the company where individual functions are sacrificed a little for the overall good? This may result in manufacturing making products that don't fully utilize the production assets; where marketing doesn't maximize the total volume sales but sells an optimum mix of products that maximize customer service and maximize profitability. You can then see it would be much better overall if there were a combined reward system so that the overall good of the organization is achieved in place of individual goals in the short and long term.

This leads to the issue of how best to manage the many objectives and how to trade off between them so that the entire organization prospers now and in the future. To do this you must first state the organization's goals and objectives. You must first specifically determine what these goals are in the short term and for the future and then set up metrics to measure how well you accomplish them. One way to do this is to ask some difficult questions. What are you trying to accomplish within the company? What are you trying to accomplish at each organizational level? Unfortunately, most firms do not spend time asking these questions, or if they do, they don't implement the answers into their everyday operations. Why does this happen in nearly all the corporations, large and small and at every level? Although everyone's intentions are good in setting corporate objectives, the major problem is that with today's approach to management, the objectives are ill-defined and consequently impossible to implement. How then can you ensure the corporate objectives are implemented throughout the organization, and how can you measure their success? The primary reason corporate objectives are not implemented at the operations level (which is the only place they can make an impact) is that they usually are subservient to individual managers' objectives.

Thus you must ask, "How can we get there if we don't know where we are going?" More specifically, what are you trying to accomplish at the corporate level, at the functional level, and most important at the individual or action level? A great deal of effort goes into establishing a 3-year plan and identifying a number of corporate objectives with everyone pretending to agree, knowing full well the plan will be put on the shelf and promptly forgotten after the exercise is over.

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