The original text of this article was first published in the early ’90’s as an academic article and is available on my LinkedIn profile, the themes remain as important now as then.
Traditionally senior management has held a negative view of the manufacturing function within their organisations. In their view the manufacturing function has acted as a “dead weight” on the company’s performance as if, somehow, the organisation would perform better without the manufacturing function.
Increased competition from foreign and domestic competitors is forcing these traditional companies to change these attitudes and traditions. However companies cannot atone for years of neglect simply by throwing money at the problem. The challenge faced by these organisations is not simply one of better product design, marketing ingenuity or financial strength. The competitors strength is based on something much harder to duplicate – superior manufacturing capability.
The passage from a relatively backward manufacturing system to a “World Class” system is a long and difficult journey which cannot be accomplished simply by copying the competition. Becoming a world class manufacturer involves commitment to a well developed strategy and cultural change. Hayes & Wheelwright proposed maturity model, a series of stages, in the formulation of a strategy to become “World Class”. Advancing through the model is difficult, it involves new skills and, more significantly, new attitudes.
The earliest attempts to develop strategies concentrated on overcoming the traditionally negative approach to manufacturing, simply moving from negative to neutral was seen as a significant advance.
The Internally Neutral Manufacturing Organisation (Level 1)
The lowest stage in the Hayes & Wheelwright maturity model represents an “internally neutral” view of manufacturing. Management tend to regard the function as neutral, incapable of influencing competitive success seeking only to minimise the negative effects it may have, they do not expect manufacturing to make any positive contribution to the business and may well tend to discourage it from trying.
The management of these organisations typically view manufacturing capability as the result of a few structural decisions about capacity, facilities and technology. When strategic issues involving manufacturing do arise management usually call in outside “experts” in the belief that their own organisation lacks the necessary expertise. Similarly, technology is purchased “off the shelf” from external vendors and only to add capacity when the need becomes obvious.
The function is typically staffed with a relatively low skin level of workers and managers in the belief that “anybody ought to be able to manage manufacturing”. Measurements and controls are geared to short term performance to ensure that “manufacturing does not get too far off track” and yet at the same time management wants manufacturing to be flexible so that the business can move in any new direction considered necessary. This is a reflection of the lack of commitment to current products and markets rather than true manufacturing flexibility which would enable them to better serve their existing markets.
Competitive External Neutrality (Level 2)
Moving on from the internally neutral stage involves seeking a competitive external neutrality which is simply a parity with major competitors on the manufacturing side of the business rather than the “don’t upset the apple cart” internal neutrality of the previous stage.
Moving to this maturity level from the previous level involves analysing the best competition and determining industry standards. Typically investment in new technology and equipment is aimed at achieving the industry standard, when product developments occur manufacturing is expected to respond with suitable processes. They are expected to buy in the technology to meet the current requirements. These investments result in a series of step changes in performance with little substantial improvement between these steps. Senior management of companies in this situation regard this type of resource allocation as the most effective way of addressing the major strategic issues in manufacturing.
This approach of keeping up with the industry average is better than lagging behind, but not much. Care must be taken with this approach as misinterpretation can easily lead to poor investments.
Progressive companies will rationalise this approach as, “if you can’t be as good as the competition then you can’t be better”, and will use it to provide a base structure to build on to create a competitive edge rather than use it in a purely defensive role.
The Internally Supportive Organisation (Level 3)
The next maturity level involves a considerable shift in attitudes and expectations. Organisations at this stage expect the organisation to actively support and strengthen the company’s competitive position and become “internally supportive”. This is perhaps one of the most difficult conversions as it requires attitudinal changes as well as re-skilling of workers, staff and operatives.
At this level neutrality is replaced with support to the overall business strategy. Management take a long term view of manufacturing and all manufacturing investments are automatically taken into account, involving the manufacturing function in the planning and decision making function becomes the norm rather than the exception. Procedures which ensure the systematic examination of manufacturing issues when forming the business strategy are developed, typically tools such as mission statements and plant charters support this approach.
Management at this stage begin to see that manufacturing can contribute more than simply lower costs. Manufacturing strategy is translated into a planned sequence of events, investments and system changes. Point solutions, management fads of the day, should be avoided as complacency can occur and the company can slip back into a “business as usual” attitude. A program of continuous improvement is often implemented at this stage. The role of the shop floor worker will be reviewed as part of this activity and problems with the necessary cultural changes may extend the time span required to make the necessary changes.
This stage is the most important one and the decisions taken affect the company profoundly as the foundations of change are laid.
The Externally Supportive Organisation (Level 4)
The fourth, most progressive level of maturity, of manufacturing development occurs when manufacturing strategy rests to a significant degree on the company’s manufacturing capability. Manufacturing should not dictate strategy to the rest of the organisation but should participate in a co-ordinated effort amongst functions. the aim of this stage is to enable the company to “become a manufacturing company, rather than a company that manufactures”.
Manufacturing management is involved in development of overall strategic plans and business strategies, not just responding to business strategy but actually helping to form it. Management takes a longer term, integrated view and the potential of new manufacturing practices and technology becomes part of the business plan. The company is able to respond to technological developments far quicker and will be involved in the proactive use of technology. The search for new technology and practises starts before any market pressures force the search and the source of ideas and solutions comes from the experience and competence of the manufacturing function.
The company’s own technical manufacturing experts avoid buying “off the shelf” technology, which is easily copied by competitors, and advise general purpose machine builders as to their exact requirements. Senior management recognise the quality and value of the manufacturing solutions which leads to a high level of managerial co-operation as the manufacturing management are treated as peers by other functional managers.
These attitudes enable manufacturing to influence competitiveness, not simply react to other peoples suggestions. The business develops its long term plans with the expectation of manufacturing involvement in satisfying the market requirements. Manufacturing strategies have equal footing with other functional strategies.
Moving to this level of maturity involves a high degree of cultural and organisational change in the manufacturing infrastructure affecting all areas. In particular technical competence is recruited into the organisation and existing employees are trained to provide technical competence from within.
The decision to pursue an externally supportive, and subsequently world class, manufacturing organisation is based on a number of factors. Management must be confident that the knowledge and expertise is present in the organisation and that sufficient training programs are in place to provide future continued expertise. Consideration must be given to the cultural state of the company, if sufficient attitudinal changes have not occurred then pursuing a world class manufacturing organisation will do more harm than good.
Financial consideration must also be given as this type of program will involve significant financial investment.
The principal aim of these type of changes is to increase the advantage over the competition. After consideration of the above points the company must make the difficult decision as to whether pursuing this type of organisation is the right direction to take.
The Development Continuum
As a company moves along the development continuum management of the transition requires a special kind of leadership because the task at hand is to change the way people think, not merely how they can be instructed to act. This is particularly important in attitudes to human resources management.
Companies at levels 1 – 3 tend to adopt a command and control structure where the emphasis is on direct supervisory control and the co-ordination of information. Level 4 companies adopt a learning managerial structure where the emphasis is on indirect control thorough systems and values where problem solving information is important.
Most young companies have manufacturing functions at levels 1 or 2 and are likely to remain at this initial stage until external pressures force a change. As long as no competitor develops superior manufacturing capabilities they will find this state of affairs satisfactory. When such competition arises most of these companies are unlikely to achieve a full, lasting move to level 3 before reverting to level 2. The reasons for this are due to the move from level 2 to 3 being made in a crisis environment when management sees the objective as regaining competitive parity with the competition. When such parity is restored the organisations natural tendency is to return to a “business as usual” mentality as soon as the crisis appears to have passed.
Making the Move
The jump to a level 4 organisation implies a deep shift in manufacturing’s role, in its self image and in the view of it held by managers of other functions. It involves changing the way that the rest of the organisation thinks about manufacturing and interacts with it, because co-ordination among functions is crucial manufacturing must have its own house in order. Becoming a level 4 organisation is not something that the organisation simply chooses to do.
Because future competitiveness rests on continued improvement and sustained effort the organisation must have first done all the appropriate groundwork to provide a broad base on which to build.
Michael Akers is a Partner at Advanced Analytics Solutions LLP.