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Everybody loves Bob. He’s a corporate hero. Just last week Bob was watching television after dinner, but he wasn’t really watching. Instead he was thinking about work, as he does most nights. Suddenly it hit Bob: he hadn’t checked to make sure engineering had included the new wiring diagram in the customer’s shipment that was due to go out first thing in the morning. Without the diagram the equipment would be useless.
“I don’t know what time I’ll be home,” he shouted to his wife as he bolted out the door, jumped into his car, and sped to the plant.
Jerry was on guard duty at the gate and greeted Bob warmly. He was accustomed to Bob showing up at all hours of the day and night. Bob went straight to the shipping dock. Sure enough, the box was sitting there ready to go, and it didn’t contain the wiring diagram. It took Bob an hour to track down a copy of the diagram, put it in the box, and reseal it for shipment. He got home at midnight.
That’s the kind of thing Bob does all the time. And the bosses recognize his devotion and applaud it often. He’s gotten raises and been promoted, and he’s been named Employee of the Month five times in the past two years. Many of his co-workers now emulate Bob and give an extra measure, too.
No doubt about it, Bob’s a great guy. Trouble is, his company’s approach to getting work done is a raging disaster. Bob is forced to be a hero because he’s a loyal and ambitious employee struggling to overcome his company’s chaotic processes for getting things done. He gets lots of credit for making the fix to save the customer, but he’s constantly creating dramatic work-arounds because the existing processes create problems that shouldn’t exist. Worse still, Bob’s behavior and the accolades he receives simply reinforce the notion that everyone should work around the system. No one seems to grasp that if the system were fixed, there would be no need for heroes like Bob.
There are lots of companies like Bob’s, fragmented and inefficient. They survive despite themselves only because people like Bob are constantly fixing things. It may take thirty days to fill a customer order, but only three of those days involve real work. The rest of the time people are arguing about who’s responsible for some part of the order or the order is languishing in someone’s in-box. It isn’t because people are dumb or lazy. Quite the contrary. Most people want to do a good job. They are given goals and they strive to meet them. They focus intently on doing their job correctly and well, and they are rewarded for their efforts. But few understand how their narrowly defined jobs fit into the overall picture of what the company is trying to accomplish. As a result, what they do in their own jobs may be at cross-purposes with someone else’s job.
Our favorite example of how people work at cross-purposes is the sales rep of a large consumer goods company who brought in a small order from a new customer. The customer was very explicit: this was a trial, but if the company could fill this trial order well, there would be a lot more business to follow. The sales rep recognized the importance of performing well and slathered the order form with “urgent” and “expedite” stickers and submitted it for processing. The order passed from department to department until it arrived at shipping. Shipping took one look at the order and realized it wouldn’t fill a single truck. Shipping less than a truckload is very costly, and the head of shipping knew his bonus depended on keeping shipping costs to a minimum. He ordered the material stacked on the loading dock until there was a full truck going to the same city.
Of course, we find this appalling, but the shipping department manager made an entirely rational decision. His responsibility was to minimize shipping costs, and that is what he was rewarded for doing. Delaying the shipment was neither wicked nor irresponsible. Indeed, to send it quickly would have violated the principles he was expected to use in managing his responsibilities. He was being relentlessly logical. It wasn’t his fault the company lost the customer. The problem lay in the system, of which shipping was one small part. The shipping manager’s job was so narrowly defined and so divorced from its larger context that doing it well hurt the company rather than helped it.
These problems aren’t limited to companies. Our government, schools, and medical system all suffer from these chaotic conditions. If you’ve had a major medical problem in the past several years, you know what we mean: countless hours spent scheduling appointments, sitting idly in waiting rooms, and traveling from one specialist to another, all while besieged by innumerable bills and insurance forms. Chaos, indeed!
This state of affairs isn’t accidental. For well over a century managers have achieved increasing productivity on ever larger scales by dividing and subdividing work into smaller and smaller units. The modern corporation that has evolved as a result consists of many specialized functional departments, such as sales, engineering, marketing, manufacturing, operations, and finance. The people who work in a given department all focus on the same departmental goal—advertising promotes sales, shipping moves the product, procurement buys the parts—and they report to the executive in charge of their department, who measures their performance and rewards or penalizes them according to the department’s own metrics. The way we operate today is a legacy of the Industrial Revolution, but that revolution ended long ago and the ideas about how to organize work that grew out of it have outlived their usefulness in a world that has become smaller, faster, and much more competitive. To see that the old ways aren’t working, you need only consider the havoc wrought in the last few years as the global finance system teetered on the brink, General Motors and Chrysler reorganized in bankruptcy proceedings, and millions of people—“our most valuable asset,” as many companies like to say—lost their jobs, retirement savings, and houses.
Today the customer reigns supreme, crowned by the information age. You know how easy it is to comparison-shop these days. Need a new flat-screen television? You can get specs and prices on the Internet in just a few minutes. Hit a button and the television arrives two days later. Your customers can do the same thing. If a customer places an order with your company, he doesn’t care that your product is designed in Texas, the parts are made in Spain and Brazil, and the whole thing is assembled in Turkey. Too often companies claim that they are global when they really are international. The difference is that an international company may have sales offices or manufacturing facilities in other countries but hasn’t taken the extra step of seamlessly integrating those various operations. That forces customers to jump through the company’s internal hoops: pricing in different currencies, different delivery schedules from various sources, and language barriers in resolving problems. A truly global company has overcome national boundaries and makes life very easy and transparent for its customers. It knows that the customer just wants a quality product when and where he wants it and at a good price. If your company is like the chaotic place where Bob works, your customer probably doesn’t realize and certainly doesn’t care how heroic your people are in fulfilling his order. But one day you’ll slip and lose a customer, either because Bob doesn’t get the fix done in time or because a nimbler competitor undercuts your terms. It isn’t a question of if, it’s a question of when. The time has come to do our work faster, cheaper, and better.
Faster, cheaper, better. The elusive holy trinity of business. So desirable, yet so difficult. If we do it faster and cheaper, we can’t do it better. If we do it cheaper and better, we can’t do it faster. And if we do it better and faster, we can’t do it cheaper. There always seem to be barriers to achieving all three.
No longer. If you believe a simple concept—that the way you organize your work makes all the difference in the world—there is an alternative to the fragmented work processes that grew out of the Industrial Revolution, and it allows us to be faster, cheaper, and better. It isn’t easy and it won’t happen overnight, but for those who master it the results are astounding. Rather than a series of discrete steps, work becomes an end-to-end continuum. People no longer focus entirely on their own jobs with no notion of how their work affects their colleagues’ ability to do their jobs or even the customer. Instead, they are thinking about the whole and not the parts, about outcomes instead of activities, about the collective rather than the individual. What are now individual fiefdoms meld seamlessly into a unified structure with one goal: customer satisfaction. Michael Hammer first introduced this concept of end-to-end process in 1993 in Reengineering the Corporation . Now, after seventeen years of preaching, teaching, and witnessing the immense potential of end-to-end work processes at a growing number of companies, we are convinced it is the way to organize work so that any organization can achieve its goals faster, cheaper, and better. Our intent with this book is to spread the gospel, making this new approach to how we do our work available to every organization that wants to compete and thrive in the global economy. Reengineering the Corporation explained why the end-to-end process is a better way. Faster, Cheaper, Better shows you how you can harness the amazing power of this simple concept to become more profitable and more competitive.
End-to-end process is a complete change in the way you and everyone who works for you do their work. It requires a revolution in the way you think about work and an evolution in the way you do your work. The most difficult part of implementing end-to-end process is sustaining the effort. There is a tendency to realize great benefits from the initial stages of implementing end-to-end process and then declare victory and move on, or worse, go back to the old ways. If that happens, an organization will fail to realize the even greater benefits that lie ahead.
If you think process is about flow charts and boxes on pieces of paper, you’ve got it all wrong. It’s about running your business in a different way, achieving your goals in a different way, and pleasing the customer. It covers every aspect of your organization, from technology to the sales force, and it affects the way all your people do their jobs and are motivated and rewarded. Come with us for a moment to visit one of our clients—we’ll call the company Andren Aerospace—to see the transformational power of end-to-end process.
In late 2004 Andren Aerospace, a large manufacturer of avionics components and systems, had a big problem. Its largest customer had just fired the company. The customer had been giving Andren descriptions of its needs and Andren would respond with a schematic—a description of the particular system to be built—together with a quote and a delivery date. If the customer approved, Andren would get an order, which it typically proceeded to mess up. Andren almost never met the delivery date it promised. And when the system did eventually arrive, all too often it suffered from quality problems—the assembly wasn’t done correctly, some parts were damaged or missing, or the invoice was wrong. Periodically the customer would get riled up and hurl imprecations and threats at Andren. Andren would then promise that it would change its ways and do better. But it never really did. Eventually the customer simply told Andren that it had sixty days to move out, that their relationship was at an end.
As it happened, the customer fired Andren at about the same time Andren brought us in to review its operations with the goal of applying end-to-end thinking and techniques to Andren’s business. The firing gave us a perfect opportunity to demonstrate how end-to-end thinking could make a huge difference. If we could redesign Andren’s processes to save its business with that big customer, Andren would gain a lot of credibility because it was having the same problems with other customers.
This wasn’t the first time Andren had tried to fix these problems. It had already tried applying vaunted Six Sigma techniques—statistical methods used for continuous improvement—to no avail. The fact that Six Sigma hadn’t helped told us the problem wasn’t an execution issue but endemic in the way Andren did its work. It had a bad process.
We started by convening a cross-functional team from the various groups involved in handling requests and filling orders—people from sales, customer service, engineering, manufacturing operations, and more. As a group, we walked through the entire process, from customer inquiry to delivered product, writing down all the steps in a flow chart on brown paper. The most remarkable part of this exercise was that until we did that no one at Andren actually had a mental picture of the whole process from beginning to end. Everyone knew his or her own job and what his or her department was supposed to be doing, but no one had the big picture. The brown paper diagram that we constructed eventually took up twelve feet of wall space. It began with the customer calling the sales rep with a description of what the customer needed. This went to the Engineering department, which created the design and specified what components should go into the system, and then created a technically valid specification. Customer service became involved to determine what the design would cost and to provide the customer with a quote and a delivery date. When the customer approved the quote, customer service would check to see if all the parts were in stock. If so, customer service would contact Inventory to have the parts sent to manufacturing, where they would be assembled into a system and then shipped. If not, the Materials group would be asked to purchase the missing parts or their equivalent.
It sounds nice and tidy. In reality the situation was uncoordinated chaos. The fundamental issue was that everyone was focused on his or her own piece and nobody knew nor much cared what anybody else was doing. They all meant well, but they kept getting in one another’s way.
These resulting delays had multiple ripple effects. By the time the order got to manufacturing, it would usually be extremely late, and the workers who had to do the assembly felt so pressured that they made mistakes and damaged the equipment. Andren also often felt compelled to ship late orders by premium freight, driving up costs. And products that arrived after the date the customer was expecting to receive them could end up on an overcrowded receiving dock without assigned space.
None of this was the result of incompetence, malice, or stupidity. Andren’s workers were smart, well trained, and highly motivated. They were just all smart, well trained, and highly motivated to do different things without any coordination. Each did the best job he or she could and each felt empowered to do whatever they thought best—including dealing with the customer directly—to get the specific job done. They all had different concerns because each department had its own goals and its own metrics; some were measured on order accuracy, some on inventory turns, some on gross margin. But no one was measured on the same thing as anyone else, and no one was measured on anything that mattered to the customer. Nobody was in charge of the whole end-to-end process of turning a customer request into an on-time delivery. And since nobody was in charge of it, nobody paid attention to it.
Andren, like most companies, suffered from the effects of the division of labor. Its work and those who did that work were fragmented into many little pieces, each focused on a small part of the work and each with its own agenda and measures. The symptoms were classic: blindness to the larger picture, ignorance and indifference to what others in the company were doing, and a profound lack of responsibility for customer satisfaction and business results. Left untreated, the disease could be fatal.
As we worked our way through the documentation of how Andren’s end-to-end process actually worked, the people on the team were astonished.
“I had no idea things worked this way,” “Why in the world do we do that?” and “That makes no sense” were recurring phrases we heard. Looking at work in the context of process shines a very powerful new light on it. Our team found ninety-four steps in the end-to-end process and classified each of them as value-adding, non-value-adding, or waste. Value-adding work is work that the customer will pay for, work that directly contributes to creating the desired result. Non-value-adding (or business-enabling) work is overhead, work that the customer does not care about but which is needed for the proper functioning of the process: checking, tracking, prioritizing, scheduling, and so on. Non-value-adding work is meta-work, work that does not contribute to a result but just enables other work. Waste is what it sounds like: unnecessary and useless work, such as duplicate efforts, errors, and producing reports that no one ever reads. Of the ninety-four steps, only eleven were value-adding. Only eleven made any difference to the customer. All the rest were either pointless or overhead.
Andren’s first response was to reorganize. That’s very common. Many executives feel that every problem can be solved with a new organizational chart. One executive we know said that reorganization was a core competency at her company. Reorganization activities may provide the momentary assurance that comes from making a decision or taking action. But the root cause of persistent performance problems is found not in who reports to whom but in how work itself is organized and performed .
So we persisted, and after developing an understanding of Andren’s dysfunctional process, we set about creating a new one. The root cause of the problems with the old process was fragmentation. The solution was integration. In this case we proposed creating two new roles with big-picture responsibilities, one to serve as the sole point person in contact with the customer and the other to identify and troubleshoot problems in operations. The two people assigned to those new roles were chosen because of their expertise, but also because they “got it”—they understood what an end-to-end process could accomplish and were imaginative and bold in helping design the new process.
Amal had been a top salesperson at Andren. He was given a job that combined the roles of sales rep, customer service rep, and gathering engineering data, and he became the customer’s sole point of contact in the early stages of the process. He took the customer’s request, devised a solution, checked inventory availability, quoted a price, and promised a delivery date. If he needed it, Amal could get technical support from engineering, but he was in charge and managed all contacts with the customer. He had the big picture.
Once the customer accepted the quote and responded with an order, Jane, an expert in operations, took over. She made sure that the parts needed for the system assembly were available to manufacturing. If they weren’t in stock, Jane ordered them and made sure they arrived as needed. She also made sure that the people in manufacturing were expecting the relevant parts and were scheduled to do the needed assembly work. Like Amal, Jane might call on other people for help, but she was in charge of the order and managed all interactions with the customer once the order was placed. These two new broad roles meant that most of the non-value-adding work of the old process, things such as multiple credit checks of customers and repeated order verification by different departments, was no longer needed and all the waste work could be eliminated. The new process contained only twenty-eight steps, the original eleven value-adding ones and only seventeen non-value-adding overhead activities.
The new process replaced an uncoordinated free-for-all with a disciplined and integrated way of working. Two individuals with broad skills and personal accountability performed and managed the work from beginning to end. And to ensure that everyone stayed on the same page, Amal and Jane, as well as everyone else in what was called the “order-to-cash” process, were measured and rewarded on a common metric: on-time delivery.
It took us about three months to devise the new process and about six weeks to implement it with the first customer. The result was breathtaking. Under the old regime, Andren met the delivery date it promised the customer less than 15 percent of the time; with the new process, it hit the target more than 90 percent of the time. Under the old regime, it typically took Andren forty-eight hours to turn an inquiry into a quote; the new process cut that to less than six hours. The quality of the delivered systems almost doubled. With less confusion and less time pressure, there was less cause for error and damage, and with fewer hands involved, there was less opportunity for misunderstanding and mistakes. “Perfect orders”—orders filled correctly and on time, and delivered in good working condition with the right documentation—went from not much more than 10 percent to 85 percent. Andren’s customer was shocked and amazed at what we had accomplished, and responded just as we’d hoped: it rescinded the divorce and increased its business with Andren by 34 percent the next year. This exceeded our own optimistic target of 25 percent. And the icing on the cake was that while such an increase in business normally would have required Andren to hire twelve more people to handle it, the new process made it necessary to hire just two more people. Overall, gross profit margins with this customer doubled. And the process was scalable to handle even more growth.
Faster, cheaper, better. All the result of looking at work from one end to the other, rethinking it, and getting everyone aligned toward a common goal.
End-to-end enterprise process is not a complex idea. Some companies explain it to their people with the phrase “look left, look right”: that is, don’t just pay attention to your own job, but think about the work that comes before you and the work that comes after you; think about the totality of work that is creating value for customers. And end-to-end process isn’t just for such routine work as order fulfillment or procurement. It applies to creative work, too, including product development and demand generation. It applies to all of the three types of processes: core (e.g., product development, customer acquisition, order fulfillment), enabling (credit to collection, people development), and governing (strategic planning). It does not impose rules and bureaucracy, and it does not reduce opportunities for imagination and creativity. As one CEO told his engineers when they complained that end-to-end process would impede their creativity: “I want you to be creative, but I want you to be creative about the product, not the process.” When we stroll through a potential client’s facilities we can get a sense of how process-oriented the company is by the number of sticky notes on desks and computers. The more sticky notes, usually the less process-oriented the company is. Those sticky notes indicate that each person has a different and often ad hoc way of doing things. When end-to-end process is implemented, the sticky notes disappear.
While end-to-end process isn’t a complex idea, we won’t pretend you can fully implement it overnight. Remember, we’re talking about a thoroughly different way of organizing work that affects everyone in your company. Change can be difficult for some people, and that is certainly true of the extent of change your business will undergo to become proficient at end-to-end process. Reward systems will change, reporting relationships will change, and authority and responsibility will flow much deeper into the organization. You will have to become an evangelist, preaching the transformative power of end-to-end process every chance you get. Still, there will be people who don’t get it or don’t like it. You may have to work overtime to convince them, but if they don’t eventually get on board, they will have to leave. Those who remain will be challenged as never before, and most will rise to meet the challenge. Many will become evangelists of end-to-end process in their own right. Perhaps most amazing is that as you make progress in your efforts to become an end-to-end organization you will find that your company will continue to make progress as a high-performance process organization. People at companies that have been doing process work for years tell us that they are constantly finding new ways to apply process to improve how they do work and how they keep their customers happy. Adopting end-to-end process is a journey without end.
The successful implementation of end-to-end process will involve some intensive work at every level. While it is true that the focus of process work is to better serve the customer by discovering what it is the customer wants (voice of the customer), that focus must be balanced by what is good for your own business (voice of the business). That balance can be difficult to achieve at first. But our experience is that there are nine critical high-level organizing principles that guide process implementation. In the chapters that follow we will examine those principles and how they are interrelated. We will use many anecdotes about companies. Some of the companies you will recognize. Others will not be familiar, for good reasons: we’ve changed the names because we don’t want to embarrass companies that have tried and failed to implement process, and others that have been extremely successful don’t want that competitive secret to get out. To summarize and illustrate what each of the chapters is about, let’s revisit for a moment Andren Aerospace’s situation when we were invited in to analyze the company’s problems and offer an end-to-end solution.
Chapter One is about designing a new end-to-end process. The design that will emerge must take into account your company’s organization as well as your products, services, and customers. Andren’s organization was a mess, to be blunt. It was characterized by extreme redundancy, a lack of understanding about what others in the company were doing, and almost no focus on customers and their needs. As you review your own company’s organization through the lens of end-to-end process, some of the worst problems will be instantly obvious. As you design a new end-to-end process less severe problems will emerge, too. End-to-end process has the potential to solve them all.
Most companies get metrics all wrong. They allow each department to determine what it wants to measure. And because you get what you measure, each department gets a different and often uncoordinated result. That was certainly the case at Andren. In Chapter Two , we take a hard look at what should be measured, and how and why, in order to successfully implement end-to-end process. That will often require redefining what it is your company is really trying to do, which is almost always “get and keep customers.” Measurements that accomplish that goal are the ones that matter.
One of the most profound changes that occurred when Andren adopted end-to-end process involved the role of managers. No longer were functional leaders managing their independent fiefdoms as they thought fit. Instead, there now were individuals—process owners—who had the sole authority to sanction changes to the process and the way the work was executed. These process owners are the subject of Chapter Three . Making sure that process owners and functional managers work together closely is an essential ingredient of successful end-to-end process implementation. That requires a change of mind-set for both the functional managers and the process owners.
The way people perform within a company involves not only how they’re measured and rewarded but also how the company supports them. Chapter Four is all about people, the “performers” in your process, and the infrastructure that will be necessary to support their end-to-end efforts. As Andren learned, redesigning your work processes and resetting how you measure performance profoundly changes the way people perform their jobs. No longer encumbered by bureaucratic tasks and innumerable handoffs, Andren’s employees became “professionals,” doing what needed to be done rather than wasting time and energy. Not everyone will be happy with the new approach and some will leave, voluntarily or otherwise. But those who remain and buy in to end-to-end process will become far more energized, challenged, and productive than you could ever imagine. They really will become your most valuable asset.
But their new approach to work requires a new infrastructure to support them, too. To be successful, the professionals who emerged from Andren’s change to end-to-end process needed new compensation plans, new training and development opportunities, a new reporting structure, and the necessary tools (many of which came from IT) to be successful.
No organization survives and thrives without the right leadership. Chapter Five explores the need for leaders who understand the strategic implications of end-to-end process, balancing what the customer wants and what the business needs. The initial impulse of Andren’s leaders to reorganize is the classic mistake many leaders make. Fortunately, they were willing to listen, and they quickly understood that without a broader vision of the company and its customers, end-to-end process would almost surely fail to produce the results of which it is capable.
Chapter Five also addresses the corporate culture that successful leaders will create on the way to end-to-end process. Once leaders understand and embrace the potential of end-to-end process they must become evangelicals, convincing the entire organization that process will be the surest route to customer satisfaction and retention and, as a result, job security. As Andren discovered, the cultural shift will be embraced immediately by some and scorned by others. But the vast middle ground needs to be sold on the idea, and it is the leader’s job to make that sales pitch if the change is going to be sustained.
Chapter Six examines governance and expertise. Governance is the overarching framework for implementing end-to-end process. It is the structure that takes care of such details as setting goals and allocating resources. In short, it is the process of managing end-to-end process. One of its primary functions is to ensure that the company develops a cadre of experts that know how to do and can teach the practice of process.
Chapter Seven opens Part II , which lays out how to bring together the nine components that make up a process-centric enterprise. Chapters Eight through Twelve comprise case studies of five companies that embraced end-to-end process with sharply different results. Two—Tetra Pak and Gamesa—have been extraordinarily successful. The other three, which will be presented under pseudonyms, failed despite valiant efforts. We hope their stories will illuminate the benefits of end-to-end process, show where to expect problems and how to solve them, and persuade you that the journey will indeed be worth the effort. Part III is made up of Chapter Thirteen , the Process and Enterprise Maturity Model (PEMM)—a framework to help you plan and assess your process-based transformation efforts.