Organization Productivity Audit
Understanding Value driven Management
While talking of Value Driven Management it is important to understand that whatever actions that are being taken for the value addition in organization must be communicated, and positively followed by the employees of the organization. They must realize that what impact each action would have on the organizational value.
However, this value is determined by considering what values are held by each stakeholders of the organization and it does not stand in singularity. It is because every culture evolves by diffusing itself throughout the organization, and a proper environment is a necessity for achieving long term objectives.
Value over Time (VOT)
Maximization of VOT is a much discussed subject, where a common myth is that a solution must possess long term orientation. But the truth is that this maximization of VOT is never independent of short term goals, and achieving these short term goals defines the path for long term.
One can never categorically state that a particular solution is an everlasting panacea for all issues. This would be a blunder. It is always easy to focus and measure the values in a short run instead of predicting them for the long run. An organization which understands what it values most is more or less on the right track.
Now comes the next factor that outweighs all predictions and good work of the past is the time factor. A delayed decision itself is a lack of decision. It is equally important to define what signifies long term and what signifies short term (In terms of days, months or even years).
So in an attempt to maximize the VOT, the best people could be the individuals whose actions drive their organization. This is where the compatibility between an organization and its employees comes into play. When the proper match exists, the value addition is maximum and objectives of Value Driven Management (VDM) are easy to achieve.
In the modern context, considering the existing competition, adding value is essential for an organization if it wishes to survive. A culture which has been cultivated to promote innovation and continuous process of learning helps in enhancing the efficiency. In rapidly changing environment the need to develop smooth procedures, healthy practices and transparent system is growing simultaneously.
The basic approach to VOT involves strategic management where a leader or manager has to frame a long term as well as short term strategies where they can foresee the possible effects over the value of the organization in estimated time. Thus the idea that lies in the core of Value Driven Management philosophy is maximization of VOT. The philosophy of Value driven Management demands the decision making ability and bringing them into action.
Importance of Value Driven Management
Value Drive Management is a collaborative approach and we will examine this in the coming sections. However, one must not confuse this type of management as a secret formula for success that will work in all circumstances. Rather it works in tandem with all other management philosophies and management tools.
There are certain underlying assumptions that must be known before taking any initiative to add value to the organization (Pohlman 1997).
Creation of Value is good. That means adding to the value of organization is good.
Actions are driven by the values they hold for an individual or an organization.
Knowledge management (creation and utilization) holds key to value creation.
Value cannot be defined objectively and have different meanings for every individuals (Organizations).
Addition and destruction of value is a simultaneous process, controlled by stakeholders.
To match a theoretical assessment of value with pragmatism, markets are the source for data.
Losing an opportunity adversely affects value.
Any strategy that is not capable of managing the spontaneity might fail in adverse circumstances.
Different values can be either conflicting or synergizing.
Few consequences can never be predicted and are accompanied with every action that is being taken.
Last but not the least, a stakeholder must have sense of self responsibility and must also understand the usefulness of self discipline.
As we have already discussed the requirements of Value driven Management, it does not completes our task of value addition. For that we need to have a set of parameters on which we can base our decision, and also monitor its effects.
The Eight Facets are crucial in effective decision making and provide the suitable framework for the purpose of VOT maximization. Moreover this is not just another rigidly structured model but a complete set which defines utility of each action. We will briefly discuss each facet under this head.
1. Culture prevailing outside of the organization:
Whenever a decision is being made under the environment which surrounds an organization, a cautious scanning of the same is mandatory. Especially in the global scenario where rapid globalization has made this task even more difficult, the level of caution must rise. There remains ample chance that despite of very noble motive, an organization might run into trouble because external environment takes it otherwise (driven by their own value set and culture).
Operating in an international market, your decisions must meet international standards.
2. Organization’s culture:
Every organization has its culture, just like an individual. Renault had French style (European) of doing things and when they entered into strategic alliance with Japan’s automobile giant Nissan, the confluence of these cultures produced positive vibes (surprisingly).
A similar attempt was made before while Renault wanted to get into similar tie- up with Volvo (another reputed Scandinavian automobile manufacturer) but things went horribly wrong, despite of lots of similarities. This explains well that why an Organizational culture cannot be predicted from its place of origin, but from study of organization itself.
3. Employee’s value:
There is no doubt regarding the fact that though an organization has generally one culture, there are number of employees who have their own set of values. Interestingly when we talk of a multinational organization, this variation in each set demands highly efficient management.
We have already talked about how each employee must understand the impact of his actions over the organization, but similarly, every management decision must be taken in light of the fact that this decision could have some impact over employees set of values.
4. Supplier’s Values:
Supplier lie at the extreme end of the Supply chain, and hence their values are equally important to an organization. A mutual understanding of the value of organization and the suppliers between both is essential. Otherwise failure of management actions and strategies would be inevitable.
These suppliers are crucial in determining the quality of final goods or services that are being delivered. The trust factor that is established between all the stakeholders determines cost of doing the business. More the level of distrust, higher will be the cost incurred in carrying out daily activities, and unimportant activities would add to further raise that cost. This is why Supplier Value’s are considered important under the philosophy of Value driven Management.
5. Customers and their Values:
They are the most important of all the stakeholders (without any less respect to all) as the sustainability and survival of any business depends on them. All sincere efforts that have been made at the backend are not reflected in unison unless customer values are taken into consideration.
Again considering the automobile industry, why do we see a particular design that is highly praised in one region or country is being severely criticized in other. It comes from value difference. Many companies have become a history for little mistakes that they have committed in understanding the customer values. On the other hand better understanding of the same sometimes ousts all other mistakes (if not a blunder).
When it comes to service industry, customer values get more important. While directly interacting with customers, we see direct interaction of customer and employee values. It sometimes results in clashes and sometimes it creates value then and there.
Mapping of organizational value with employee value should be such that when it meets the customer value, probability of such clashes is kept around zero. Though such congruence requires painstaking and sincere effort from the management, it is impossible to achieve the same in the absence of employee’s commitment.
6. Third Party values
Third party is constituted by all those agencies and unions, which affect the functioning of any organization. They are crucial in decision making process because their interventions are inevitable and could have serious consequences over an organization. It is well known that why all these multinationals avoid entering into a politically communist environment, where unions and government regulations are generally strong.
They might affect the smooth functioning of the organization by creating conflicts of values and culture, which can only be avoided by developing high level of trust (even that is not guaranteed sometimes).
7. Competitor’s Values
A competitor is someone who competes not only in financial aspects of the business but also the Value aspects. It is simple to understand that when an organization lags behind in value creation and addition to its competitors, it is generally the start of the chain reaction that affects it in all domains.
So, that makes it important to evaluate competitor’s value in order to remain competitive in the market. All good leaders and managers are well acquainted with values of their competitors.
8. Owner’s Values
It starts from here. An owner is the one who creates assets for an organization and these assets (including employees) participate in developing the culture and defining the value for the organization. It is always natural to consider that who the employees are working for and what values are held by that individual.
As most of the employees that come to an organization are mapped if they possess desired set of values to synergize in the environment that is provided by the organization, scope for deviation from the value set of the owner is least.
Now as we have understood the key concepts of Value Driven Management, and importance of VOT maximization in deriving that addition to the value, we will perform the productivity audit for the organization.
Need for Productivity Audit
Productivity improvement is the need of the hour. Irrespective of the fact that whether an organization is operating in service industry or manufacturing industry, performance improvement is always sought. This audit objectively points out the need and the method for carrying out all the desired assessments related to productivity, and suggests action to the managers.
The productivity audit helps a company in achieving consistency throughout the organization irrespective of physical, social or any such limitations. All related strengths and opportunities could be mapped easily through productivity audits.
In the given case, eight areas have been identified under which the performance of an organization will be assessed.
Critical analysis of the organization with illustration of the respective area is as under.
All organizations should communicate its vision and mission statement throughout so that anyone who is by any means associated with the organization could also relate himself with the mission of his organization.
If it is associated with productivity maximization, all must work together to achieve the same. For this, managers should match the productivity plans to the broader plan that is at organizational level.
Continuous review and evaluation of the results must be carried out at regular intervals and it should be checked that employees are actively participating in decision making. Even each department must be integrated with appropriate flexibility in the organizational structure, and accountability must be fixed for all the employees.
But the response suggests that the organization under consideration has not yet taken any initiative for the empowerment of employees. In the given circumstances there is enough possibility for employees to lose their focus from the productivity mission of the organization. This will further hinder value creation and organization might have to suffer.
A leader’s job is to monitor and influence the focus of the team. Being practical is the best way to bring the change instead of setting ideal goals which are difficult to achieve. Coordination that is multi dimensional as well as cross functioning of all the teams and departments can only be achieved if a leader is effective. A leader also has to work from bottom to top, and thus motivating all levels of employees to strive for common goal.
Leaders must be informed about what is the existing level of performance by all the teams, and utilize all the available information’s that are generated while productivity audit.
The received response suggests that whatever attempts are being made by organization for productivity enhancement is being nullified by the lack of commitment from the leaders. Leaders are not efficiently utilizing the audit report which is actually killing the basic purpose of productivity audit. This needs a quick look from the top management and other stake holders so as to check if right people are at the right place.
Measurability of the objectives is extremely important because it is the only way in which decisions could be effectively made. These little objectives form the pathway for achieving long term goals and any misalignment in these elementary objectives would make the success impossible.
These objectives, just like mission statement must be communicated among all the employees. Again, the key is to be practical because objectives which are not attainable are actually never achieved. That generates need for close monitoring and keeping a close eye through a proper channel or reporting system.
The organization fails to clarify the objectives to its employees. This simultaneously offers scope for deviation from long term goals and there is enough a possibility that same would happen. Lack of clarity in objectives not only makes communication difficult, but also introduces chaos through confusion. Organization needs to re state its objectives before this chaos rises to next level.
It happens that wrong identification of resources often leads to unexpectedly poor allocation of resources which indeed leads to cost consumption. Similarly when sum of time contribution from all employees does not add up to make the considerable part of the contribution that determines actual productivity, VOT maximization suffers.
Human resource mismanagement is detrimental to functional performance of any organization as there is absence of proper utilization of the resources despite of quality inputs which are consistent in nature. Resource allocation is always linked with financial input, and return on investments decides productivity. If any unit goes beyond that, profitability is affected significantly.
The organization seems to be in dire straits when it comes to resource and budget allocation. This severely affects proper utilization of available resources and hence there can be abnormal difference between the input and the related output. This also points out complete failure of value driven management.
While measuring performance, it is worth mentioning that there can be huge difference while measuring individual and group performances. While an individual might lack competency working in a particular department, but as a team he could be highly productive without any formal training.
The sense of responsibility and self discipline allow certain degree of control over the resources, but in absence of three i.e. training, team work and control, the quality and productivity both suffer, as in the case of this organization.
Technology is only an enabler and never the main factor for achieving high productivity. So whatever expenditures are being made must be in proportion with the potential productivity of the unit or department. Managing the supply chain and operations determines the importance of machine scheduling, but in absence of quality workforce, the purpose can never be solved.
In this organization, the independence from the operations of other units is hard to achieve and there seems to be lack of long term plans. Managers are short sighted as they do not locate the need to adapt to the changing environment. They find it hard to accept the fact that technology changes continuously, and so changes the way of doing the things.
Despite of all this organization seems to be a little comfortable with technological aspects in the present case.
The characteristic of a system which is transparent and smooth lies in consistency of quality that is being reflected in product or services. Better placement of control checks throughout the work flow always has positive effects on productivity. This is because all the redundancy in operations is automatically removed or minimized and quality checks assure consistency through timely monitoring the processes.
Considering the response in the current case, as discussed earlier, lack of training does not help in achieving proper synergy between human and automatic machine resources. There are various lacunas and scope for system lapse as the only focus remains on productivity and not the support activities tat augment high productivity.
Last but not the least is the staff. As discussed earlier in the eight facets, the employees who are generally taken into an organization undergo values mapping between individual values and organizational values.
But in the current case there seems to be a little surprising perspective. It is the organization which is struggling to map the same because of poor management. The rewards are missing and this lack of appreciation not only alienates employee from the organization, it also makes him indifferent towards the company’s performance. This does not help in achieving high level of commitment from the employee end whose motivational level is at ground zero.
Any organization which strives for high productivity, sets high goals, and demands commitment from its stakeholders need to stick to the basics of Value Driven Management. Overlooking the Eight Facets, as reflected by the current organization, not only eliminated all the scope for Value over Time maximization, even the short term goals could be jeopardized. Such misalignment of short term objectives and long term goals must be avoided in all circumstances.
If any organization wishes to develop a robust, conducive culture for productivity maximization, it first requires aligning its human resources through training and rewards. Use of technology is also important, but adapting to changing technology is even more important.
When true practices of value driven management are followed, and every individual associated with the organization gives his sincere effort in adding to the value of the organization, a new level of synergetic organizational culture is developed.
Under such circumstances, productivity audit tool is used for its true purpose which is to measure and inform the management that which areas need their attention and how they can be improved. These features reflect a healthy organization.
Pohlman, R.A. 1997. VDM-Value Driven Management. Retrieved May 15, 2010 from http://www.huizenga.nova.edu/5090/vdm.cfm