Conflicting Goals

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Conflicting Goals

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Productivity Gains Through Work Process Improvement

Originally published in the Singapore Economic Bulletin March 1999 Issue

Reprinted with permission

When assessing the productivity of an organization, we commonly examine the efficiency of the daily work processes. However, if you want to create lasting improvements in efficiency, you have to look deeper.
By Douglas R. Rosensteel, CMC

When assessing the productivity of an organization, common sense tells us to examine the efficiency of the daily work processes. Efficiency studies normally uncover problems including:

The need to work around missing components or information

Non-value added steps designed into the workflow

Bottlenecks

Incomplete or incorrect training

While the solutions to these problems often seem dreadfully obvious, implementation of the obvious solution does not always achieve the planned result. The key to developing lasting improvement is to understand where the problems originate. Why does the assembly operation have to wait for Part A, yet receive an abundance of Part B? Why does the bank teller only receive half of the information needed to complete the transaction? Why do our work processes cause us to jump through hoops just to insert Tab A into Slot B?

One answer is a lack of organizational alignment. Figure 1 shows an organization where goals are aligned. This organization has the following attributes:

There is an overriding set of goals that support a specific strategy.

The overriding set of goals is well communicated throughout all levels of the organization.

The lower-level goals, i.e. those of each department as well as those of each employee, fully support the achievement of the overriding goals. In other words, if the Purchasing Department achieves its goals, it actually becomes easier for the Manufacturing Department to achieve its goals. The same can be said for every group. Conversely, if the Purchasing Department fails to meet its goals, it will be more difficult for the Manufacturing Department to meet its goals. All goals in an aligned organization are closely connected.

In a typical organization, however, each department sets its goals independently of other departments. Consequently, many organizational goals are actually in conflict. In other words, for Department A to achieve its goals, Department C has to fall short of its goals. To carry it further, if Department Manager A meets her goals, Department Manager C will fail to meet his. A classic example is the arrangement between the Quality Manager and the Operations Manager. The Operations group is normally rated on machine efficiency, downtime, operating costs, on-time delivery, etc. The Quality group is rated on customer complaints, scrap rates, rework costs, and the like. In order to reduce customer complaints, it is sometimes necessary to shut equipment down for maintenance. While this action works toward the customer complaint goals of the Quality department, it works against the downtime and delivery goals of the Operations department. Consequently, for the Quality Department to meet its goals for Customer Satisfaction, the Operations department will have to fall short of its Efficiency goals. Many of the problems normally categorized as “inefficient” are due to misaligned goals.

Alignment of goals

What is organizational energy? It can be defined as the energy an organization spends to complete the work it is engaged in. It is, simply put, the energy created by the knowledge, desire, and alignment of the organization. Since every organization is made up of people, every organization has a wealth of knowledge and desire. When this knowledge and desire is directed at the completion of a task, energy is created. But as we know all too well, all energy that is created is not used toward the goals of the organization. Independent Goals are goals that are not linked in any positive way to the overall organizational goals. Independent goals by their very nature divert organizational energy from Organizational Goals. The ability of an organization to achieve the goals it desires depends on how well aligned the goals are. The degree of alignment determines whether the individual energy sources strengthen or neutralize each other.

A simple example is illustrated by the natural alignment of an orchestra. If we think of an orchestra in terms of business, each section is a "department." If we were to work on improving the process of the string section to the point that is becomes the most capable section in the orchestra, what would happen to the quality of the music? Naturally, it would deteriorate. The quality of the music is determined by the alignment of the sections, not the number of prima donnas in a section.

What would happen if we were to give each section, or "department," a separate set of music to work from? The level of talent of the individual sections would have little effect on the quality of the sound, because they are each working from a different page of music. Yet this is exactly the way we tend to run organizations. Each department is given a separate sheet of music from which to play. Then, to improve the music, we focus on improvement of each department. The results are predictably less than desirable.

When everyone is working toward the same goal, the goal is reached more efficiently and quickly. The reason is that everyone's efforts support everyone else's efforts. When everyone is working toward independent goals, some goals are in conflict with others. If the goals are reached at all, it is with far more effort and wasted energy, since some efforts actually neutralize other efforts. In other words, if I am trying to make as many as I can as quickly as I can, and you are trying to improve customer satisfaction with improved product quality, you will naturally try to convince me to slow down and only make good ones. Or worse yet, you'll want me to stop and think about my process long enough to improve it. Meanwhile, I'm getting behind in the number of parts I'm trying to make.

Figure 2 shows an organization with misaligned goals. If we examine Figure 2, we will notice that there are indeed overriding organizational goals. These are the goals developed by the top managers and cascaded down through the organization. There are also departmental goals that seem to support the stated organizational goals. The organizational goals are:

Maximize Profitability

Improve Customer Satisfaction

Reduce Costs

To meet these goals, the management team is given Profit Targets, the Sales Group is given quotas, and each department has its own specific goals which seem to support the organizational goals. A very powerful test for alignment of goals is the question, "If I achieve my goals, will that help Department X achieve its goals?" Using a specific example, if the Purchasing Department in Figure 2 achieves its goal of meeting raw material cost targets, will that help the manufacturing department to achieve its production quotas?

A manufacturer of industrial chemicals had similar goals. The Purchasing Department did indeed achieve its goal of meeting Raw Material cost targets. After quite a bit of research, the Purchasing Manager located a supplier who could meet his target costs. The Purchasing Manager received a large bonus as a reward for meeting his goals. The Manufacturing Manager, on the other hand, now had a cheaper raw material to work with. The material could be purchased at a lower cost because it had a higher level of contaminants, even though it still met the specification. The manufacturing scrap rate increased, actually lowering productivity. The Manufacturing Manager not only failed to meet his Production Target, his productivity actually decreased. The process group was called in to improve the efficiency of the manufacturing process. Through a series of statistically designed experiments and additional equipment, the manufacturing process was able to meet its goals. However, the added cost of experimentation and new equipment caused the management group to fall short of its profit goals.

Another good example of problems caused by a lack of organizational alignment is pictured in the Causal Loop Diagram in Figure 3. Organizational goals tend to create systemic structures that can be portrayed using a tool called the "Causal Loop Diagram." A Custom Computer Retailer had a goal of increased profit. To meet his goal, the Sales Manager increased marketing efforts to boost sales volumes. The loop on the left side of Figure 3 shows a system where increased marketing led to increased sales, which provided more profits to further increase marketing. The Sales Manager met his goal. But sales volumes were affected by more than just marketing. The loop on the right side of Figure 3 shows how, as sales increased, so did the workload for the store. As workload increased, the amount of time available to thoroughly complete the job decreased. Part of the job included updating the inventory database when parts were taken out to build the computers. As workload increased, updating the database became a secondary priority to moving on to the next job, so the accuracy of the inventory suffered. As with any business, inventory accuracy is pretty important. When the accuracy was poor, the Service Department had to search for parts to complete their new computers. They often ran out of parts. This meant that customers often did not get their computers when promised. After a while, they became dissatisfied and sought other vendors. Naturally, this affected sales volumes in a negative way, just the opposite of the intent of the Sales Manager.

Overwork leads to burnout

To further illustrate the consequences of misalignment at a deeper level, the level of individual thinking, let's look at the story of Nick, as illustrated in the Causal Loop Diagram in Figure 4. Nick is the manager of the Service Department of the Custom Computer Retailer. He is also a very competent problem solver. If there is a tough problem, one that nobody else can solve, Nick tackles it with great enthusiasm. In fact, the Service Department employees often call on him to handle problems they cannot solve themselves. He works 70-80 hours a week, and sometimes shows signs of burnout. Nevertheless, after a day or two off, he’s back and ready to go. Nick is torn between the need to be at customer sites solving problems and staying around to manage the department. The problem is that things seem to come to a grinding halt when he’s out of the office, which happens frequently. No one else knows as much about so many things as Nick. He often says he would like a clone of himself to make his job easier.

Nick is caught in a structure of conflicting goals that, in this case, is purely a structure of thought, or paradigms. Nick's goal is to solve all tough technical problems. However, systemic structures also have inherent goals. The goal of the system in Figure 4 is to create more problems than Nick can solve alone. In this structure, a goal is “achieved” by applying a symptomatic solution to achieve the goal – temporarily. Because the symptomatic solution achieves the goal, there is no real need to develop a fundamental solution, one that permanently achieves the goal. When the goal needs to be "re-achieved", the symptomatic solution is reapplied, and the cycle continues. In addition to never permanently achieving the goal, the symptomatic solution has some side effects that work against long-term improvement. In Figure 4, the goal to be achieved is “Fix Technical Problems”. The symptomatic solution is “Calls to Nick for Help”. This achieves the goal. When the goal arises again, it is “achieved” by increased support from Nick. This symptomatic solution has two consequences:

1. The long-term solution to Tough Technical Problems becomes reliance on Nick.

2. Nick spends all his time firefighting.

So, in essence, Nick never achieves his goal because of his mode of thinking. There is powerful leverage in changing the structure of one’s thinking. The effect of conflicting goals, or organizational misalignment, is often the opposite of what was intended. For all the reasons sited, work process improvement alone is a very ineffective method for improving productivity. The key to improved efficiency is to analyze the organization for the alignment of goals. Since misaligned goals can be a major contributor to efficiency problems, an assessment of organizational alignment should be included in any study of organizational efficiency. The analysis should include activities to learn:

The goals, both explicit and implicit, of senior, middle and lower level managers, and of hourly and administrative personnel.

The method by which complaints and crises are handled.

The organization’s culture, ethics, beliefs (real and perceived) and attitudes toward customers.

Stated or described Corporate Mission, Vision, and Values.

By including organizational alignment in the study, a deeper understanding of the organization from a total system perspective can be gained. In addition to insight on areas of inefficiency, such a study will yield:

A comparison of the goals of the various departments to see where they align and where they conflict. This information is critical for redesigning systems with inherent conflict or inherent inefficiency, as well as for reinforcing systems with built-in alignment or efficiency.

A comparison of the goals of the workforce to the goals of management to see where they align and where they conflict. This information is also critical for system redesign or reinforcement. Some well-intentioned management policies set up conflicting goals between management and the workforce. One example is piecework. The intended consequence is improved productivity. The actual result is reduced quality and, consequently, reduced productivity.

Insight on the ratio of reactive behavior to proactive behavior. The majority of organizational behavior, regardless of industry, is reactive – reacting in response to customer demands. While this action is necessary, a lack of proactive behavior guarantees that the organization will always be stuck in a reactive mode.

An overview of the organizational culture concerning general beliefs, perceived beliefs, and attitudes toward internal and external customers. It is necessary to understand the culture of the organization if you want to create lasting improvement.

So if you want to evaluate your organization’s efficiency, study the work processes. If you also want to create lasting improvement, do not forget to uncover areas where individual or departmental goals are in conflict. The Number One cause of system fragmentation is a lack of organizational alignment. The Number Two cause is thinking that the Number One cause is not important.