Lecture 3

Examples of Performance Enhancement by Organizing

• (1) Keep Structure

flexible
• (2) Promoting Innovation
• (3) Design-Manufacturing
Interface
• (4) Heightened Employee
Motivation
• (5) High-tech Marketing
Interface
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(1) High Performance Enhanced
by Flexible Structure
• Starbucks - Encourages new ideas from all,
fast corporate decision making, special
marketing teams, reward systems - Coffee ice
cream, Frappuccino, “Store of Future,”
“Lunch Service Concept,”
• First USA - Quick formation of teams to
pursue new opportunities, new credit card
products many times more than competitors
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(1) High Performance Enhanced
by Flexible Structure
• Dell Computer - Give P&L responsibilities
to more people running smaller business
units.
• 3M - 15% of time for creative work of own
choice, supported by extra grant money,
Group is to derive 30% of income from
inventions made in the last 4 years.

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 (1) High Performance Enhanced
by Flexible Structure
• COMPOUND ANNUAL GROWTH RATE (CAGR) - 1994 to 1998

• Name CAGR (%) Average Growth Rate of Next Three

Largest Competitors in Industry (%)

• Trilogy 75 49
• First USA 60 21
• Dell Computer 51 39
• Starbucks 46 23
• Home Depot 25 17
•
• Source: Nora A. Aufreiter, Teril Lawyer and Candance D. Lun, "A
New Way to Market," The McKinsey Quarterly, New York (2000).

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 (2) Organizing For Innovation
• Key Trade-off: Talents versus control
• Vertically Integrated Structures:
Systemic Innovations (requiring close
coordination and information sharing)
• Virtual Flexible Structures: Autonomous
innovations (independent inventors with
breakthrough ideas without coordination).

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 (3) Design-Manufacturing
Interface
• Difficulty created by a lack of coordination
• Design is “thrown over the wall” and check
on produciability may require undoing
design
• Methods to eliminate “silo” effect:
(1) manufacturing sign-off, (2) integrator,
(3) cross-functional team, (4) combine both
functions into one department
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 (4) Heightened Employee
Motivation
• AES Corporation - Runs 90 plants in 14
countries as contract generator using
regional and local teams (5- 20 people each)
• Local teams for power plant operation and
maintenance. Members “own” the work
they do and are extraordinarily motivated
• Employee mobility is encouraged after
skills are verified by company exams
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 (4) AES Corporation
AES Corporation Total Revenue

3000

2500

2000
Millions

1500

1000

500

0
1990 1991 1992 1993 1994 1995 1996 1997 1998
Year

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 (5) High-Tech Marketing
Interface
• High-Tech: (1) products/services with
scientific-technical bases, (2) products
become obsolete quickly by new technology
(3) products create new markets, if built on
emerging technologies. Examples:
semiconductors, microcomputers, robotics.
• Strategy of marketing: market-driven versus
innovation-driven
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 (5) High-Tech Marketing
Interface (Cont’d)
• Market-Driven: Products fit to customers’
needs, but may cause potential delay of
innovations, giving preemptive advantages
to competitors
• Technology-Driven: New innovations may
not be needed by customers, producing no
value to company
• Teams with members from both camps
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Cross-Functional Teams

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 Traditional Product
Development Sequence
 Marketing - conducts research to identify
customers’ needs and defines product features
(functionality, reliability, ease of repair, resale
value, warranty, price, etc.)
 Design Engineering - develops specifications,
performs functional design, selects material,
obtains vendor/supplier inputs, and conducts
engineering analysis to create product features
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 Traditional Product
Development Sequence (Cont’d)
 Production Engineering - reviews and
simplifies the product design for
manufactureability and reliability
considerations.
 Service organization - changes the design
some more for serviceability.
 Production - finally develops manufacturing
techniques and makes the product.
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 Cross-Functional
Product Development Team
• Representatives of all functional groups are
participating, in addition to procurement,
financial, vendors/suppliers and customers
• Issues related to product design/development
are considered early on and concurrently
• Create an optimum product in shortest time, at
lowest cost, while satisfying constraints and
meeting customers’ needs
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 Benefits of
Cross-Functional Teams
• Reduction of product development time:
30% to 70%
• Reduction of number of engineering
changes: 65% to 90%
• Reduction of time to market: 20% to 90%
• Improvement in product quality: 200% to
600%
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 Successful Examples of
Concurrent Teams
• Mercury Computers, Lowell, MASS - Reduced
time to market from 125 days to 90 days for its
add-on boards of VNE bus
• Hewlett Packard, Palo Alto, CA - Reduced the
time to market by 2/3 for its 54600 Oscilloscope
• Toyota Motors, Tokyo, Japan - Reduced product
cost by 61%
• Medical Electronic Instruments – Reduced the
time to market from eight months to one.
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Cross-Functional Teams (Cont’d)

Team Discipline

Team Learning

Team Effectiveness

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 Team Discipline
• For achieving “blow-the-roof-off”
performance, teams must have discipline: (1)
common purpose, (2) specific goals of
performance, (3) complementary skills, (4)
commitment to how the work gets done (each
pulling the same weight), (5) mutual
accountability - commitment and mutual trust,
being accountable to each other - “being in the
boat together”
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 Team Learning
• Team must learn quickly all needed skills
(process of working together, use of design
tools, communications)
• Factors affecting team learning speed:
(1) composition (a mix of expertise)
(2) culture of risk taking allowing
experimentation
(3) people-oriented leadership Style
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 Team Effectiveness
• Team Goals are clear, of high impact, measurable
and with top management support
• Members are results-oriented, efficient, having
complementary skills and experience, high energy
level, positive attitude to collaborate, each
supported by staff with specific expertise
• Work Environment is excellent (easy to use
communications tools, opportunity for self-
expression, pleasant work atmosphere, etc.)
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 Roles of Team Members
• Team Leader - Keeps team moving forward
• Conceptual Thinker - Sources of original ideas, with
imagination and vision
• Harmonizers - Assuring team harmony, foster
collaboration, resolving conflicts
• Technicians - Specialists with expertise
• Planners/implementers - Bring methods to tasks of
team, autocrats with inflexibility
• Facilitators - Offering help and support, being adaptable

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 Role of Team Members (cont’d)
• Critical Observers - Making sure the team is on
target
• Radicals - Not accepting conventional thinking
and solutions, offering new approaches to
problem-solving
• Power Seekers - Wanting to be right all the time,
shaping the teams’ view
• Diplomats - Coordinating inter-team relationship,
getting information for the team
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 Check Team Player Mentality
• Do you compliment your co-workers when you observe them doing
a good job?
• Are you enthusiastic about helping your teammates in any way you
can?
• Do you always to do your job thoroughly and completely?
• Do you take advantage of every opportunity to support the team
effort?
• Do you have a professional respect for everyone on your team?
• Can you follow through and support policies and rules with which
you personally disagree?
• Do you attempt to avoid undermining those around you for personal
gains?
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 Check Team Player Mentality
• Are you enthusiastic about your company and the direction in
which it is headed?
• Do you show appreciation for the efforts of others and
acknowledge their contributions to the big picture?
• Do you seek new relationships and acquaintances through the
company?
• Do you take responsibility for your mistakes and easily admit
when you are wrong?
• Does your attitude have a positive effect on those around you?
• Are you personally dedicated to making the company the best in
the industry?
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 Team Stages
• Formation Stage - Members get together to
have roles and responsibilities defined
• Gelling Stage - Members of like minds will
form subgroups and stay close together
• Unison Stage - All team members are
getting highly organized with a common
goal

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 Question # 3.5
• The company has been making most of its
sales to a few large customers. The
company president wishes to broaden its
customer base. To do so may require a
change of company culture, its product line
strategy, its marketing/sales program, and
its service organization. How should he go
about making the required changes?
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 Question # 3.7
• As the company’s sales are coming down
unexpectedly, the president asks you to
chair a task force with the objectives of
developing solutions to correct the
situation. Who do you want to be on this
task force? How should this problem be
resolved?

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 Delegating
• Objective - To improve manager’s overall
efficiency by selectively distributing work
for employees to do
• Process - Managers delegate the
responsibility and needed authority of doing
specific work to employees and create
upward accountability in them for securing
the anticipated results
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 Why Delegating
• Improve quality and quantity of work done
• Allow manager to do manager’s job
• Become knowledgeable of employee’s
capabilities
• Distribute work load efficiently/equitably
• Develop leadership capabilities in people
• Improve operating decisions - reducing cost
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 Why Delegating
• Facilitate teamwork, making job more
satisfying to employees
• Create opportunities for employees to gain
recognition, encouragement and incentives
• Allow employees to develop new skills and
knowledge, fostering initiative and
competence, and gaining self-confidence
• Encourage employee growth/development
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 Delegation Matrix

1: Employee

Can 2: Neither; if must,

1 3 then to be done
Employee by engineering
manager

Cannot 2 4 3: Employee

4: Engineering
manager
Cannot Can
Engineering Manager

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 What to Delegate
• Problems/Issue requiring exploration, study
and recommendation for decision making
• Activities coming within the job scope and
capabilities of employee
• Tasks fitting company’s needs and promoting
employee development and growth
• Activities, if done right, would save
manager’s time
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 What Not to Delegate
• Planning (to define the right things to do)
• Resolve morale problems, differences and
conflicts in groups/units
• Coaching and developing employees
• Review, evaluate and correct performance
• Own assignments from big bosses
• Others (own “pet” projects, tasks absent of
talents)
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 How to Delegate
• Communicate the importance of task, set
goals and performance indicators, check on
understanding/confidence
• Delegate responsibility for quality of work
• Allow operational decision making
(resources, method, sequence of tasks, etc.)
• Trust the employee and give recognition
• Retain own upward accountability
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 Barriers to Delegation
• Own technological obsolescence -
Employee may learn and grow technically
• Organizational barriers - unclear roles and
responsibilities, line and staff positions

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 Notes on Delegation
• Delegation is limited by control in effect - no
control, no delegation
• Authority must be commensurate with
responsibility (related to work delegated)
• Accountability - Achieving the expected
results by discharging responsibility and using
authority delegated
• Willingness and ability of employee are keys
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 Question # 3.9
• Steve Lee, the Engineering Manager, delegates tasks as a
good manager should. However, Mark Hayes, the
Engineering Director, has the bad habit of calling up
Steve unexpectedly to get detailed reports on various on-
going activities in Steve’s department. Steve does not
want to hold daily staff meetings in order to satisfy
Mark’s information needs, because Steve is quite certain
that requiring his professional staff to make daily reports
will definitely upset them, as all of them are known to
prefer independence. What should Steve do?

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