Archiv der Kategorie: Management

Here you find topics like planning, organization and leadership.

Cooperative Metamorphosis

Henry Ford introduced that assembly-line. He was inspired by Taylorism and also made efforts, to get all levels of value creation under his control. For this purpose his enterprise had temporarily one hundred percent depth of production – plantations for rubber, glass factories, steel plants and power stations for the required energy. The automotive depth of production is on average approx. 20 percent. Thousands of suppliers share three quarters of the value of a car, from simple rotary switch to complicated injection or navigation systems.

Now, for the first time, this decrease of production depth has to be paid for. It took the small supplier’s years, but now they seem to be on eye level with those, who ruled the prices for years with their market power. At VW the production lines stopped, because obviously purchasing gambled away. Are we standing in front of a cooperative metamorphosis between manufacturers and suppliers?

Monopolist

After VW sound the bell for the last transformation, when they hired José Ignacio Lopéz and brought suppliers a new role, VW can not do other than delivering a reorientation concerning the interdependence between manufacturers and suppliers. The stop of Golf production in Wolfsburg that presumably creates for 20,000 employees short-time work is the wake-up call for the entire industry. The following mechanisms burdened the harmonious cooperation over the years.

  • Adjustment of the supplier portfolio
    After the internal improvement efforts and due to the low depth of production, there are not so many opportunities for reducing the expenses. All that remains is reducing the costs for the externally delegated 80 percent. In the absence of monetary incentives, the outside vendors could only be provided a benefit with the privilege of being part of the supplier circle. This means sometimes that they can participate to bid and to receive the traditional title purveyor to the court, as so-called strategic suppliers.
  • New pricing models
    Only the enormous quantities offer a large lever that result in favorable conditions and prices. The huge numbers of items are the incentive for the suppliers. Simultaneously the timely and variant-oriented deliveries require further resources that additionally diminish the yield.
  • Exhausted terms of payment
    The payments are not aligned to the need that the suppliers receive their money quickly, but they are based on the financial reporting dates. Consequently, the supplier carries the expenditure of the financing. This means that we talk about six months of prefinancing in the case of the procurement of material. However, there is no payment after delivery, but manufacturers wait, based on agreed payment targets for over three additional months to eventually pay their dues. The bridging of these time spans has to reproach the supplier – beside the raw materials, the wages and salaries, the storekeeping, the operation of the infrastructure etc.
  • New forms of negotiation
    The personal negotiations in private that were the basis for trusting cooperation, are replaced by formal tender procedures and electronic forms of negotiation. The personal contact is removed from the businesses. This leads to quasi-automatic decisions based on good value for the money and general quality standards without personal impressions.
  • One-sided contract terminations
    In many purchase departments still prevails the illusion to sit at the longer lever, since there are world-wide enormous amounts at suppliers, who seem to be ready to deliver at lower costs. This results quickly in the fact that a supplier, who falls in disgrace, will be eliminated in the blink of an eye.
  • Risk delegation to the suppliers
    The upstream procurement of material and the stand-by resources increase the risk unilaterally to the disadvantage of the suppliers. If a contract expires or the manufacturer terminates a running contract, this can quickly lead to insolvency.

The possibilities to reduce the costs at the expense of the suppliers reached their limits. Also suppliers use outsourcing into country with low-wages. However, considering the narrow margins and the interdependence, new models for cooperation have to be found. The required exchange of information must take place mutually and count on Win-Win. In the future it will be essential that the buyers will be in personal contact with the suppliers, in order to get a local impression and to get in such a way to realistic estimates. The persistent compliance that was introduced particularly in the interest of the shareholders did not prevent abuse by particular people and harms cooperation.

Bottom line: Interaction between manufacturers and suppliers must be brought to a new level of confidence and joint benefit. The distribution of the value creation needs a reorientation in the economy and even for the politicians, who nowadays stand up for VW although they silently sat out the precarious situation of the suppliers for years. At the end of this phase the industry will be empowered, since the current inclination will be balanced out. This metamorphosis will again weld together manufacturers and suppliers, since the one cannot without the others.

SVC – Capacity killers from the top

Division of labor is determined by horizontal and vertical distribution of tasks. The enemy of this arrangement is the micro manager, who interferes with the tasks of the employees. A typical form is the supervisor call – the capacity killer from the top.

SVC2

Originally the supervisor call had to terminate the function of a running program on a host computer. Programs did not come to an end due to errors in the program code. In order not to restart the entire computer, a SVC could interrupt this program. It always had to be decided, whether the procedure is frozen in an infinite loop or it simply had to process many data. Surprisingly there are executives, who proceed according to a similar pattern in their organizations. They interrupt ongoing tasks regardless of the consequences. How can you recognize them?

  • Like the leopard cannot change its spots, we all have to live with our selective perception. We only consider what attracts our attention in the respective moment the most. Also decision makers cannot escape from this bias. As soon as people draw positive or negative attention with their activities, it can happen that a superordinate instance is motivated to a direct interference despite all delegation.
  • Similarly the blind spot works, which makes the look at specialties impossible. For executives these are mostly the restrictions that are imposed by money or time budgets, which they are not willing to accept. In the US, bosses invented for this purpose “stretched goals”. In the mean time we know the negative effects, if the bow is overdrawn.
  • Good leadership is characterized by an overview of existing and already used resources. As soon as this overall picture is missing, the requirements add up much higher than the possibilities that are available. Fatally the employees are double-charged for this deficit, since they are additionally accused of not being ready to make enough efforts. This produces a continuous discontent, which lowers the usual performance.
  • An important instrument of the leadership is setting goals with a certain prioritization. Long-term planning offers for this the general framework. The damage that is caused by the repetitive change of priorities is immense. Nothing is accomplished. Desired changes do not take place. Personal goals are not achieved.
  • A common approach is the temporary overriding of processes, hierarchies and schedules. And this happens, after the structures were developed, coordinated and decided. But why are you superior, if you do not have power to set this order off whenever you want.
  • It is also popular to assign special tasks spontaneously – past all the installed chain of command. This going around the established rankings with an overriding from top to the bottom is multiplied by the frustration of the ignored levels. Eventually the commitment of the involved people sinks because of their expectation of the direct interference, since they cannot assert themselves in any case.
  • The executives, who want to hold the pressure on the pipe by always coming up with new ideas, are particularly difficult. They undermine thereby the efforts of the employees to convert the ideas that they had just brought on the way. From the outside they seem to be creative and active bosses, who promote new things. That they bring nothing to an end, you usually see after they rose to their level of incompetence.
  • Superior people, who do not trust their employees, are condemned to the fact producing only what they can deliver by themselves. Even though the decisive delegation of tasks would increase dramatically the effectiveness of the own area of responsibility.
  • Those people are also remarkable who make their own ideas the measure of all things, despite missing arguments and out of complete hubris. They live out their Because-I-Want-It syndrome and do not even make an effort to consider the arguments of the others. It is only a matter of time, before the organization will uncover them.

Enterprises can overcome these exemplary symptoms of capacity killers, by taking care of their corporate culture. The most important tool is thereby the regular reflection of the way how executives behave and get to a decision. This is done with an open exchange of opinions within the top team and through employee surveys. Based on this, new ways should be found, in order to avoid awkward behaviors like SVC.

Bottom line: Leadership needs clear goals, roles and a consistent implementation. Superiors have to be thereby role models, who are passed on through all levels. In the positive case this happens for the advantage of the entire staff. Harmful behavior, on the contrary, can have life-threatening effects for the company. A good start is the persistent avoidance of the SVC – the capacity killer from the top.