Much has been written on Total Quality Management (TQM) systems, Reengineering the Corporation, Fifth Generation Management, and Reinventing Companies. I totally agree that dramatic changes are needed in the way corporate America thinks and works, and even more important, that the time to make those changes is now, when the mindset of the employees is conducive to accepting change.

The formal definition of reengineering given in Michael Hammer and James Champy's book Reengineering the Corporation is "the fundamental rethinking and radical design of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed. [bold added]"

There is a big difference between reengineering as they define it and downsizing. Downsizing tends to reduce costs and perhaps improve efficiency by reducing the number of employees, but reengineering sets out to improve customer service by making radical changes in how things are done. Since a process may overlap several different departments or locations, dramatic change needs to be brought about in the fundamental thinking of an organization.

As the market moves more to services from products, customer service is becoming progressively more important. Ignoring how processes are done now and starting from scratch to meet today's competitive situation is the way to go.

Everybody's talking about the changing paradigm, reengineering, strategic partners, and total quality management (TQM), but what's all the fuss about? Are these just the latest buzz words management is using to mask poor performance?

Of course no one's going to argue with attempts to become more efficient by analyzing and redefining operating procedures. No one will object to getting management committed to doing things right the first time, providing customers with better customer support, and making customers and vendors true business partners in an increasingly complex and competitive marketplace.

Aren't these things what good management is all about? Why should we need a systems revolution to get these issues high on management's priority list? Why should we need articles, lectures, and seminars to convince management that improving techniques and programs should be part and parcel of the normal way of doing business?

Unfortunately, in rapid-growth industries such as computers and computer-related products, many companies never took the time to learn how to do it right the first time. As revenue and throughput drove the company, who had the time to build the proper framework to support the spectacular levels of business they attained in such short periods of time? I remember one company where the throughput off our bread-and-butter line more than doubled year after year after year. We continually over-promoted and under-trained personnel because we simply couldn't wait for people to learn their new jobs before we needed them somewhere else.

When one multi-billion dollar company I worked for merged with a leading Japanese computer company, I was amazed at some of the changes and commitments we had to make.

For starters, we had to commit to a firm, fixed manufacturing schedule for at least six months. In their great "generosity" they allowed us to make a 5% change six to nine months out and a 10% change ten to twelve months out, but it didn't matter whether we were selling or not. The systems continued to land on the dock every Friday just like Space Invaders -- they just kept coming and coming.

If I had ever given this type of schedule to one of our American manufacturing managers, he'd have thought he died and went to heaven! In contrast, we were normally having several revenue meetings daily in order to make changes based on the latest customer input. It was an unusual day when we didn't make changes to the current month's schedule.

In retrospect, I have to wonder why we never had the time to do it right, but always managed to find time to fix it. Not doing it right the first time sidetracked us from our main objectives and substantially decreased the company's efficiency.

For example, it was common to see whole racks of returned product waiting for repair. Because there was little revenue incentive, returns were often ignored for long periods of time. This situation improved somewhat when "returns" became a cost and profit center, but ultimately, the best answer was to make a better product.

Such rapid growth is synonymous with compromise. It was not unusual for new product to be shipped unfinished in order to met schedule commitments, and the design was then completed at the customer's site.

Unfortunately, this mode of operating spawned a generation of managers, promoted too rapidly and insufficiently trained, who then went into other, uncontaminated companies and perpetuated the style.

One of the real tragedies from this period was the way training became such a low priority. So many of the budgets I've seen set aside little or no money (investment) for training. Worse yet, I've seen some companies where accounting hadn't even defined an expense account for training!

As a result of these failings, we are now faced with the task of undoing what's been done, unlearning what's been learned, and getting some long overdue efficiency back into the way we operate.

Without a doubt, changing the paradigm (reengineering) must start at the top. The CEO must first ask, "What am I trying to do?" "What responsibilities can I eliminate?" "How can I work more efficiently?" Only then should the CEO ask, "How can I get more from my staff?"

Most importantly, the CEO should look to the customers and vendors for their insights about the company's efficiency and attitude. This is a good time to really get inside the customer's head and make sure you're doing everything you can to get the maximum amount of business. The vendor is also a business partner, because they can minimize your purchasing costs and help you find ways to off-load tasks that can be done more efficiently elsewhere.

Setting goals is the easy part of the equation. Successful implementation, on the other hand, requires that you set, continually review, and communicate priorities. Over and over I find that when a company is not operating efficiently, the senior staff either do not have consistent priorities or have not made them clear throughout the organization.

When priorities have not been made clear, employees will set their own priorities and agendas, perhaps believing that these are their boss's priorities as well. For example, the CFO of a $20 million dollar company was spending a tremendous amount of time selecting a dental plan for the company. He could have optimized his time by going through a broker or giving the task to a subordinate. I am sure that if the CEO had found out what the CFO was doing, those priorities would have been rearranged in a hurry!

Good people are perhaps the most dangerous when priorities have not been made clear, because they will go off in their own direction faster and farther than others. The CEO needs to put the company's priorities in writing and make sure that the staff's priorities are aligned in support of the company's priorities. The CEO must also make sure that employees are aware of each others' priorities. I have always told clients that one of a leader's primary functions is to set priorities and review them as needed.

People also tend to confuse priorities with their desires. I once asked the CEO of a client company what his top priority was. He answered that his highest priority was to hire a national sales manager. "Well," I asked him, "why isn't there a line of people outside your door waiting to be interviewed?"

I then asked how long it had been since he had talked to the search firm and found out that it had been two weeks! Clearly, hiring a national sales manager was not really his top priority.

The CEO must then determine if the top staff are up to the changes that need to be implemented. The CEO cannot compromise with his staff or pay people to tell him why he can't make the necessary changes. In the past, I have told my staff that I could call in a wino off the street to tell me my plans won't work and it certainly wouldn't cost me as much!

Middle management as a phenomenon came into existence because the staff in place were not able to do their jobs efficiently. If staff can be made more efficient, there will be less need for supporting organizations. Staff efficiency is decreased by unnecessary meetings, excess reporting requirements, poorly defined responsibilities, and the continual distraction of "fighting fires." These types of inefficiency result in the addition of assistants, coordinators, administrators, and worst of all, program managers. In the commercial world, program managers evolved as a crutch because the systems in place couldn't get the job done.

To avoid all these problems, strive for efficiency. Define every position's responsibilities clearly, set and communicate priorities well, minimize meetings, streamline reporting, and give timely and accurate feedback. On the other hand, here's what not to do:

• Don't assign one person to do a task and five others to nit-pick and second-guess them. Give them the ground rules and specs, and let them do their job.
    
• Don't require three bids and twelve signatures to buy a pencil. Keep decision-making authority at the lowest possible organizational level. For example, in one of the companies I worked for, purchase orders required six levels of approval. When I went back and talked to these people, I found that everyone who had signed the purchase order had assumed that the person before them had analyzed it, so they had not analyzed it themselves. Even worse, we gave the vendors copies of all the paperwork (with all the signatures!), and they usually thought it was pretty funny.
    
• Don't undermine your sales staff. I have seen situations where there is so little trust in the sales staff that, when they are dealing with a customer, they have to go back to management over and over just to get the price down an inch. However, if sales people are to be your interface with the customer, you have to give them some decision-making authority. Instead of handicapping the sales staff from the start, hire the right people and train them to do the job the way you want it done. Make sure they understand that while they represent the customer, they work for you.
    
• Don't go overboard trying to satisfy a customer. In one company, I found that out of thirty employees, eight were working on a problem that required finding 25 cables to meet a weekly shipping commitment. Obviously I had impressed upon them how important pleasing the customer was, but I had certainly not made it clear who was responsible to solve the problem.
    
• Don't do it that way just because you've always done it that way. Too often, we accept things the way they are. It is natural to review all the systems and processes of a company in trouble. After all, what they're doing now obviously isn't working, right? I was once with a company where I attended quarterly progress meetings. One general manager complained for several meetings in a row that he couldn't meet goals because he couldn't hire enough senior engineers. When the CEO assigned someone to look into the problem, it was found that they could solve the problem by getting staff assistants to work as gophers for the senior engineers. They had to change their strategy, to do it a different way.

When all is said and done, the most important part of changing how you run a business is to improve efficiency. Knowing this, how do you go about improving efficiency?

1. Do It Right the First Time

2. Define Roles and Expectations

3. Define Responsibilities and Authority

First, do the obvious: Match the authority to the responsibility. In fast-growing companies, responsibility and authority change so rapidly that it can become unclear who is supposed to be responsible for what and who can authorize what. This can create inefficiency and duplicated efforts.

I have found two effective techniques for clarifying responsibilities and authority. The first I call "one-liner policies." It often takes too long to set up and maintain a formal, detailed policy and procedures manual, but one-liners can be zapped out instantly to those involved. For example, if a new VP Marketing has been put in place to control travel, you could make a new policy, "All travel must be approved by the VP Marketing."

The other technique for clarifying responsibility and authority also effectively maintains the checks and balances that tend to get lost in the chaos of a growth situation. In this technique, you set up three categories for tasks such as signing checks, signing leases, pricing, and setting terms and conditions:

1. A person responsible for approval,
2. A person who must be consulted before the decision is finalized, and
3. A person who must be informed.

For example, let's say all top staff have the authority to approve travel for their staff up to 200 miles. The CFO is running out of patience with a customer who isn't paying on time and makes plans to send the person in charge of receivables to visit the customer. The VP Marketing must be consulted, because they may be working on a major opportunity with that customer that makes it an inappropriate time to shake things up. If it is still OK to send the person, then the regional sales manager must be informed, since he should know about any visits to customers in that territory.

4. Streamline Reporting

Top staff should report to the CEO weekly with a short list of one-line updates. This will save multiple phone calls and meetings in the hallways but still give the CEO the input he needs. These reports should contain five to ten brief items such as, "There is nothing new from IBM," or "Engineering is still adhering to the latest schedule," or "The audit looks like it will take one more week than planned." If the CEO wants additional information, he can contact that person at his convenience.

Also, accounting and MIS cannot determine what reports are needed to run other departments. The heads of accounting and MIS should sit down with the staff, both collectively and individually, to find out their

reporting needs with regard to content, form, and frequency. Too often, piles of unneeded reports accumulate on the desks of people who don't read them, and then they feel guilty every time they look at the pile. On the other hand, I have lost count of the manufacturing managers who have complained that they don't get the information they need.

5. Shortened (But Focused) Meetings

Meetings are the cancer of an organization. They are usually too long, have too many people, and are not focused on the topic. Often, few of the action items discussed get accomplished.

First, the meeting shouldn't start without an agenda. When I was the boss, I walked out of meetings before they got underway because there was no agenda. Second, someone has to be in charge to keep the meeting focused, to stop unrelated small talk, to write the minutes, and to follow up. Third, copies of the minutes should be given to all participants' bosses, because they are the ones who set the priorities of those attending. Finally, people should only attend if it is really necessary, and the person in charge should enforce time limits to make sure everyone makes their points quickly and concisely.

6. Priorities

Set clear priorities, review and revise them frequently, and keep everyone involved up to date on what they are. If the CEO has done nothing other than set priorities and make sure they are adhered to, he has done a good job.

Priorities can be a tricky area, because setting them doesn't mean that they will necessarily be adhered to. I have often found that when you give someone the third "top priority" in one week, the first one tends to get lost. Also, too often priorities get spit out with no follow-up. Many times managers fail to recognize when their staff is already overloaded and a new priority will not have any impact. In this situation, the manager needs to make clear which other priorities can be downgraded.

Human nature resists change.

The difficulty with this, as presented in Reengineering the Corporation by Michael Hammer and James Champy, is that a company's corporate culture must undergo dramatic changes if the company is to be reengineered effectively. However, the time is ripe initiate the dramatic changes that are needed to make corporate America responsive and competitive in the "new" markets.

The Problem

These problems have their roots in the 1950s and 1960s, when U.S. computer companies such as Burroughs, Univac, Amdahl, Honeywell, and RCA sold their heart and soul to Japanese companies. In doing so, they gave up the tremendous lead they had over the rest of the world's computer manufacturers.

These corporate giants naively believed that the Japanese companies would copy the technology but never produce the quality needed in the U.S. market. However, that notion was soon proven false.

As an engineer, I watched the Japanese record and study every conceivable detail of our corporate and national culture. They copied the best aspects, including quality control theory, and rejected the worst: an overflow of consultants, union pressure, and most importantly, the "Not Invented Here" attitude so rampant in most U.S. high tech engineering departments. It wasn't long before the Japanese got the upper hand in nearly every one of these "strategic partnerships."

The American loss of competitive advantage accelerated in the early 70s, when the off-shore flow of high tech companies turned into a tidal wave. Thousands of workers were needed to build large volumes of transistors, semiconductors, electronic assemblies, computer memory chips, and consumer electronic products.

When I helped a Southern California company start a factory in Hong Kong, the lack of reasonably priced labor had worsened significantly. We eventually required over five thousand direct labor employees to build ferrite core memories. Not only was the cost of labor there much lower, but the workers were available.

We had a related facility located in Southern California, but had great difficulty maintaining the fifty workers this facility required. Very few people in the area would apply for and stay in such "mundane" jobs as stringing cores, and if we could have found the workers we needed, the hourly wage we would have to pay them was non-competitive.

In addition to the high cost and low availability of labor, productivity was shrinking among American workers. After my experiences in the Orient, it was clear to me that American companies were losing their competitive advantage. One of the first rules I learned in engineering school applied: Productivity is directly related to standard of living. With no productivity increase, our standard of living would drop, and the American unions had reached a point where they wouldn't tolerate being judged by efficiency or productivity.

After the Pacific Rim nations had built up their labor bases and product experiences, it was a natural step to build up their technical and product design expertise. The next step was to take over the market completely, as happened in the consumer electronics market.

The Impact

Many trends and events since the mid 70s have helped make our work force vulnerable and insecure. Unions are wielding less and less power as companies transfer labor to off-shore facilities and to other states more friendly to business. Their power is also lost in events like Reagan's firing of the striking air traffic controllers. The world's map has changed, bringing increased global competition in a market with a new set of rules. To make matters worse, the federal government has often been insensitive to these problems, letting foreign policy and large amounts of economic assistance to other nations take priority. Annual wage increases are lower today than they were in the past, and pay reductions are becoming common, highlighted by companies such as newspaper publishers and airlines who force policy changes and concessions with the threat of bankruptcy or closing. Our work force no longer has a sense of security.

In addition, our work force can no longer count on market growth -- there may not always be "enough jobs out there." Perhaps most devastating was the loss of market leadership in semiconductors, steel, consumer electronics, and automobiles to the Japanese. However, not all of these difficulties come from "outside." We have moved manufacturing off shore. We have seen many mergers accompanied by massive terminations, resulting in the loss of hundreds of jobs. The aerospace and defense industries continue to decline. The prolonged recession has forced people to take lower-paying jobs outside their profession and skill mix. The workers' lost leverage has created in them a need to survive.

One Solution

In all my experience in management, nothing has ever been more difficult than changing a company culture. In my career as a business consultant, I have worked with at least fifteen different companies, each of which was in deep trouble, and each of which had a chance for success if I could just neutralize the current corporate culture. This usually had to be accomplished by replacing at least half the management that had created and perpetuated the culture.

However, all the pressures and insecurity afflicting our work force give companies a better chance of making changes and completely reengineering their companies, as the surviving workers will likely be very cooperative. We also have a chance to eliminate the "I" generation, with the "I will get as much as possible for doing as little as possible" attitude.

Reengineering seems to make a lot of sense, but it could also deal another devastating blow to work force morale in its move to eliminate middle management. Others will find that there is no place for them in the new culture, as many jobs for the untrained and narrowly focused worker could be eliminated.

Hammer and Champy, in Reengineering the Corporation, point out that intelligence and initiative will be primary characteristics required from the worker, with a decreased emphasis on specialized skills. Their book offers examples where the restructuring associated with reengineering eliminated 80% of the people originally involved with a particular process.

However, this seems harsh. Is there an alternative to restructuring the corporate culture? Hammer and Champy, as well as Charles Savage in 5th Generation Management, make it very clear that the answer is "NO!" For large corporations with years of added fat on their payrolls, this restructuring is a must, and the odds are good that enough talent exists to pull it off.

The nation's work force must then rely on American ingenuity to create new products and services, as well as new markets for the workers. If this doesn’t happen, reengineering will have been done in vain. Most importantly, much of the work force must acquire a renewed direction and thrust and seek out all the education and training possible in order to join the new "mainstream."

Human nature resists change, but the time is ripe for reengineering!

It is common to find employees in small companies (under 50 employees) wearing multiple hats, so what can the small company learn from reengineering?

The need to improve customer satisfaction is the driving force behind most of corporate America's attempts to change its culture. However, if they have experienced success, the small company must already make customer satisfaction a high priority. In fact, many small companies thrive because they are far more responsive to the customer's needs than their larger competitors.

Many small companies are started by employees dissatisfied with their employer's poor attitude toward customers. They see a niche for the company that puts the customer first, finds a better way to serve the same customer base, or recognizes a customer need that no one else seems to feel is important.

After all, isn't it nice to know that, when you have a problem, you can call your vendor and talk to someone, usually the president, who can make the commitment to solve your problem -- and then make sure that the commitment is kept? Don't you appreciate it when you don't have to battle your way through several layers of management to get a simple answer to a simple question? When you can get answers in hours instead of days?

How is it possible for the small company to be so responsive? Generally it is because the founder has formed the company precisely to meet such customer needs as quicker turnaround, lower prices allowed by lower overhead, or services that the big companies can't fit into their mainstream. Designed to respond to these needs, the smaller companies are far less complex. As a result, they are almost always in a better position than the larger companies to provide quick solutions to most customer problems. This fact alone goes a long way towards keeping them in business.

Finally, small company management and personnel see a much more direct link between customer satisfaction and their paychecks then their big-company counterparts. They appreciate the fact that the customer pays their salaries, and as a result, are usually more motivated to keep that customer happy.

All this is not to say, however, that small companies have it made and don't need to be concerned with the rewards reengineering techniques have to offer. Often the culture in small companies feels very strongly that, "If it ain't broke, don't fix it." Small companies do not have personnel with the time to study how to do things better. In fact, the owner is often reluctant to confuse the people with new methods and procedures. Finally, if you are wearing several hats, supporting several different steps in a process, it is rather difficult to meet with yourself to discuss efficiency and brainstorm ways to make things better.

As a result, the same problems and stresses will keep reoccurring, but the philosophy is that time is cheap, so we will just have to work a longer day. It would make more sense if, whenever a problem stops the system, there is someone whose regular job it is to think through what happened and try to make improvements. They would examine the situation for ways the problem could have been prevented and ways to ensure that the next crisis won't be treated with the same dilution of energy.

Customer satisfaction can become too important as well. For example, one of my clients had a major customer who was ordering more and more of a product that required certain cables. Unfortunately, however, the vendor was dragging on deliveries. Both management and employees were under a lot of pressure to satisfy this customer at all costs. At one point I walked around the company and found 8 out of 32 people working on the problem from various angles: trying to find a substitute, expediting deliveries, trying to get the customer to take the product without cables for a little while, and stripping other products with similar cable. This much interest at the employee level is commendable, but the fact is that one person could have been working on the problem much more efficiently. We had stressed the importance of satisfying the customer, but had not established correct priorities or given proper direction.

The key question in this example is "How much more might have been accomplished that day if these people hadn't all been working on the same problem?" How much does duplicating efforts like this raise the cost of the product?