Functional silos – the idea that all engineers have to work in an engineering department, all sales people have to work in a sales department and all procurement people have to work in a purchasing department – represent the over-arching deficiency in just about all companies. They are at the root of enormous amounts of wasted time and money and they are at the root of most lousy cultures. The term ‘politics’ so often used in business refers primarily to the competition and jockeying between the various functional departments for supremacy within the company.
Value Stream Mapping is such a powerful tool for the simple reason that it provides a comprehensive look at just how screwed up things are as they pass from one silo to the next; each with a different set of priorities and metrics; none responsible for the whole process from end to end. In 99% of its applications Value Stream Mapping efforts pull up short in identifying the root cause of problems. Instead of correctly pointing out that the organizational chart is the problem, something one level from that is named, and the solutions are usually new meetings, new reports, some other new communication mechanism to try to fix the gap between the departments and to eliminate the waste and redundancy resulting from departments operating on different wave lengths.
The silos even have their different lingos. Outsiders often have no idea what the sales or engineering people are even talking about half the time. Accounting systems muddy the waters further with all of the departmental overheads being calculated and accumulated until there is no way of understanding what anything really costs. And ERP systems are huge money pits largely intended to get sales, purchasing and production folks into some sense of unison.
There is no good reason for organizing this way. It is just the way things have always been done. The fundamental question is, ‘When a Value Stream Mapping exercise identifies all sorts of problems and opportunities, why would anyone want to launch a few projects to fix things, and then go right back to the organizational structure that (1) created the problems to begin with; and (2) made them impossible to see without a Value Stream Mapping project?’
To understand why companies like Aluminum Trailer are so much faster, have such lower costs, have such better quality and use lean tools so much more effectively one has only to pause the well viewed video of their value focus and stop about 9 minutes and 34 seconds into it. The frame to the left is a shot of one of the value stream offices. These are folks who previously worked in sales, engineering, purchasing, production and so forth. Now they are in one department – the value stream. None are measured by departmental or functional objectives. All are equally measured by value stream results – contribution to profit, delivery, quality.
With that simple change, meetings, reports and the need for lots of computers went up in smoke. Costs went down and lead times magically dropped by huge numbers. No need for most of the meetings, emails and computer applications. People just talk to each other and get things done quickly. No more one-size-fits-all supply chain and factory scheduling techniques. Each value stream has their own approach that best serves their customers. No more convoluted, murky overhead calculations. Instead, the folks at ATC work full time, every day on optimizing the value stream map.
Why doesn't everyone do this in light of the fact that 100% of the companies that have joined the lean elite by transitioning their formal organizational structures and business processes to value streams have enjoyed near unbelievable gains in sales and profits? No good reason. Just management culture and leadership. Most leaders are all in when it comes to lean so long as the gut wrenching change and cultural overhaul is on the factory floor. When confronted with the proposition that to reach the full promise of lean the big change is really in them and in their personal sandboxes they are unwilling to meet the challenge. It is the true test of leadership commitment to lean, and most come up short.
That is why the folks at ATC put videos like this out in the public domain. It is why other companies well along the path to value stream management are willing to put their management processes out for all to see at events such as the Lean Accounting Summit. They know their competitors don’t have the wisdom and courage to follow suit. The competition will continue to play the safer hand of looking to big computer systems and overly complicated metrics and employee performance processes to solve their silo structure problems.
What is especially interesting is that value stream management structures are a unique American contribution to lean. Toyota has never seen the need to change its structure for the simple reason that auto plants are basically a value stream already. For all the talk about SMED and one piece flow, an auto plant has a pretty limited product range and focuses on a single market. Lean is a lot easier in an auto plant than in most factories. Value streams arose from non-auto plants that make a wide range of products and serve multiple markets, each with their own value propositions, flows and rhythms. Toyota is seeing the light, however, and a big part of their recent restructuring is a move toward breaking down silos and creating a cross functional organization. So the pupil is teaching the master a thing or two.