ORGANISATIONAL FAULTS

  1. Too Many Levels of Management

    2. Many companies seem to be overmanaged. There are the Chairman of the Board, the Vice-Chairman, the Managing Director, the executive Directors, the senior Managers,
    the group Managers, the assistant Managers, the divisional Managers, the general Managers, and the assistant general Managers,
    to mention only some of the more common titles.
    Are all these levels necessary? Perhaps not.
    In fact probably between 10 to 20 per cent of all management and supervisory levels hinder rather than help company efficiency.
    They raise costs unnecessarily; not merely the costs of salaries, but of office space, data processing, and those costs relating to communications.
    Furthermore companies which are top-heavy are too slow to react to change and may founder when the going gets rough.

    The Cost of Organisation For each key position the cost of organisation includes:
    1. Salary
    2. Bonus and incentive plans
    3. Share options (perhaps)
    4. The cost of information received and distributed
    5. Travel and related expenses
    6. Fringe benefits - Top Hat pension, life insurance, BUPA medical, company car, free housing etc.
    7. Communication costs - telephone, correspondence etc.
    8. Office space used plus related facilities costs
    9. Other costs - secretary, use of services (e.g. personnel, maintenance), administrative and supervisory costs (a suitable portion), stationery and supplies.
    10. Holidays and sick pay costs.

    Depending upon the objectives of the calculation, further costs must be taken into account:-
    When building an organisation, recruiting and training costs must be added.
    When eliminating people, costs related to early retirements and dismissals must be subtracted from the savings indicated above.


  2. Unclear Performance Standards

    3. Few companies make it clear to each person what the meaning of a job well-done really is.
    Is it then surprising that performance in such companies is below par?
    People must know what is expected of them in clear and certain terms.
    Even the brightest people are not mind readers, and it is only in this way that full efficiency can be achieved.


  3. Unpredictable Discipline

    4. When business is bad a company is torn between full decentralisation of authority on the one hand,
    and tight control over details on the other.
    Frequently both approaches are applied, almost at the same time, in a given company.
    The result is usually management through fear.
    The absence of a clear organisation plan is usually evident to all.
    Trial and error become the order of the day.
    The usual consequence of this situation is that the real business problems are amplified out of all proportion, and their effect is much more devastating
    than it is in a company where consistent, confident discipline is applied all the time.


  4. The Encouragement of Mediocre Performers

    5. This assertion is unfortunately correct in many companies where the following conditions exist:-
    1. relatively narrow salary ranges in most key categories of personnel, such as salesmen and foremen
    2. no incentive of any kind
    3. deliberate encouragement of a uniform type of personal behaviour; an emphasis on conformity rather than on specific performance and results
    4. a poorly executed merit rating system, where poor ratings for poor performance are hardly ever recorded
    5. few, if any, dismissals or demotions for poor performance
    6. promotions heavily influenced by seniority and group acceptability within the company.
    The net result of all these is to discourage, whether we intend it or not, the aggressive, the unusually competent,
    and the innovator from remaining with the company.
    Regrettably what is left includes most, if not all, of the average performers and an all-too-small proportion of the best men.
    The best people in any company are usually blessed with impatience and a personal sense of urgency which produces success for the firms
    they serve and which achieves their own aspirations. To retain a large proportion of such men requires a system of early identification and accelerated promotion, which is rarely found.


  5. Poor Co-ordination, Co-operation, and Teamwork

    6. The combination of rigid adherence to the line-staff concept, excessive decentralisation of authority without adequate controls,
    and position descriptions which fail to describe even minimal necessary co-operative relationships usually produces this condition.
    Specific examples of poor teamwork include:-
    1. the common feud between sales and production, which costs many companies substantial sums every year.
    2. only partial utilisation of the talents of expensive staff people.
    3. the frequent failure of decentralised divisions of companies to co-operate voluntarily on any matter whatsoever.
      Even savings running potentially into thousands of pounds do not appear to change this basic infatuation with full autonomy without heavy-handed intervention from above.


  6. Toleration or Laissez Faire?

    7. Too often tolerance in general is regarded as a good thing, without asking, "toleration of what"?
    Consequently tolerance ends up as too little management, and merely winked at are such evils as:
    1. poor performance
    2. non-compliance with clearly defined company policies
    3. inadequate reporting
    4. failure to disclose the true facts behind overspending on capital and operating budgets
    5. failure to meet profit, volume, and standard cost targets.
    Just as management through fear is destructive to an organisation, so is the absence of remedial action when indicated by any of these conditions.
    In addition, in some companies where some or all of the above conditions exist,
    senior management assumes that key subordinates are operating on a high level of efficiency and taking a serious businesslike approach to current problems.
    Often subsequent investigations indicate that in many instances this confidence has not been warranted.
    Meanwhile, competent employees have been shocked by what appears to them to be top management toleration of incompetence,
    and lack of integrity, and have either left in disgust or lost all incentive to do their best.


  7. The Mixed (or Mixed-up) Organisation Structure

    8. This condition appears in so many different forms that it is impossible to describe all the many examples which represent this bad habit.
    This organisation chart looks weird enough. Would it surprise the student to learn that no less than seven separate groups perform
    a variety of sales and marketing functions, of which only two report to the Director of Marketing?
    Furthermore, the Director of Research and Development manages three manufacturing establishments which are not in the domain of the Director of Manufacturing.
    Is a condition like this rare? No. It can be found in varying degrees in a great many companies.
    We tolerate irrational approaches to organisational design which we would never permit for product design, plant layout, or packaging.
    And the resultant overlapping and duplication of effort costs companies dearly.


  8. The Committee System of Management

    9. The committee habit occurs in many companies to such an extent that senior people often have to do double duty.
    Many of the meetings are badly run and poorly conceived. Often senior executives hardly have time to do their own work properly.
    We fall so deeply into this habit that it usually takes well-conceived, drastic action to correct this situation.
    One such action is the proper design and execution of a committee organisation structure appropriate to the requirements of today's companies.


  9. The Absence of a Co-ordinated Manpower Planning and Control Function.

    10. Here we have failed to recognise that our manpower needs change gradually from year to year.
    In the absence of careful long- and short-range planning for future manpower needs, many companies end up with:
    1. too many people of certain talents
    2. key shortages in other categories
    3. no capabilities of any kind in a third category.
    A lack of balance also produces excessive total-salary and fringe-benefit costs, as well as an imbalance in age distribution,
    education, and experience of personnel.
    The manpower planning and control function is rarely performed effectively at a high level of professional excellence.


  10. Emphasising the Development of Men as the Sole Purpose of Company Organisation.

    11. How many speakers have said proudly about their own companies, "A basic object of our organisation is to develop men"?
    Calling this a "bad habit" is not likely to be popular.
    Yet this policy statement has come to mean, in a number of companies, inefficiency and the unnecessary "development" and encouragement of some basically weak and ineffective people.
    Indeed, in some companies this habit threatens to create too many lifelong trainees here and there throughout the company whose sole goal in life is "more training".
    The thought of "doing" or "accomplishing" as an objective has not been developed as a primary goal in such men,
    because they have not regularly been in situations where achievement and performance of specific results have been demanded of them.
Question: Why are conditions like these allowed to persist?
Answer : There is one overriding reason: Basic organisational decisions are conceived at one point in time,
executed over a much later period (after the original conditions have changed) and not reviewed at regular intervals.
Consequently it is difficult for the manager to know in retrospect whether the decision was right or wrong!
The net effect is that we tend to regard organisational change with suspicion.
We fear tampering with an environment that appears to be giving the company a reasonable amount of success.