Companies A and B share equally a major slice of a particular market. They generate about the same revenue, and produce about the same variety of products in the same volume, using the same processes. Both are divisions of major public companies, with about the same net capital and number of employees. They look like twins--except for their engineering functions!
Company A has six people in "engineering." They design the products and manage the tooling and hardware needed to make the products. One of the six is the leader, based on tenure and ability and the earned respect of his colleagues. They often share tasks and while they work diligently, there's no stress or bureaucracy. They don't have a secretary, and don't think they need one.
Company B has nearly 100 people in "engineering." They, too, design the products and the means to produce them. However, they are organized under a vice president, to whom five group leaders report. All six have administrative assistants. Here, too, everyone is busy.
So, if Companies A and B produce about the same number of products and earn about the same revenue, what do the "other 90 people" in Company B do to keep them so busy?
They train, meet, strategize, set goals and initiatives, set budgets, forecast industry trends, attend seminars, participate in Kaizen blitzes, and form and work as teams. The managers mentor and guide and help develop individual skills.
This is an abundance of good stuff. The vice president for "engineering" is well-regarded in the corporation, and is in line for higher office. There is one obvious problem, however: The engineering function in Company B costs nearly 17 times more than it does in Company A, and produces not one iota more revenue!
One might conclude that the senior managers of Company B are either suicidal or idiotic. The fact is they are neither; however, they have lost sight of the engineering function's objective. Company B could eliminate all forms of "engineering" and the engineering function would continue unfazed. It's even likely to grow regardless of what happens to the need for real engineering effort. Here are the growth hormones:
Status. A vice president is in charge. Vice presidents must have managers reporting to them, and managerial prominence at all levels is a function of the number of persons managed. This stimulus for growth has nothing to do with the reason for a group to exist, or its function.
Initiatives du jour. Contemporary management theory stresses social initiatives such as training, communication and team building. So it isn't surprising that people take them so seriously that they become the major element of the workday.
Stealth. The engineering function in Company B didn't grow to its present size overnight. It grew gradually, adding a person here, another there, justified by the workload. No one would have signed off on such a behemoth at one step, but because it grew over time, no one noticed.
Engineering is the example here, but it could be any function or any department in any firm. In this case, the overstaffing is gargantuan and the extra cost critical to the financial performance of the firm. There may very well be similar cases in your firm and, in these days of soft markets and cost reduction, they should be the places to start pruning!
What's your opinion? Whether you agree or disagree, Don Ewaldz will welcome your comments. You can contact him via the Bourton Group's Web site. Just point your browser to www.bourtongroup.com and click on "Contact Us".