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It may sound alarming, but the truth is that most organizations perform at less than their actual capacity.
The organization’s capacity is the sum total of the capacities of individuals it has, the processes it employs to do work, the systems it has built over time, and the culture it has deliberately or unconsciously helped to evolve.
We shall first discuss the reasons as to how and why it happens.
Size notwithstanding, every organization has multiple departments and divisions. They are assigned to do various parts of the whole that the organization is designed to deliver. Let us take the example of a manufacturing company. The marketing will give forecast of what it wants to take to market and how much, procurement will procure, warehouse will store and issue, production will manufacture, quality assurance will ensure quality, marketing will then market, sales will sell, distribution will make product available; the finance will count money, inflow and outflow. The layout is synchronized and if all of them work in a well-oiled manner, the output will be high, and business would be great. In real life however, the story gets changed. Marketing gives a forecast which is highly inaccurate; procurement does not buy on time or right materials or right quantities; warehouse has problem reconciling physical stock with data; production has down times and poor planning; quality assurance is a pain in the neck rather than value adder; marketing runs ineffective campaigns, sales does not meet the targets it commits; distribution does not match availability requirement; and finance is actually interested in penny pinching in the name of financial management. All departments knowingly and unknowingly keep dragging the overall performance down. In truly bad places, the overall performance may be really dismal; in better managed places, it may be somewhat better.
Three main reasons may be identified.
Lack of Understanding of Relationships Within Organizational Universe
The most common issue is the lack of recognition that everyone is working for a common purpose. Everyone knows they are working for the same ‘company’ and ‘business, but their ‘causes’ are different. They know very clearly about their functions. In fact, they are too aware of it, and are so engrossed in their own work that they fail to see how their part is connected to the next part or the whole business. The common objective becomes so much elusive that the effort and hard work is not channelized towards it.
Lack of Appreciation for Others’ Work
“I probably do the most important job. Without my function, this company would not survive for long. Everyone else must support me so that the business keeps running”. Sounds familiar? Each and every department feels and says the same thing and rightly so. Each department certainly has critical importance. However, what is forgotten is that one is not more important, and the others are not less important. If everyone gives others due importance, there would be less friction and more speed.
Lack of Organizational Perspective
For decades, it was believed that the employees should only be given information on ‘need-to-know’ basis. This gave rise to development of departmental fiefdoms based on short-term views, self-centeredness, and survival of the biggest or most powerful. If you talk to someone sitting in accounts, how does his particular work relate to company’s growth, he would look at you strangely and say “My job is to keep books. What do I have to do with growth?” This approach is almost universal and is hurting the organizations enormously.
Culture of Organization
Simplest definition of culture is ‘the way the things are done here’. Culture builds itself based upon the understanding and consensus of people about practices. It is therefore important to influence the practices so that the culture develops in the right direction. Some organizations have culture of performance, while many others have culture of dragging the work. Civil Service and most government departments are notorious for ‘not doing’. This is their culture. It does not mean that all private corporates have culture of ‘doing things’. The situation is not too different on this side as well.
The ‘What To Do
Improving and sustaining organizational performance is a complex task which needs consistent work over time. It is like growing a child. Primary onus is on the corporate leaders; be they owners or employees. Unfortunately, most owners believe that treating employees poorly and harshly will drive performance. In some ways, it keeps proving itself right also. Over time, only those people survive who accept this treatment. They also know that bad treatment is not always motivated by bad performance; it arises out of the sense of ownership. Therefore, the corporate owners and leaders have to understand what level of performance they want to achieve.
Change starts form better hiring, engaging employees, creating atmosphere of respect for work, developing systems and processes and giving freedom even within defined limits. Performance is the only factor that will sustain and grow a company. Nothing else is as critical to survival.