How to Optimize Performance in an Organization

What happens when more than one person or more than one entity work together in the same direction? Is the result just the simple sum of their efforts? The answer to this question is yes, but…

ONLY when the elements involved are independent of each other. In the theory of systems, the global “performance” of any collection of entities that are NOT interconnected is simply the sum of the single performances. (Think of a bowling team.)

However, when the entities are interdependent, i.e. interconnected, then the global performance of these entities is NOT the sum of the single performances. The performance of the whole is not just the sum of the separate parts. It can be so much more.

Let’s take an example

If we talk about an organization, e.g. a company that is  made up of 5 different production facilities that operate without inter-depending (as if they were independent companies) then the profit of the whole organization is the simple sum of the profit of the single facilities. Nothing complicated here.

The situation changes drastically when you have a set of facilities that inter-depend. The interdependence is manifested in the exchange of products/services between the different facilities. This exchange generates a global performance that is affected by the variation and co-variation associated with the “exchange process”, and by the combined effect of the different “efforts” of the single facilities. Due to the highly non-linear nature of this process, the global performance of the system cannot, and will never be, the simple sum of the single performances.

How do we ensure optimal performance?

Since we do not know in advance the nature of the variation and co-variation we are dealing with, technically speaking we don’t have any “tool” that can predict the performance of the system. The combined effect of the different efforts can generate a performance that is even better than the sum of the single performances.

The solution to the “optimal performance” problem has various  aspects, and they form the foundation of any attempt to manage an organization systemically. They consist in:

1. Understanding the System
2. Understanding the Variation that affects our processes
3. Synchronizing the System

Let’s take a brief look at these:

1. Understanding the System
First we have to understand the system. What does that mean practically? It means we have to design the interdependencies. We do this by mapping out all the processes with the aid of Deployment Flowcharts.

2. Understanding the Variation that affects our processes

We need to understand the nature of the variation associated with any process we operate.  We can do this by using Statistical Process Control, and we stabilize the processes and work toward the reduction of the associated variation through process improvement.

3. Synchronizing the System
Once the processes are stable, we synchronize the system by subordinating each part of it to a well chosen constraint. In this way we focus the work of the organization towards a common goal   instead of focusing on individual, “local” goals as this leads to sub-optimization.

Hold your horses

In order to give a visual example, the result we obtain is similar to the sum of vectors. What would be the effect of two horses that are pulling a load but are heading in different directions instead of the same direction? The individual effort is the same, but the combined effort is different, depending on the directions they head towards. The more they pull in the same direction (common goal), with minimum diversion (low variation) and in synch, the greater the combined result. And this is why individual performance reviews in organizations make no sense.

To optimize performance we need to design our organizations systemically to make sure that pulling in the same direction with minimum diversion and in synch is exactly what happens.

See our new book ‘Quality, Involvement, Flow: The Systemic Organization’.

About the Author

Angela Montgomery Ph.D. is Partner and Co-founder of Intelligent Management, founded by Dr. Domenico Lepore.  She is co-author with Dr. Domenico Lepore and Dr. Giovanni Siepe of the forthcoming ‘Quality, Involvement, Flow: The Systemic Organization’ from CRC Press, New York. Angela’s new business novel+ website  The Human Constraint looks at how Deming and the Theory of Constraints can create the organization of the future, based on collaboration, network and social innovation.