At enVista we believe there are four fundamental types of supply chains: Distribution, Manufacturing, Purchasing and Service Centric. A vertically integrated CPG company would be classified as a hybrid of three different supply chains (Manufacturing, Purchasing and Distribution) compared to a retailer who is (Purchasing and Distribution centric). At the end of the day and regardless of which type of supply chain your company is your supply chain is required to meet or exceed the end customer’s expectations while maintaining profitability. Supply Chains are becoming more complex, they are dynamic in nature due to economic pressures and require agility in order to be competitive. There is an increasing interdependence on technology, processes and people. The Supply Chain Eco-System is ever evolving, and what has worked in the past is no guarantee for future success. Technology solutions used to manage the above supply chains vary vastly based upon the business objectives of the company. A pure-e-commerce retailer has different software requirements compared to manufacturer of cell phones.

Historically, Supply Chain practitioners have had to use: 1) enterprise resource planning (ERP), 2) best of breed (BOB) or 3) legacy or home grown solutions to manage and execute their supply chains. Over the last decade many companies have used a combination of BOB applications with their ERP system. Or in the case of some retailers they have used a culmination of BOB and legacy solutions for merchandising, replenishment, allocations, financials, and distribution to manage their business.

Many of the ERP software vendors have tried to develop end to end solutions but have struggled in the area of optimization and execution. To overcome the functionality gaps in their core solution they have made acquisitions to fill in the holes. On the other hand non-ERP providers who have focused on execution and optimization have made acquisitions to overcome their inability to plan and become the transaction of “record”; single data model for the enterprise.

These software companies have either built or acquired a “suite“ of solutions that may or may not be integrated but more importantly do not work on a common data model with shared business objects. The extreme is a software vendor that has made numerous acquisitions or has developed solutions on different technology stacks that are not integrated but may have “assembled” their solutions with a common user interface to look like a “suite” but the underpinning solutions are not integrated and do not share data between applications in order to form basic optimization.

Imagine for a second that you are a Sr. Supply Chain Officer and there is complete transparency from source to consumption. Your organization is completely aligned based upon business objectives and desired outcomes that have been developed by your Executives. Your team acts and behaves knowing the decision and actions they make impact either 1) customer service, 2) top line revenue, and/or 3) profitability. Unfortunately in many retail environments or complex supply chain environment resources make decisions in a vacuum not knowing REAL time the impact their decisions may have on the supply chain upstream and down-stream. For example a merchant/buyer decides to bring in product early because of potential spike in demand (forecasted snow storm), they decide to expedite the freight and the only supplier that has the desired inventory can ship on Friday meaning the warehouse will have to work on Saturday and deliver to the store during the weekend. Sounds great in theory but what is the costs and service impact of making that decision. What happens if the snow storm does not hit as predicted what is the impact of the extra inventory, space in the warehouse and expedited transportation cost? But on the other hand the snow storm does hit and the buyer was right, did the buyer know the impact on his or her margins and the cost to serve prior to making the decision….I doubt it. How about if the platform architecture used SOAP and WSDL to allow for easy integration to other applications, widgets, and programming languages and informed the buyers of the snow storm proactively because the demand planning and replenishment system was tied to the National Weather Bureau.

This leads to why I believe having a universal technology “transparent platform” to run a supply chain where-by there is complete transparency is key to improving supply chain performance in 2010 and beyond. There is “one version of the truth” from source to consumption. Having a platform is more than just visibility and alerts, which are historical in nature. I am referring to multiple applications that reside on a single platform that can be used for optimization and predictive what if analysis. In the case of my previous example, if there was a single platform sharing the same data model and with common business objects then the buyer could prior to issuing the PO to the ski supplier understand the impact on his or her decision. What if I execute one PO and expedite the freight by having the vendor drop ship to a few stores, versus shipping to the DC. What if I ship to the stores on Monday vs. Saturday, what is the impact to my sale through rate on the item and transportation cost. My point is that this is impossible without a single platform that is synchronized from source to consumption. The buyer could have completely eroded his margins on the item because the merchandise had to be air freighted from the east coast to west coast.

The trend for 2010 and beyond is for supply chain centric software technology firms to develop their solutions on a single “transparent platform” which runs on one technology stack with one data model. Supply Chain Planning and Execution centric software vendors are adopting integrated work flow and user personalization (defined roles) with common business objects. Meaning there is only one item master, purchase order, and sales order. This minimizes master data integrity issues and ensures that ALL supply chain management personnel are using the same data. Data integrity is key when trying to develop multiple reports, dashboards or queries across an organizations enterprise and supply chain. Having common business objects that are shared across applications is mission critical to drive the lowest total cost of ownership. In addition common business objects are shared between applications (functionality) allowing for either simultaneous optimization or common work flow. An example would be optimizing purchase order consolidation for an inbound load plan and sharing that consolidation with the WMS. Having one PO table within the data base that is used by both the WMS and TMS with shared business objects allows for improved work flow through out a company’s supply chain. Last but not least a platform allows for transparency and drives accountability within the end user community. For example a vendor is going to be late with a shipment based upon the initial requested must arrive by date (MABB), an alert is sent to the buyer, replenishment team, inbound receiving team and transportation team providing each with visibility to react to the alert but more importantly allowing the applications to re-plan automatically. This could mean sourcing the product from the other vendor or expediting the freight and knowing the costs impact in advance.

The new splash and buzz is about getting on one “transparent platform”. Technology has matured to allow for a common work flow layers, business objects layers, optimization layers, web services layers and business intelligence (management reporting) layers. Supply chain are not getting simpler to manage they are getting more complex. The future is about cross-functional awareness and organizational accountability through a “Transparent Technology Platform” which reduces the complexity and simplifies decision making and execution.

Is this a dream or reality? I encourage any solution provider: Manhattan Associates, Red Prairie, High Jump, Microsoft, JDA, I2, SAP, or Oracle to come forward with their plans to move from traditional suites and assembly architecture to what I predict will be a revolutionary “Transparent Technology Platform.”

Always in Motion,

Jim Barnes

As I write this from my hotel in Germany, 2009 is behind us. I don't need to inform anyone of the economic crisis our country has experienced over the last several quarters. Our economic meltdown has impacted almost everyone, regardless of industry. The retail industry, however, was hit especially hard (specialty retail, apparel and footwear retailers), and numerous retailers were forced to close stores in order to reduce cost and diminish operating losses.

Since retail sales impact manufacturers and distributors upstream in the chain, let's look ahead to this year. There are two questions to ask: Is the retail industry back on the right track and what can retailers do differently to ensure success?

I will attempt to answer these questions using a number of key retail statistics. As examples, I have selected companies where I have a personal interest in the company (they are an enVista client or I use their goods and services). Two key public retail company indicators of success are comp sales and annual stock price percentage change. Same store sales reveal the strength and growth or weakness and retraction of a retail chain. Stock price is how much one is willing to pay for one share based upon the company's performance and should not to be confused with stock value.

When evaluating the data in the table below I believe these retailers are on the right track to recovery. The majority of 2008 and 2009 have been dismal for retailers and buyers have lost confidence in the economy due to uncertainty about their own economic fate. However, the comp sales figures for these companies are improving compared to 2008 (although, there are really only two directions they could go - up or bankrupt). If you look at the stock price percentage change last year, all of the companies have made significant improvement. (Unfortunately, I did not invest in Nordstrom on December 31, 2009. They produced a return of 182% - not bad!). However, a key static is a two-year return. Had you invested in these companies two years prior on December 31, 2007, your return on investment would have been less than stellar.

Source: Yahoo Finance and retailindustry.about.com

Why do some retailers outperform others and what do underperforming retailers need to do change their fortunes?  
Obviously, all retailers need to have great merchandise that we as consumers want to buy. However, retailers that excel in 2010 and beyond will focus on 1) customer service and satisfaction, 2) integrated technology platforms that allow for exceeding customer expectations and exceptional customer service, 3) integrated applications on one data model that allow improved work flows from point of sale, replenishment, merchandise planning and allocation, and 4) retailers must be relentless about cost containment (inventory working capital and operating expenses).

Let's look at each of these points:

• Customer Service includes activities and actions that an accountable retail organization is required to perform in order to enhance the level of customer satisfaction. Customer service and satisfaction are not the same. Customer satisfaction is the feeling that a product or service has met the customer's expectation.
  
  
  Nordstrom and Walgreens understand customer service and hence deliver great customer satisfaction. What makes these two companies unique is that they go beyond the basics of customer service.
  
  
  The Nordstrom name is synonymous with customer service, it is engrained into their culture which is aligned with their company's business objectives. Nordstrom makes you feel good about buying their merchandise. When you buy an item from Nordstrom, the sales person will walk around the sales counter, hand you your purchase and shake your hand. That is customer service. Some have argued that the quality and level of customer service has decreased in recent years, and that this can be attributed to a lack of support or understanding at the executive and middle management levels of a corporation and/or a customer service policy. In the case of Nordstrom, I believe their executives realize that the customer service is a key competitive differentiator and one of their main business priorities.
  
  
• Retailers need to understand that an integrated technology platform is also one of the keys to improved customer service. I personally believe that Walgreens has used their integrated technology to improve customer service, specifically in the area of pharmacy management.
  
  
  I recently experienced how Walgreens has integrated technology and applications to improve the flow of information and data from patient, doctor, pharmacist, retail store and health care provider. My wife, Julie, needed medication that required a doctor's prescription. From the time my wife called the doctor (on a holiday), to the time I picked up her medication was less than 1 ½  hours. Walgreens has used a superior technology stack and platform to connect and manage data information and make things easier for their customers.  For example, their integrated technologies surrounding pharmacy cases are proactive as they called us when my wife's prescription was ready. Due to the positive experience, I purchased $50 worth of staple merchandise while picking up my wife's prescription... unplanned sales revenue due to a great customer experience.
  
  
  Walgreens understands the importance of customer service and satisfaction and uses technology to differentiate themselves from their competitors. Customer satisfaction provides an indication of how successful the organization is at providing products and/or services to the marketplace.  Have you polled your customers to see how satisfied they are with your company?
  
  
• Retailers need to replace their disparate legacy applications which typically run on a multitude of databases and technology stacks (platforms and operating systems) and implement an integrated application which utilizes the same data model and framework. Why? Because as a retailer your core application suite is required to support a synchronized flow of inventory to meet variable demand. Does this mean that every application requires the same data model and systems architecture? No, but if you are a multi-channel retailer, some functions such as: demand planning, forecasting, purchase planning, purchase execution, merchandise planning and allocation, store replenishment, POS and visibility should all be on the same data model and architecture.
  
  
  I am an advocate of running a retail company's core solutions on the same data model for the following reasons: improved flow of information and data across functional departments. The improved information flow increases transparency and improves organizational accountability. There is reduced total cost of ownership with one core solution versus multiple applications. The core solution must provide the retailer the ability to be agile and flexible to meet customer demands through the use of SOA and end user configuration. Unfortunately, Microsoft Excel is by far the leading application used by small and mid-size retailers to manage their company's work flow.
  
  
  You may be thinking this is contrary to the common belief that Best of Breed (BOB) solutions provide increased flexibility and agility. Retail technology providers are using SOA to extend their applications allowing non-developers to make rapid changes. Manhattan Associates, JDA and Microsoft understand the need to run core retail systems on one technology platform and data model. However Microsoft's recent acquisition of LS Retail has taken it beyond just core retail flow and now they have one common data model that runs the entire Retail Enterprise (MS AX and Navision). Microsoft's only gap is in the area of warehouse management system. However Manhattan Associates SCALE (ILS.NET) is completely integrated with Microsoft's AX platform and provides a powerful combination for that medium size retailer with both push and pull replenishment strategies.
  
  
  From an overall sales process engineering effort, customer service plays an important role in an organization's ability to generate income and revenue. Retailers must at least keep up with the technology curve. In today's fast-paced world where customers are more demanding and where social media has increased transparency, technology has become the core of what we do and who we are.
  
  
  Customer service is normally an integral part of a company's customer value proposition. In their book, Rules to Break and Laws to Follow, Don Peppers and Martha Rogers, Ph.D. write that "Customers have memories. They will remember you, whether you remember them or not." They further say that, "Customer trust can be destroyed at once by a major service problem, or it can be undermined one day at a time, with a thousand small demonstrations of incompetence.”
  
  
• We are not out of the woods and some predict that our economy will not fully recover until 2011. In the meantime, retailers are required to focus on the bottom line and ensure that they are managing and reducing their working capital (inventory) and operating expenses.
  
  
  The old cliché that retailers are required to get the right product to right place at the right price is still relevant. However, retailers in 2010 must also focus on getting the right product to the customer at the lowest total supply chain cost. Last year in one of my blog entries, What You Can do Now to Cut Costs in These Economic Times, I wrote the following: 1) the retailers that are surviving provide value through discount prices and, in most cases, exceptional customer service, and 2) the retailers that are surviving, and will continue to survive, are constantly seeking efficiencies in their supply chains. They are squeezing every penny from source to consumption. Wal-Mart's entire business model is focused on cost containment, cost reduction or cost postponement. As I said last year and 2010 is no different, retailers require a relentless 24/7 and 365 days a year focus on COST. In 2010 retailers most also focus on ROIC (Return on Investment Capital). The wrong inventory, too much inventory and in the wrong place is not acceptable in today's competitive retail environment.
  
  
  Retailers and companies in general that are focused on customer service and investing in integrated technology in order to improve their customer's experience will be the big winners in 2010. In addition, they will continue to develop tactical and strategic initiatives focused on enterprise cost and waste management.

To validate my point, Wal-Mart's stock price has increased by 12.46% for the same two year period compared to the sample of retailers I listed above for the same period. As for the technology stocks, both Microsoft and Manhattan Associates' stock prices are -16.87% and -9.68% for the same two year period (12/31/07 - 12/31/09); however, they have recovered significantly from stock price lows of 50% of their current price in the first quarter of 2009.

I believe all signs point that we are moving in the right direction; however, I predict that retailers focused on customer service and cost containment using an integrated technology strategy will survive and those that don't…

I have spent the last 4½ months in Europe developing a Supply Chain Strategy for a Global Company that distributes “widgets” in Western, Southern and Northern Europe. During this time, I became immersed in the culture and business practices of the region. Now that I am back in the States, it is especially apparent to me that Europe is faced with different cultural, language and infrastructure challenges compared to the U.S.

I have provided a simple table below that illustrates the geographical region and background information on each of the countries in the European Union (EU). (Although, Norway and Switzerland are not part of the EU and most likely never will be- unless Norway’s oil reserve dries up and the Swiss decide get out international banking). The Union is made up of many countries with unique cultures, languages and business infrastructure. This presents clear business challenges to the region, especially within supply chain.

In the table below the population for each country may be slightly out-of-date, but what is important is the relative size of the population compared to other countries. Population size also provides insight into the size of the consumer market.

I don’t claim to be an expert on European Supply Chains but over the last 4 ½ months and now my third European Supply Chain design in seven years, I have learned and experienced a lot. Over the last seven years I have seen significant changes in Europe. Additional countries have joined the EU. Countries are slowly but surely building out logistics infrastructure. Most of all, European countries are starting to realize that in order to be competitive, they must act as ONE. The economy, global competition, and market conditions have taken a toll in Europe. In the past, the mission of “Think Globally and Act Locally” has only been a tagline within Europe, without real execution. Companies in Europe are now acting on this mission. They don’t have a choice.

Culture & Language:

Americans struggle sometimes with how to define our culture. . Our 250-year old culture is still taking shape and maturing, whereas European countries draw from cultures that date back over 2,000 years. Thus, the culture is much more ingrained into the rhythm of life and business and into the attitudes of their people.

During my most recent stay, I spent the majority of my time in Germany, Spain, Italy, Denmark, Slovakia and Belgium. While in Germany, I made camp in a small city called Trier. The Romans built Trier in approximately 180 AD; Trier was the largest Roman Empire North of the Alps. Today there are numerous historical Roman artifacts in Trier: Porte Negra, the Coliseum, and numerous bath houses. The people of Trier are proud of the fact that they live in the oldest city in Germany. There is a strong and rich legacy that strongly influences attitudes and practices.

As an American visitor in Trier and throughout Europe, I clearly felt the distinct and rich heritage of art, architecture, food, language, religion, and family ties and tradition. Now consider how the culture of each country influences business practices. Instead of one universal language in the EU, there are many different languages and dialects. There are long-standing alliances and discord between countries. And there are different mindsets that all weave together to create a colorful, and sometimes difficult patchwork in which to conduct business. Americans sometimes have a mentality of “what is good for the U.S. must be good for Europe.” Clearly however, the business landscapes are distinctly different, and must be treated accordingly. Americans need to keep an open mind and consider culture and language differences when designing a European Supply Chain.

Infrastructure:

In Europe there is perception and reality that business is conducted within Country and you cannot conduct business across borders. Many global and international companies are set up with independent operating business units in each country because of language and cultural variances. Does this matter when it comes to designing a European Supply Chains? The answer is ‘yes.’

Unfortunately many companies, as a result of acquisitions, mergers, or go to market strategy, have established independent or decentralized supply chain networks to support the local business climate. It is not uncommon for a company to have different sales, administration support, and warehouses spread throughout Europe in order to service their local customer base. Many customers (Retail and Wholesale) expect that a Distribution Centric supplier and organization have in country stock and can service their needs by the next business day (17:00). I believe the last time I completed a U.S. network analysis where the client needed next-day coverage using a ground parcel network, the company had to have seven distribution centers (covering all 42,000+ US Postal Codes). You may be thinking it is simple, Europe is not that big. And you’re right, Europe is not that big compared to the U.S., but there are a number of infrastructure and tax challenges that must be considered when doing business in Europe.

It is a fact that Europe as whole is 10+ years behind the U.S. when comes to supply chain infrastructure, and in some cases, countries are 20+ years behind. I define supply chain infrastructure as air, rail and road networks, transport carrier coverage (all modes), supply chain execution technology, open trade policies (VAT Exempt), and free circulation of goods.

Two weeks ago I spent two full days with two of the larger parcel carriers in Europe (DPD and UPS). Meeting with each carrier validated my assumption about the logistics and technology infrastructure across Europe. UPS started their European operation in 1976 within Germany. This makes sense since Germany has the largest population and largest GDP within Europe. (For comparison purposes, imagine that UPS started their U.S. operations in California). The UPS European network was designed to optimize Germany, not Europe. This is not stay that UPS does not service other countries because they do. However, when UPS designed their network they designed their parcel network to optimize “in country” shipments versus all of Europe. Their major ground hub, which was built in Frankfurt, came online about 10 years ago. Similar to the U.S., UPS Europe utilizes a hub and spoke network, therefore packages most likely going through Frankfurt for sortation. UPS admits that had they had the opportunity to design a European Ground Network from scratch it would look entirely different. UPS by far has the strongest technology in Europe compared to their competition, and more importantly, it uses the same technology solution for all shipments within Europe.

In contrast to the U.S., European Parcel Carriers do not use zone & weight based pricing. Only a handful LTL carriers use tariffs. If you have ever negotiated a LTL or Parcel contract in the U.S., you understand the complexities. In Europe, these shipments are charged a flat rate, regardless of distance, but rates do include weight breaks.

DPD is an interesting company. The French Post owns approximately 86% of DPD. DPD is a non-asset based carrier that uses sub-contractors and an extensive franchise network to deliver their parcels. Unlike UPS, they use a “dynamic” ground network which is a fancy way to say that they have numerous depots and hubs and they ship point to point (line haul) from any depot to any depot. The advantage to their network is that they can improve both cut-off times and transit times. Although DPD is extremely competitive on pricing, you get what you pay for. If you are shipping cross0 border, you will be dealing with multiple entities and technology platforms.

I use the example of DPD and UPS to illustrate that even two of the largest parcel carriers in Europe do not provide a “Total European Solution.” To further validate the lack of infrastructure in Europe, I challenge anyone to find a parcel and LTL execution system that can execute rating, routing and carrier compliance labeling within Europe. I am not referring to a Transportation Management System, I am referring to a simple parcel/LTL execution system. In the U.S., we have numerous options: Kewill, Connect Ship, Logicore, Varsity Ship, and wide number of U.S. based WMS providers. In Europe it is a different game. There are companies that have “in country” solutions but there is not ONE solution provider that has a system that effectively complies with all of Europe.

The European Union (EU) was established to open up free trade between its members and allow free trade between countries, much like NAFTA. The reality is that each country wants a cut of the trade and they do this through a Value Added Tax (VAT). I have provided a VAT table below. The VAT laws in Europe are complex. I suggest that if you are going to ship cross-border (even within the EU), hire a VAT lawyer. Ultimately some participant in the source to consumption supply chain is going to pay the VAT.

In summary, when designing a European supply chain network there are many factors that must be considered, including: cost, service, inventory and risk. Regardless if the network design is for Europe or the United States always develop value stream maps from the customer backwards. However, a European network design provides challenges beyond cost and service. In a continent of diverse cultures and languages, humility, an open mind and willingness to learn will get you a long way. Of course, this practice will get you a long way in life in general too.

Always in Motion,

Jim Barnes

When you spot a penny on the ground do you pass it by or pick it up? I have a compulsion for picking up pennies when I see them. It is not because I think I can buy a lot with a penny in the 21st Century. For me it is a mindset, a disciplined attitude about saving money. When the opportunity presents itself, my natural instinct is to pocket a penny because I am keenly aware that pennies make dollars, dollars make hundreds, and hundreds make thousands of dollars.

This same mindset is required when evaluating Performance Labor Management Systems and programs. It is the cumulative pennies that are saved over time from such programs that create significant value. Consequently, I am amazed that in today's economic times executives are willing to walk by pennies on a daily basis that add up to millions of dollars in savings for their organizations. Is it a lack of focus on their part? Is it because executives are looking for the quick win, the silver bullet? Or is it because they just don't understand that value of Performance Management Programs?

We recently completed an ROI analysis for a Labor Performance Management Program for a mid-sized CPG Company. The labor savings were conservatively 16% (approximately $1m annually); the simple payback calculation (less the time value of money) was less than 4 months. The program NEVER got off the ground, not because the executives did not understand the savings, or believed in the savings. Rather, the executive team spotted the pennies, and they consciously walked by them! Why?

As a trained engineer I have a tendency to look at problems logically. But in this business case, obvious logic did not apply. I actually threw pennies on the ground in frustration and asked the Executives if their culture was such that they regularly ignored money at their feet. Their answer was an astonishing ‘yes.'

I walked away from the meeting perplexed, but intrigued as to why $1M annually wasn't enough motivation for that company. After some reflection and an internal team meeting, I came to conclude that the underlying issue was the CPG company was OK with, and actually preferred, the status quo.

Labor Performance Management systems raise the bar on personal and organizational accountability. A million dollars in annual savings was not enough incentive for that leadership team because they themselves did not want to have to be transformed and hold themselves to a much higher standard and level of accountability. Tolerance for change may well be why companies leave the pennies on the ground. Employees at all levels can be averse to change, even executives, illustrating why Change Management is a critical component to the success of any Performance Management program.

McKinsey's Emily Lawson and Colin Price provided a holistic perspective in “The Psychology of Change Management,” which suggests that four basic conditions are necessary before employees will change their behavior: a) a compelling story, because employees must see the point of the change and agree with it; b) role modeling, because they must also see the CEO and colleagues they admire behaving in the new way; c) reinforcing mechanisms, because systems, processes, and incentives must be in line with the new behavior; and d) capability building, because employees must have the skills required to make the desired changes.

The lesson learned for me, and hopefully you, is that opportunities exist, sometimes right at our feet, if we're willing to look for them and make the effort to pick them up.

Cheers!

Which is more important, the structure of the organization (flat, cross-functional, hierarchical, or siloed), or the way the organization behaves within the structure?

For years I have advocated that metrics drive behavior and that organizational design is critical to a company’s success. When I speak at industry events and talk to clients, I encourage companies to evaluate and develop an organizational structure that is aligned with their supply chain.

As a huge fan of Eli Goldratt and a disciple of his teaching and theory of constraints, one of my favorite quotes is, “Tell me how you measure me and I will behave accordingly; if you measure me illogically expect illogical behavior.” In other words, you can change behavior through measurement systems.

Management consultants will tell you that compensation is the true measuring stick; if you want change behavior, tie it to compensation. Although I agree compensation is a key component to driving behavior, it is actually further down the list of performance factors than one might think. The most important factor is creating a structure that enables employees to perform to their greatest potential - and then communicating expectations and measuring against them.

So how do you develop the ideal organizational structure? There have been countless books written on Organizational Design and Structure and there are many professed subject matter experts on the topic. Tom Peters co-developed the 7S model when he was with McKinsey, which took Organizational Design and Structure to a new level. Rightfully, Peters went beyond basic structure by adding: Strategy, Style, Staff, Systems, Skills, Shared Values and Structure. These elements are the building blocks for “what” is required to build a fully functioning organization.

The 7S model serves as a framework for organizational design. However, it is missing the critical component of how an organization is built within the framework. Metaphorically speaking, it is like an architect creating blueprints detailing a magnificent house design, but leaving out the bill of materials that instructs the craftsman how to build the house. And then more importantly, when the craftsman does not build the house exactly to plan, how does the structure recover or rebuild?

Like many people, I was trained in what I call deficit-based problem-solving . This involves identifying the problem (something is not working or must be wrong), developing a plan of action to fix it, jumping into execution mode and fixing it, then stepping back and evaluating by having good measurement systems in place; correcting the plan if off course, and then developing a new plan or fixing the old plan.

I have come to realize that deficit-based problem solving only points back to the status quo and does not really provide true transformation. So if we use traditional problem-solving techniques to develop an organization, we assume that the structure is broken and requires fixing. While the approach of Plan, Do, Check and Act (Deming’s PDCA Wheel) and SWOT analysis (Strength, Weaknesses, Opportunities and Threats) all have merit, I now use a new approach and that starts with asking the question in a different manner.

Instead of asking what do I want less of in my organization (fixing the problem), I propose asking “what do you want more of from your organization?” The shift in mindset is to focus on strengths vs. weaknesses. Assume your organization has a sexual harassment issue and a committee is formed to stop it. The obvious question is how do we stop sexual harassment? A more profound question is how do you develop working cross-gender relationships that promote open communication and mutual respect between genders? Hopefully you see the difference. By asking an affirmative question that is focused on the positive vs. the negative, you go beyond merely fixing the problem.

This focus on the positive as means to go beyond the norm to create revolutionary results is based upon the Constructionist Principle, which was developed by Dr. David Cooperrider while he was attending Case Western. Since that time, one of the many related principles developed over the last 20 years is the practice of Appreciative Inquiry, which is rooted in the affirmative. Appreciative Inquiry (AI) is the study and exploration of what gives life to human systems when they function at their best. AI is an approach (not a methodology) to personal and organizational change. AI makes the assumption that questions and dialogue about strengths, successes, values, hopes and dreams are themselves transformational.

The Genesis of AI is learning. AI Implies a quest for new possibilities, being in a state of unknowing, wonder and willingness to learn. The word inquire means:

1. To ask questions
2. To study
3. To search, explore, delve into, or investigate

Organizations benefit from AI. They need less command and control by a few and more exploration of new possibilities among the many. I have found AI as the answer to “HOW” the craftsman uses tools and a bill of materials to build out the Organizational Framework . It also provides a more agile path to set a course of action when things don’t go as planned. Peters is a great architect, strategist and thought leader, but it has been Coopperrider and many AI practitioners that are the co-constructionists responsible for building the house and ensuring the vitality and sustainability of the organizational structure.

In order to develop and sustain an organization, you must mastermind how the organization behaves within the organizational structure. Many companies want to jump into Visio or Microsoft PowerPoint to develop an organizational chart with boxes with individual names. Voila - we have a structure! Unfortunately, this technique fails because: 1) the structure does not focus how to get things done and 2) it does not focus on how individuals need to behave within the system.

I recently witnessed an organizational structure redesign with a mid-sized retailer. The Executive Team walked out of the meeting after the “Silo Killer” CEO made the organizational announcement. Do you think anything changed? The answer is no, the same behaviors continued (sabotage, passive aggressiveness, command and control).

An organization must establish the behavior and actions that are in line with the company’s desired outcomes. This is better known as Organizational Accountability. But what happens when things do not go as planned? Your organization, department and teams will not always act in accordance with your desired outcome and conflict will occur. Thus, you must create a proactive recovery plan that recognizes the behavior, and asks the questions: what are likely to be the barriers or challenges working in this new structure and design, how do we avoid the challenges, and when we do have conflict, how do we handle it as a unified team?

My final recommendation for developing an organizational structure that is sustainable and full of life is to co-create the structure with a team of cross-functional team members. The reality is that you will not get your organizational design perfect, and it most likely will have to change the design over time. However, creating it with a cross-functional team ensures some level of buy-in, acceptance and flexibility. Complete buy-in is not required (it is not realistic to think you are going to make everyone happy). However, we humans are more likely to hold on to and verify a lottery ticket where we picked the numbers than the ticket where the numbers were predetermined for us.

Always enMotion,

Jim Barnes