Sunday, July 21, 2013

Optimal Support Systems: Organizational Infrastructure

A building is only a firm as its foundation.

This post is strictly a business model post regarding best practice for any organizational infrastructure. I find that the content of this post is quite helpful for the #DPTStudent and anyone looking to change organizations.

To begin this post, we must understand that with all organizations, there exists a chain of command responsible for the financial and workplace well being of the employee body. Additionally, in this chain of command, a lattice of bureaucracy exists so that the top of the chain can do what they do best; make decisions. This function serves to benefit the organization up and down the chain of command. Some chain's of command are very long, lengthy, and remarkably tall - typically these organizations hold amazing amounts of redundant bureaucratic functions. Other chains of command are really quite blunt; these are the ones that run on the proverbial "bare skin and bones" with practically no support systems. However, neither extremes upon this continuum is ideal for optimal productivity. For the optimal results, one should seek the classical lesson from economics in supply and demand.


Without getting into splitting headache mathematics, the best balance between the management chain, support systems, and the floor staff (operators) is a combination of supply & demand with considerations to profit maximization (which we won't really get too much into). Essentially, even within the internal functions of the organization, staff will naturally grumble when there are too many support staff or an insufficient number of them. In both cases, you'll notice this from the consumer side in the following fashion:

Welcome Sir/Madam! Start on this hideous line. Now: Go to window 5, then line C, then window 2, see area K... oh, don't lose your place because you'll have to start alllllll over. If you're lucky, this will be a 2 hour visit - if not, you'll be here with us allllll day!

Or, you may get this:

Welcome Sir/Madam! Please wait for a couple hours in this single line!

Any of that sound familiar? Yeah. Lame stuff. This is a CLASSIC symptom of organizations that function with too much or too little support. What is most costly is when an organization functions with far more supply than demand of the support systems required. On the flip side, what may seem like a cost saving measure in hacking & slashing support systems will actually rob an organization of profits. Why? Same economic law prevails: now there is more demand for support system than has been supplied.

The question inevitably will surface: how does an organization make for an equilibrium state? This is where I punt to profit maximization principles of Microeconomics. In essence, if an organization reaches the point when their marginal revenue equals their marginal cost - they are indeed at the point of profit maximization.

In any case, since I'm really more of the operations & marketing guy (and thus, I leave the more number crunching events to the interested experts), the key behind this concept of organizational infrastructure has more meaning to me in terms of business administration, strategies, and solutions.

Organizations that have too much infrastructure tend to be sluggishly redundant, wasteful, and yield appallingly poor customer service. Organizations which too little infrastructure tend to ask too much of their middle management and floor operators (as pressured by the board of directors and c-level executives); this yields a weakening of the lattice which ultimately will result into burnout and collapse.

From an ideological standpoint, I'm a conceptual minimalist - why use five strokes when three will do (and do better!)? In terms of rendering optimal support systems for any organization, simply check on these following and very easy to track measures:
  • Staff overtime (or lack thereof): This is probably the FIRST indication that an organization really needs to hire on some support staff or invest in support systems (ie. computers, company cell phones, etc.). Employees/staff how are stretched out far too thin will be habitually going into overtime. Most staff aren't there to sap company hours/pay, those that do don't last very long. So! When one sees habitual over time - or worse - employees constantly working off the clock to get stuff done, it is time to hire on and develop support systems. By doing so, the well being of the organization will be lifted and the profit margins will also improve. The opposite of this is true: when one observes an organization constantly sending people home early, then too much infrastructure exists and people are beginning to crowd out each other's productivity & function.
  • Middle management stress levels (or lack thereof): Middle management is a rather shoddy deal. Most floor staff/operators see this as the next level up. It is - but - it comes with a whole 'nother can of worms. Middle management and operational management serves as quite the literal ping-pong-ball; the middle man between floor staff and upper management. There is no true power nor control over anything except the day to day operations at this level. They are held to pressures in staff satisfaction as well as sufficient performance measures which are reviewed (typically) weekly by their superiors. When the stress levels at this rung of the organization seems in the order of "stressed out of their minds", the organization NEEDS to strengthen their support systems. The opposite is true, if the middle managers and operational managers are simply chill and constantly leave early or show up late - they need more work to do and/or they need to move on.
  • Turnover rate (or lack thereof): Haha! This one always makes me chuckle. If you see people leaving a firm and running for the hills every couple a months, you should beat them there! This type of organization has virtually no support systems and you are witnessing the seasonal tidal exodus of people who have been overworked, underappreciated, and/or thrown under the bus in the name of "underperformance" or being a "poor fit for the team." The opposite is also true, when you have a company that has retained the exact same people in the exact same positions for YEARS and you're considering joining the ranks... I have one word for you my friend: "RUN!" This is a classic sign of a stagnant organization. I always wonder on what the upper management thinks upon such situations. The same people have been supervisors for 10-15... maybe 20 years? Hmm... Shouldn't every organization promote growth, development, and upward mobility? Isn't this what makes organizations grow into social significance? Into something that really helps our present and future? Now given, certain people do certain things with true excellence and there is no point to remove them from these positions. Nevertheless, this shouldn't and realistically cannot be a universal trend for an entire organization.
Now, I listed the above three factors, or, lack thereof in that specific fashion because most organizations are starved for support systems. It is a rare occasion that organizations have too much support; in these cases, you can bet there exists some rather angry board members not to mention stockholders if not now... VERY soon.

If you are in business management, I hope you find this information useful in your own practice. If you are looking for work or are looking to manage up or move up, I hope you find this information empowering in best positioning yourself to effect positive change.

Until next time!
-Dr. Ben Fung

3 comments:

  1. Were would or how would a Labor Union fit into this model? Very intresting and Thank you.

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    Replies
    1. By definition, unions remove the ability for a system to remain perfectly competitive (meaning, it the system isn't functional "naturally", so to speak). The usual pattern is that unions make for certain redundancies/safeguards by the nature if protecting their interests - the union's own labor.

      Microeconomics teaches us that redundancies are costly; in general, these costs will typically be passed onto the consumer in the form of higher prices and/or taxes depending on the situation. If the consumer does not absorb the cost, then companies will absorb it in which case profits go down. That is the usual mathematical result.

      From a business administration perspective, a responsible union should hold the attitude that its duty to the public is to effectively manage the labor force by best serving the market. The stronger the market, the stronger the economy and the stronger everyone's jobs will be (and friendlier all prices will be to all parties).

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  2. Should be read by all managers and above. This post combines words and graphs on issues seen everyday in all organizations just a variation of theme.

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