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Want to Improve Performance in your Service Org? Look to your Division of Labor

I recently wrapped up the first phase of a project with an ambitious import-exporter who delivers just-in-time parts to auto manufacturers in Mexico.

The initial phase of the project involved an assessment of the client’s current “order to delivery” process. Our goal: to identify the root cause for increasing vendor claims, which for the sake of clarification, we defined as: 

The delivery of wrong parts

The delivery of unwanted partial shipments

The delivery of damaged goods

All three types of orders directly impacted the client by delaying delivery of customer orders, increasing customer dissatisfaction, and increasing customer defection.

After conducting a process assessment, we had identified several issues in how they sold and fulfilled orders. Based on our findings, we recommended reorganizing in such a way to enable the sales team to key in their own orders, instead of depending on a part-time order entry clerk to key orders in.

The client was puzzled. Didn’t the hand-off from sales to order entry make sense from a division of labor perspective?

Moreover, like in the movie Glenn Gary Glenn Ross, shouldn’t “sales always be closing” (ABC) instead of entering in customer’s orders? Perhaps, but our recommendation was based on two observations:

First, the order entry person was a part-time employee who left at lunch time. This meant that orders made by customers after lunch would sit, at a minimum, 24-hours before they would be received by the client’s suppliers.

In a business where contracts are won and lost by speed and accuracy, unnecessary waiting undermined the client’s goal of being the expediter of choice.  

Second, the hand-off between sales and order entry was one of the primary areas where errors crept into the client’s process. In effect, the act of putting a quoted order in a queue to be processed later, allowed a layer of organizational dust to settle on the order. So, as an example, if the order entry clerk didn’t understand the salesperson's notes, they either had to interpret the notes or go back to the sales person to talk through the details of the order.

The conversation with my executive sponsor brought into focus one of the main challenges facing serviced-based organizations seeking to improve performance. Unlike manufacturing organizations, where signs of inefficiency build up between in stacks of excess inventory or finished goods, waste in service organizations is harder to see, but equally present. The equivalent of excess inventory can be stacks of unfilled orders sitting on a clerk’s desk, unread email, or other stacks of work waiting for attention. The buildup of “work in waiting” is then often reinforced by company policy and organizational structure.

Classically, the concept of the division of labor is based on the specialization of tasks in a system such that the system as a whole increases in efficiency. However, if the work itself is not specialized – and can be done by anyone—then there is no meaningful division of labor. Instead there’s waiting and unnecessary movement of paper between departments.

In my client’s case, for division of labor to make sense, the work done by sales and the order entry clerk needed to be sufficiently different and valuable to merit the costs, and risks, of waiting.

This then led to a second organizational recommendation: re-organize the sales team such that there was both a customer outbound sales team and customer inbound order entry team. Other improvements, could then be added after the client began tracking sales effectiveness.

Ferreting out waste can be a challenging task for service based organizations as it is not always immediately visible. Waste can be hidden by departmental handoffs and unnecessary employee specialization. When trying to determine whether division of labor makes sense, ask yourself these questions:

Are there any trade-offs to specialization in terms of customer value – for example, impacts to quality, accuracy, speed of delivery or project team velocity? 

If so, do the benefits of the trade-offs exceed the costs?

You may find, as we did with our client, that the benefits were not worth the risks.

For more information about OpEx Digital Consulting or for a complimentary process assessment, please reach out to us at ContactUs@opexdigital.com.

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