Beyond Silos: Achieving Business Alignment with Frank Piuck

Are your business functions truly aligned? Ed Drozda chats with Frank Piuck from Organization Renovation on tackling silos and improving business efficiency. Don't miss this insightful conversation that's essential for all small business owners! #SiloBusting #Entrepreneurship 

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Welcome to the Water Trough where we can't make you drink, but we will make you think. My name is Ed Drozda, The Small Business Doctor, and I'm really excited you chose to join me here as we discuss topics that are important for small business folks just like you. If you're looking for ideas, inspiration, and possibility, you've come to the right place. Join us as we take steps to help you create the healthy business that you've always wanted. Good afternoon folks, this is Ed Drozda The Small Business Doctor, and I want to welcome you back to The Water Trough where I am joined today by Frank Piuck. Frank Piuck is the founder of Organization Renovation, a new consulting firm that helps businesses gain and maintain alignment among all their various functions. He helps optimize the whole business rather than the various functions themselves. Frank has worked in IT, website development, business operations, and manufacturing. He has an MBA from Columbia University. Frank, welcome. Thank you, Ed, glad to be here. And I'm very happy to have you here today. I appreciate this opportunity to learn more about balancing a business by bringing things into alignment. So let's just jump right in there, about business alignment, and start by asking the question, are we aware? I think people have the illusion of alignment as opposed to the actual fact of alignment. If you talk to a senior executive of any company, off the record, they will complain about their peers. They will complain about what the other department's doing that gets in their way and may be completely oblivious to what they're doing that gets in the other department's way. A very strong illustration of this is a company I worked for a long time ago that sold scheduling software. They did a demo for a plant manager at a major company. The plant manager said, Ooh, that's awesome. I wish I could use it. And they said, why can't I? He said, well, because I am measured on machine utilization and cost per piece and if I follow your schedule, I'm gonna stop using a lot of machines as much as I'm currently doing. Which will actually be good for the inventory levels, but my performance measures are gonna go to heck not to mention my cost per piece numbers will rise even though the throughput of the factory will be better and the delivery will be more reliable. And so I am impeded from doing the right thing by the performance measurements imposed upon me by the finance department. Interesting and finance department thought they were doing the right thing because they're unaware of what's going on, on the shop floor. Absolutely. Sounds like we're back to the old days of silos. Maybe the silos never went away. I don't think silos ever will go away. Mm uh, I mean, we do need experts in disciplines, but the expertise and the discipline comes at the expense of a holistic understanding of the whole thing. And people do things that are obviously gonna make their department efficient and run better with consequences over there that they're not even aware of. Really good CEOs, really good COOs, understand that this is going on and they will mitigate it. But if they've been raised in the same kinds of systems and the same kinds of mindsets as the people who are reporting to them, they're gonna be oblivious to a lot of the opportunities for improvement. It's interesting because as a senior manager I have a responsibility to the shareholders, presuming it's that size, to make sure operations are working smoothly. So whether or not I've been schooled in that environment you'd think that would be the responsibility I'd take on. That I would be aware of and be able to mitigate these issues. To the extent that you're aware of them, you're able to mitigate. The bigger the company, the less you're aware of them. So what you're saying is the size matters. Size matters. When a solo entrepreneur is the only person in their business, the only thing that creates disalignment is neuroticism. But, you get a few subordinates and you trust'em, they have issues with each other, you talk to them and you negotiate and coordinate and you resolve them, and then you hire middle managers or department heads, and you don't know what's going on at the bottom level. You're relying on reports, and the reports have been constructed on your behalf. Most likely. You have an IT department and a finance department that are developing them, and they come with certain mindsets and biases that you may not be aware of, and those reports may be giving you disinformation. And if you come from one company to another company and you assume that the reports that use the same words mean exactly the same things, you are very likely wrong because the algorithms, the data collection mechanisms are different, and therefore the information summarization is different, and you're getting information that looks like it means one thing and doesn't mean exactly that. You gave a software example earlier. While it might have been worthwhile for operations to adopt your system the plant manager would suffer the consequences because it wouldn't be aligned with the finance department. That's one example. I presume you encounter these things repeatedly, which gave rise to the concept of your company. Organization Renovation sounds like organization revolution to me. Well, that's a little too ambitious. No, I guess my point is I'm looking at you specifically. I think the collective us would say, this is true. You must have encountered enough cases of this to realize this is a big issue. Part of it was the company that I worked for, where this was a foundational idea. It was called Creative Output. It was founded by Ellie Goldratt, an Israeli physicist who had no preconceived notions about business when he came up with software to schedule a factory and was constantly surprised at the things that people told him. In many cases he would investigate and realize they were right. In many cases, he would investigate and think they didn't know what the hell they were talking about. And so indoctrination is a strong word, but I have to use it. I was educated in that point of view and it stuck and then I'm looking for stuff and I can see it all around me. So, one of my favorite examples is the hospital bed. Famously, it's institutionalized that hospital beds are expensive and to be minimized. Hospital beds are not expensive, at least, you know, not compared to the$3,000 a day that hospitals charge for'em. What are expensive are hospitals, and if you divide the hospital costs by the number of beds, you get a very large number. Every time you remove a bed to save money, you decrease the denominator, and it looks like the hospital bed is even more expensive. This is a disinformation system built in to the hospital. It's in the regs for the hospitals, it's in the insurance policies, it's probably in the laws of the United States. And it's wrong. It's just a misunderstanding of reality. I've never worked in a hospital, but this is blatant to me. Right, right. Well, I think the root of Organization Renovation then resides in the loss of alignment because of misinformation. Is that a fair way to put it? That is a fair way to put it. I would say that again, the training that a person with a marketing degree has and the training that a person with an accounting degree has, there are gaps in their information and there are words that they use that mean slightly different things to them. And when you have two people having a conversation using the same word meaning slightly different things, you get a failure of alignment. Unless they understand that the other person doesn't mean exactly the same thing they do, at which point you can say, do you mean this? Oh, you don't mean this. This is how I was taking what you were saying. Where am I wrong? And then you've enlightened each other and you can get more aligned. One of my most recent podcasts was with a woman who had come up through the ranks at a hospital and was put in charge of housekeeping, and she had been in the hospital for a while, so she was pretty well versed in how it worked, and she saw that her people were doing things that didn't make sense to her, and she told'em to do it differently, and she shut down the operating room without intending to. Had her head handed back to her, she reversed the decision, started asking her people intelligent questions, overcame their suspicions, because people hadn't asked them those kinds of questions before and they hadn't been trusted and they didn't really expect to be trusted and didn't trust in return. And she became very, very good at her job. And the infection rates in her hospital went way down. But even though she understood an awful lot about how that hospital worked, she made what seemed to her, based on the training she had, based on her understanding of the world, and her people's jobs, she made decisions to reorganize things in ways that if the operating room wasn't involved, it would've made perfect sense. But it didn't make perfect sense because it's really important in a hospital that the operating rooms get cleaned up after every operation very promptly, so that you can keep patients going in there both for the sake of the hospital's finances and for the sake of the health of the patients. This is a very smart, well-intentioned woman. She missed it. And that's not the only time I've heard that story. I've heard it about a different hospital. So you would think that there'd be a sort of allure of hospitals that they'd all be sharing information and be saying, you get a new head of maintenance, you get a new head of housekeeping, make sure that they know that it's better to be inefficient around the hospital in terms of human utilization to make the operating room efficient. Are you making your customer service department efficient by measuring the number of calls everybody has and punishing people who have too few? Or are you screwing your business by alienating customers and reducing the lifetime value of the people you've spent a lot of time acquiring its customers? I think we all know the answer to that one. Not the people who are measuring their customer service departments that way, and there're an awful lot of them. This is true. I'm sure that some of those people making those idiot decisions get really angry at the customer service departments of the businesses that they are customers of, even as they're doing the same to their own customers. Alignment comes in all shapes and sizes or misalignment. I hear you. You are seeking clarity in systems. You've identified there are silos. We know they're out there. Yes. And, silos by definition have clarity within themselves. Yes. But not adjacent silos. Yes. When Silo doesn't know what the next one's doing, and assuming that leadership is familiar with all of the silos, that's still not sufficient for them to bridge the gap between one and another. You get an MBA, you go into the finance department, you rise through the ranks, they put you in charge of operations in some place, and you learn a lot about operations, but you don't know the nuances of purchasing. You don't know the nuances in marketing, you definitely don't know the nuances of sales, or you come up as a salesman and you don't understand operations very well. And so you have a position of great responsibility and you understand very well the silo you came out of, and if you are smart and creative, and patient and committed to learning, you know, you need to learn that stuff. But on the other hand, you're suddenly hit with a whole bunch of new problems and issues that you have to deal with quickly and don't have the time to delve deep, to understand the underlying causes. So you're gonna make the best decision you can with the training you have, the information you have, and you're never gonna learn all the things you need to know. And the bigger the organization, well, if there's a hundred people in the organization, you can meet every single person in the organization. If there's a thousand, you could maybe do that, but only at the expense of some of your other responsibilities. If they're 10,000, it's absolutely impossible. Okay. Okay. We can agree that misalignment occurs and it's directly proportional to growth. The bigger it gets, the more misalignment occurs for a variety of reasons, such as you've alluded to. That is kind of a common sense thing, not saying it's right, but it's a common sense expectation. Bigger, faster means more complexity. Bigger, faster means more opportunity for misalignment. So is misalignment something that we can prepare for before it becomes a legitimate problem within our organizations? That's a tough question. One can be intellectually prepared for it and looking for it and miss it. Again, the bigger the organization, the more complex, the harder it is to manage all this. But, one of the biggest problems in avoiding it is simply the fact that the more complex the organization, the more senior you are, the more time you spend putting out fires, negotiating, browbeating, being browbeaten, trying to broker compromises between the functions without understanding what the underlying problem necessarily is because neither of them is explaining them to you, to your satisfaction, do you have the time to spend? It might take you two weeks to understand the problem deeply, and you don't have two weeks, you have an hour to get these people, these two knuckleheads to cooperate. And so they're gonna come up with something that kind of works for them, sort of, and may screw up something over there that they're completely oblivious to. Hmm. Okay. Perfection in organizations is impossible, even in small organizations. And the bigger they are, the less perfect they're going to be but that doesn't mean that it can't be improved and it doesn't mean that if you have some sort of systemic process the way Toyota developed Just in Time, that you can't make huge strides. So the process in Toyota, which they called taking rocks out of the river, was to take a small amount of inventory out of a workstation and see what happened. And if nothing bad happened, they wouldn't put the inventory back. And if all hell broke loose, which undoubtedly happens, sometimes they would put it back right away. Right. And if something came up that they could figure out, they might put it back but go address the specific problem that they saw and fix it. And by the time they've done that a hundred times, they have a pretty good idea where they can take the next batch of inventory out without causing all hell to break loose. And they can systematically. Find a problem and fix a problem, and find a problem and fix a problem, and the system gets smoother and smoother and better aligned until it was so much better than American manufacturers, I read a book recently where American manufacturers went to Japan and saw an auto plant with next to no inventory, and he said this is bullshit. You can't have a factory without inventory. He just didn't believe his own eyes, but he did have a plant with no inventory and it worked much better than his plant that was full of inventory. But he was conditioned, right? He knew how his auto plant worked and he didn't think there was any other way to do it. So if you follow that Toyota model, you can get much, much better alignment by solving little problems systematically. And I would expect that if you solve what looks like a little problem every now and then, you're solving a big problem without even realizing it. For so many things, one win can inspire us to seek more, and in the case of Toyota, for example, this is clearly an example of misalignment prevention. yes. Or I guess presumably there was some degree of misalignment, but they recognized that early enough to take steps to prevent it from continuing or growing beyond that point. I've never been to Toyota and I only know these stories secondhand, so I'm sure there's much more complexity to it than I could intelligently talk about. Yeah, I don't think there's a need to get into the finite, details, but I do believe that there's a lesson here that one must be aware first, that there is misalignment. Being aware is step one, as with so many things, being aware and then of taking appropriate action. It shouldn't have to be completely retrospective. Though it seems to me that the idea of management of misalignment should be an ongoing concern such as performance evaluations where we're not evaluating people every six months or 12 months, we're consistently assessing them so that we can prevent an issue at the six or 12 month review time. We're looking for opportunities for efficiency and improvement all the time. Yeah. Likewise, misalignment. With misalignment we're looking at something that can have significant deleterious effects, right? Absolutely. But yet, if the mindset is that we're looking for them and taking steps, then the misalignment we're dealing with is far less outta whack. That's really a good technical term. If we ignore it, let it go, it would eventually get to the point where it might be production stopping versus production delaying. Yes. Absolutely. I have been in quite a few factories and some factories are messy and chaotic, and some factories are smooth and the factories that are smooth, I was in a factory that ran really beautifully and was casually talking to one of the employees who said three or four years ago, this was so different. The new plant manager came in and he just little by little fixed things and now it's so much better and it's so much easier for everybody here. So it absolutely can be done. But this was a small company. There were perhaps a hundred people. Okay. And, it was one plant. If you had a multi-plant company and you had a guy like cleaning up one plant, it wouldn't necessarily cause the other plants to clean up. There might even be some backbiting. Hmm. Yeah. Mature people wouldn't do that, but not everybody's mature. Yeah, that's for sure. It seems that there's for the smaller companies, for example, you said this company is a hundred employees, they've got more to lose. The larger companies to some degree have enough different revenue streams perhaps that they can kind of overlook some of these things to some degree, I'm not suggesting they should. But the small companies really have a lot to gain here. Every company does. It's easier in a small company. Right. If they have the right mindset in the first place, it's easier never to get in trouble. And if they have the right mindset at some point, it's easier to get out of trouble. Right. GE was the most respected company in the United States not that long ago. Jack Welch was amongst the most respected chief executive officers, and he retired and his successor bumbled, and then the successor after that, basically the company collapsed and they've broken it into small pieces. And an awful lot of that in hindsight, were problems that built up under Jack Welch's watch. Right, right. He was generating these very smooth earnings because GE Capital was a black box and they were doing black box things and some of those black box things blew up years later. Right. Eastman Kodak was a giant, it was one of the top. Fortune 20 company, I think had worldwide market share, well over 50%. Invented the digital camera. Yeah, and? Eastman Chemical was a division that still is viable and the Kodak name has been resurrected, by people who bought the name from the bankrupt company and are doing things under that name that have nothing to do with the company that, I mean, there are still film photographs taken, I'm sure, and it's very special circumstances. But, there's nothing Kodak could have done to preserve the legacy photography business once the iPhone came out. Right, right. Failure to keep up. In their case, they did an awful lot, for an awfully long time. I did a consulting project there many years ago when they were still so prestigious and so successful, and just walking through the place with fresh eyes I saw all sorts of stuff that just is, why are they doing it that way? They would mount huge roll of film in the dark. They'd run them through chemicals to put the photosensitive chemicals on them, and then they take it off the roller in the dark. They put it onto another machine that would slit it into the strips of film and put the sprocket holes in. Mm-hmm. In the dark. Now, if you're dealing in colossal amounts of film that may very well have been the most efficient way to do it. But they were doing enormous amounts of quality control testing. They were throwing away lots and lots of perfectly valid film to make sure that the film that they weren't testing was good. They were also making specialty films. Why not cut the film in the light, put the sprocket holes in and run strips of film that were this big and put the photo chemicals on them. Mm-hmm. The quality control issues would've been so much less. Maybe it would've been less efficient in terms of the amounts of machines needed, but in terms of the chemicals and the film wasted, it would've been a huge difference and certainly for small rungs of films that were not billions of units a year. Mm-hmm. It would've been a much more efficient way to do it. I emailed the CEO, I got a very nice letter back saying thank you. It would've been a small investment and it would've been a better process. So, to some extent, the more successful you are, the more the blinders are on. Yes. That's true. And that's assuming success will continue unfettered. Unfettered. Yes. Now, the American auto companies have been through some serious substitutes in the last 40 years, and I think they're much more sensitive to the fact that they are vulnerable. But I am sure there are still things they're doing that are legacy that should be reexamined. Right. So Frank, our time is coming to an end. What kind of thoughts do you wanna leave us with? What are the things that you think that we need to know? It's hard not to sound self-serving, but people need to come to outsiders like you and me for the perspective that they cannot get as an insider. We talked about that executive who has a hundred decisions to make every day and doesn't have the time to dig deep. Especially an executive who's grown up in an organization and there are things that are just as natural as air to them that are dysfunctional that you or I would see immediately or within an hour or two anyway. Mm-hmm. So to bring one of us in and say, let's have a conversation, I am frustrated about things that I don't understand why I'm having these problems is a very wise thing to do. I think it's that simple. If you are managing and you are frustrated because there are things that you have a sense are solvable, but you don't know how, and you don't have time, get somebody like Ed, get somebody like me to come and look and we should be able to help you very quickly. We won't solve every problem overnight, but we can spot some stuff and we can fix it. I do believe that there's an advantage to, I think it goes back to what I had mentioned earlier, first, you have to be aware that something is not right, but that does not always mean you can know why it's not right. It's just knowing something is not right or sensing sometimes that something is not right. And I agree with you, having someone whose perspective is not clouded by the day-to-day operations is worthwhile, because things can be played back to you. Things you had not thought about or not thought about in that manner. So I totally agree with you and I don't think it's self-serving because the truth be told, our intent, the intent of persons like you and me, is to support the growth and development of business. Being in business for me as for you, I'm sure for you as well, is about supporting people. If they win, I win. I can't win unless they do. I don't remember when I first heard about win-win, but it made all sorts of sense in the world. To me it does and my pleasures in life are taking care of other people. That's incredibly gratifying to be helpful. I agree. I think it's a fundamental human, desire, if not a need as well. So I thank you for that, Frank. I am once again, very grateful to have been joined today by Frank Piuck, the founder of Organization Renovation. Frank, thank you very kindly for joining me, and I really enjoyed this conversation. Well, I did too. This is Ed Drozda, The Small Business Doctor and here at The Water Trough, I want to wish you a healthy business.