Thursday, September 16, 2010

One Not-So-Simple Thing

I worked in a company with $50 million in revenue, where the supervisors could make the decision to scrap thousands of dollars worth of materials. They couldn't make the decision to buy a tool that cost $65. That decision needed three layers of approvals.

This corporation's systems were wrong on several levels: focusing their resources (the number of signatures needed) on the trivial; no major oversight on the significant (material costs comprised 60% of the total costs); a lack of trust.

The company trusted the supervisors' experience and training to know when they should rework or scrap material worth a lot of money. However, they did not trust that same experience and training to know what tool to buy, and whether that tool was the right choice.

Some leaders will tell you, "The devil's in the details" and quote the ancient proverb "For want of a nail...the kingdom is lost." They use these sayings as leadership mottos to justify controlling all the little details in the corporation. It's a false sense of control.

With the purchasing policy setting spending limits of $50 for some of the management team, requiring three approvals for a $65 tool, there is no more control on the company's expenditures. Most of the money is being spent on the job's operations: the material usage (under-, over-usage), freight, and labor. More money is being spent on the development: marketing, research, developing product or job specifications, work instructions, etc.

Leaders should be focusing on these things, rather than small expenditures.

One wag wrote a few years ago that we trust our car's brake mechanic more than we trust the guy who works next to us. We double-check our teammate's work all the time; there's lots of oversight sometimes. We don't double-check the mechanic's work. We trust that their experience and training is (at least) good enough, if not great. Why don't we trust the guy we know and have worked with?

It's not a simple thing to extend trust. It's also the key thing. If you want to be trusted, you have to trust.If, as a leader, you want to focus on the significant things ("major on the majors"), you have to trust. You know your staff. In many cases, you hired and trained them. My rule is to believe everyone is trustworthy until they prove me wrong through inexperience, poor skills, poor training, poor judgment or bad assumptions/perspectives/paradigms about how the world operates.

What are your policies saying about the level of trust in your organization? (What are they saying about what really matters--$65 tools or $3000 worth of materials?)

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