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Tuesday, August 11, 2009

Building your company structure.

How to Design a Flat Organization
By Matthew E. May

Conventional wisdom says that to be successful, our ideas—be they designs, strategies, products, performances, or services—must be concrete, complete, and certain. And when it comes to managing a company big or small, we need organizations to be highly ordered, with a strong and well-defined structure. But what if that’s wrong?

Take the case of French company FAVI, an autoparts supplier manufacturing copper alloy components. CEO Jean-Francois Zobrist eliminated the personnel department immediately upon taking the helm of the company in 1983. But that wasn’t all he got rid of. Says Zobrist: “I came in the day after I became CEO, and gathered the people. I told them tomorrow when you come to work, you do not work for me or for a boss. You work for your customer. I don’t pay you. They do. Every customer has its own factory now. You do what is needed for the customer.” And with that single stroke, he eliminated the central control: personnel, product development, purchasing…all gone.

The company formed twenty teams based on knowledge of customers like Fiat, Volvo, Volkswagen, etc. Each team was responsible not only for the customer, but for its own human resources, purchasing, and product development. There are two job designations in the team: leader and compagnon—or companion—which is an operator able to perform several different jobs.

Every customer has a single FAVI linchpin who oversees all aspects of the relationship which are handled by the team. This includes all the technical requirements, cost negotiations, purchasing, product development, quality control issues, scheduling and delivery, meeting organization, and information coordinating. The linchpin is a critical position of high strategic importance, so Zobrist handpicked each one. In effect, what happened at FAVI was that it moved from being one big plant to being a couple of dozen entrepreneurial miniplants housed under one roof.

Zobrist did what the best designers do: add by subtracting. The lack of hierarchy solves a number of problems. With work at FAVI organized into horizontal customer teams, job titles and promotions become irrelevant, so they are no longer a distraction. All that energy is channeled into the work itself, which at FAVI is of the highest quality.

Accountability is to the customer and to the team, not a boss, so FAVI people are free to experiment, innovate, and solve problems for customers. They’re known for working off-shift to serve customers or to test out new procedures. Equipment, tooling, workspace, and process redesign all rest in the hands of those doing the work. FAVI people are encouraged to make decisions and take quick action to improve their daily work and respond to the needs of their customers. Control rests with the front lines, where it adds the most value.

It works. Still, customers visiting FAVI are often astounded at what they perceive to be a total lack of control. A favorite story Zobrist tells involves a customer’s site inspection at FAVI: “They asked to audit our procedures,” he says. “They were not pleased because we had no measurement system for tracking late orders—nothing in place, no plan, no process, no structure in case of delay. They are a customer for over ten years, so I say, ‘In that time, have we ever been late?’ They say, ‘No.’ I say, ‘Have we ever been early?’ They say again, ‘No.’ And so I ask them why they want me to measure things that do not exist.” Good point.

Zobrist’s management reveals a different way of thinking, one driven by a central question: how can we achieve the maximum effect with the minimum means?

In other words, Zobrist was thinking like a designer.

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