Managing the White Space of an Organizational Chart

Written by Robert Kurtz Wednesday, 16 March 2011 14:58

The RGZ Blog

Management of white space in an organization can often lead to increased efficiency and production. White space is a term used to describe the interdepartmental gaps and interactions in an organization. A white space manager is charged with eliminating waste and redundancy throughout all departments. Member communication and effective information flow augments cohesion between all the members of the organization. You can save time through the careful management of organizational white space.

Successful change requires management to look at its organization in a new way and, as a result, define its role differently. We believe that a major ingredient in establishing competitive advantage is management's ability to recognize that one of their primary responsibilities is one of managing the "white space" on the organization chart.

We all know what a typical corporate organization chart looks like with the Chairman of the Board at top reporting to a Board of Directors. Reporting to the Chairman is usually the CEO and/or President with Finance, Legal, Human Resource, etc. (Figure A) reporting to that position. Reporting relationships and functional responsibilities tend to dominate the way people who have this view think, evaluate and communicate about organization performance.

The danger in viewing an organization as a set of functions that are connected only vertically is that one begins to manage that way. More often than not, the manager of several units begins to manage on a one-to-one basis. The goals and measures are set separately for each function. In this environment, each manager tends to be protective of his or her function, often behaving as if other functions are the enemy, rather than partners in the battle against the competition.

Figure A

Each function and sub-function works hard to meet its goals, which are set independently of other functions. All too frequently, when a function optimizes (meets its goals), it ends up contributing to the sub-optimization of other functions and of the organization as a whole. Marketing makes its numbers by selling products that can't be designed or delivered on schedule. R&D looks good by designing sophisticated products that can't be profitably manufactured. Manufacturing meets its yield goals and, in so doing, sends inventory costs through the roof.

In this environment, barriers exist between functions and sub-functions. Issues must go to the top of these chimneys or silos before they can be resolved, which takes managers away from higher priority customer and competitor concerns.

When the manager of functions A, B and C goes to the manager of sub-function B to determine why B failed to produce on time, the response tends to be: "It's those dimwits in A."

In the good old days of a seller's market, a company could introduce products at its own pace, meet only its internal quality goals and set a price that guaranteed adequate margins. In “the good ole days” functional silos, did not lead to serious consequences. Those days are over. Because of strong global competition, most organizations now compete in a buyer's market.

At a macro level, we see the organization as a giant processing system that takes in resources and produces products and services for a receiving system, the marketplace. The organization processing system responds to the demands of the marketplace for product quality, customer service and price. An organization that does not quickly respond to these demands will usually fail as a business.

When we publish our "White Space" white paper (coming soon!), in addition to making visible the products/services and the market, you will have a full understanding of what actually goes on inside an organization. Functional boundaries are present, but in the background. The focus is on the way work is accomplished. In this case, new product ideas move from Sales and Marketing to R&D, where new product specs are developed and provided to Manufacturing. This horizontal, or systems, view makes visible the internal customer-supplier relationships through which products and services are produced.

The effectiveness of horizontal work processes make or break organizations. Processes (such as the product development and introduction process and the customer service process) are the key to quality, cost and cycle time/productivity improvement. In successfully competitive organizations, process performance, not function performance, is the primary concern of management.

How does your organization manage the white space? Stay tuned for future posts that cover “how to” ideas for your consumption!