Big Sky Thinking

This question is often posed by managers and consultants alike in addressing decision making situations they encounter. The unit of analysis often refers to the level of the organizational unit around which the decision making models are built. The conventional wisdom has been to do the business planning analysis at the strategic business unit (SBU) level, group analysis at the team level, and operational analysis at the individual employee level. While intuitively reasonable and logical, it is possible to bring all these different levels together if the analysis is done with the key process being the unit of analysis. It promotes better decision making, cuts across organizational silos, and applies the maximum leverage in producing the desired results.

Let me illustrate this concept through a decision-making situation I encountered. A business unit of a Fortune 500 firm was experiencing delays in filling customer orders, many of which were distributed between both domestic and international clients. Inventory levels for finished goods were high, while at the same time order fill rates were stagnant or declining. The distribution center was full with inventory spilling over to the tractor trailers parked outside the warehouse. The trailers were more or less being used as long term storage areas. Profits were down to the point where at least one of the manufacturing plants was considered less than viable despite having becoming more efficient and productive over the course of years.

In an improvement initiative, a top level management team was created to analyze the underlying problems with the objective of stemming the tide and improving the bottom line results. Representatives from different functional areas offered opinions and insights as they saw fit. While these suggestions were often correct and factual, they failed to provide a complete picture. It appeared that decision making analysis was simultaneously being done at all three levels – organizational, group, and individual. It increased decision making complexity without the emergence of a coherent plan of action that could unite different view-points and decision making levels.

A more tractable means of analysis was found when the “order taking and delivery” process was defined as the unit of analysis. This process was mapped for both domestic and international orders, and nested process maps were created wherever appropriate. In this fashion, one could work all the way down from the top organizational level down to the group and individual level. Redundant steps were identified that unnecessarily lengthened lead times. One such step for instance was doing credit checks on all orders irrespective of the financial reliability and payment history of individual clients. While fiscally sound, it created unnecessary delays and expended organizational efforts. Similarly, mismatches were identified between shipping schedules from international ports and actual delivery schedules from a regional warehouse where all customer orders were assembled based on shipments from different manufacturing plants. Only through such a process based analysis, which also questioned long standing procedures, did coherent insights finally begin to emerge. It was more an issue of matching demand information and product flows, rather than viewing the overall problem as purely a marketing problem, or a manufacturing problem, or a distribution problem. Any meaningful action plan would have to focus on coordinating the entire supply chain all the way back from customer orders, to the distribution center, to the manufacturing plants, and then to the suppliers. The management team would not have got to this point had they not identified a key process that impacted their desired objectives, and then made its improvement as their unit of analysis.

When in doubt or confusion, always look towards identifying and analyzing the key underlying processes in order to make headway and achieve decision making clarity.