Years ago, a well-respected and rich entrepreneur showed me around his new factory. In a back room a dozen people were analyzing customer requirements, doing complex calculations, and writing contracts.
“Do you see these engineers?” the company owner giggled. “They write more in one day than I have written in my whole life! They are more interested in their paperwork than in what we are making in this company.”
I have had similar experiences in other companies: a large furniture enterprise, a meat-processing company, an industrial bakery chain …. The owners all wanted me to first know and understand their Core Product before I was allowed to drive changes in their company. I cannot tell them wrong. I have seen people taking wrong decisions because they did not understand the relationship between their decisions and the Core Product or Core Values of their company.
Today, I call this Distrans, which is defined as follows.
Distrans is the number of resource layers from a specific resource to the Core Product of an organization.
You can consider the Core Product as being the reason of existence of your organization. It is what your organization (or department) makes its money with. It can be something touchable, it can be a service, or it can be the Core Values of your organization. A resource can be a person that you manage, it can be your email client if that is how you communicate with people, or it can be someone’s report that you are reviewing. A resource can be anything, as long as it is a layer that separates you from the Core Product.
As an example, consider the industrial bakeries that I mentioned earlier. The Core Product of the bakery is bread, so the Distrans of the bread equals zero. The bakers and sales clerks have a Distrans of one, since they are in direct contact with the bread. We are talking about a group of bakeries, and each shop has a Shop Manager. They have Distrans two, since the sales clerks and bakers are in between them and the Bread. The Shop Managers of different shops in the country send out sales reports (Distrans three) to a District Manager, who inherently has a Distrans of four.
Now, do you think that this District Manager is still psychologically connected with the bread? Her products are the sales reports, Human Resource numbers, sales margins …. She may make decisions that seem to improve her products, but not the Core Product. The District Manager could e.g. decide to buy cheaper flour to increase the quarterly profit, but will that be a good decision the long term? You can easily think of higher Distrans levels by adding ERP software, the programmer of that software, software Quality Control … The higher the Distrans, the more a person gets disconnected from the real Business.
My empirical rule of thumb is the following.
- The higher your Distrans, the higher your relative cost to the organization.
- The higher your Distrans, the lower your added value to the organization.
Let me make a bold statement here. My recommendation is to keep organizations at a Distrans level of three or less. If you have a large company, make sure that your departments can work stand-alone with their own budgets and decision levels with respect to the Core Product within their department. You may need to re-organize your company for this, it would be an interesting exercise.
So, have you calculated your Distrans already? If you did not by the time you reached this point of the Article, I bet your Distrans is very high.
Oh yes, one more thing. Some people may object that the bread in the bakery example does not have a zero Distrans. They may claim that it is the customer who has Distrans zero, and that the bread only comes at a Distrans of one. While I congratulate you with you customer-friendliness, I don’t really agree. I would agree if the customer is the Core Product, e.g. in healthcare, or when you sell customer data (e.g. email lists). Simply put, if you can describe your customer in detail, it will probably be the customer who has a Distrans of zero. In all other cases, the customer is only an important stakeholder who may have specific requirements for the Core Product.
The ideas in this article are part of the Chagwa Project Management methodology, http://www.chagwa.com.
Read more about the Chagwa Project Management theory: https://linchpinbooks.eu/product/chagwa/