A question of context--why manufacturing cultures don’t understand project management

preliminary phase II findings

The Challenge

Thanks in large part to the efforts of PMI® leaders and membership around the world, Project Management is now widely recognized as a legitimate profession. Unfortunately, wide recognition does not always imply understanding or the informed ability to manage such efforts.

During the last 10 years I have worked with literally thousands of Systems Engineering and Project Management professionals, (on every continent except Antarctica), and discovered a common truth: Their ability to perform is frequently limited not by the skills of the individuals, but rather by the artificial business rules imposed by middle and senior management. Although “correct” from a manufacturing viewpoint, such limits are severely handicapping the Project Management community.

While some strategies tend to be universal, many of the accepted “truths” of the manufacturing environment run directly counter to those developed in a more system-oriented environment. The attempt to blindly apply manufacturing management experience to the non-manufacturing portions of the business life cycle is a fundamental error that costs billions each year and denies companies access to critical competitive capabilities. Yet this behavior is sustained by a pervasive culture that has developed around manufacturing, and the mantra of cost reduction drowns out all but the most determined challengers.

Manufacturing is an important and essential skill set, but it lacks understanding of the broader problem-solving role of Project Management. Handing your manager a copy of the PMBOK® Guide (PMI, 2000) won't work. Simply believing in Project Management won't work. Not only must you be skilled at the discipline, you must also be able to explain it to people who find it counterintuitive, and persuade them to expand their viewpoint to acknowledge the overall life cycle.

Revolution and Inversion

The last century was marked by explosive growth in manufacturing process and technology, and vast fortunes were made inventing and building products of all conceivable purposes. Combined with equally staggering improvements in worldwide transportation infrastructure, the overall result marked the end of any personal connection between Customer and Craftsperson.

Customers cheerfully traded interaction and customized solutions for the flood of cheap standardized goods the factories turned out. Isolation from Customers made it possible to freeze designs and processes for maximum profitability. The skill set of understanding and responding directly to individual customer needs was replaced with the skill set of efficiently manufacturing a predefined article and then selling it at the highest possible price. Efficiency demanded elimination of all unnecessary tasks, and the holy grail of cost reduction fueled the passion for production. Within a generation, factories were solidly in control of customers, and the Industrial Revolution had successfully inverted the business model to put manufacturer's needs on top.

Placing the needs of the supplier ahead of those of the customer is never a sustainable business model, however, and it is particularly vulnerable when the barriers to competitive entry are low. Therefore the shift that took place as a result of the novelty of mass manufacturing is inherently unstable and will eventually flip back to the customer-dominated model. (Who schedules an oil change two weeks in advance anymore, or waits a month for their local bookstore to order a title they could have the next morning at less cost by ordering online?) The proliferation of “Customer Satisfaction” initiatives throughout the manufacturing sector is testimony to the awareness of a problem, but that problem is far more fundamental than can be addressed through seminar-of-the-month-club offerings.

The Roots of Misunderstanding

The goal of manufacturing is to make as many exact copies of a 100% predefined article as possible, at the lowest possible cost. Product cost and quality are easily quantified, and the manufacturing sequence can be absolutely defined in advance. Even the most beneficial changes are unwelcome, since fixed costs are amortized across the number of units produced. Value is associated with product, and everything else is considered a cost to be minimized. However effective modern manufacturing methods may be, their success depends upon a very delicate and artificial set of conditions found only within manufacturing.

Unlike the manufacturing process, Project Management begins with questions, not a “build to print” solution. There is no exact definition of “done” that can be used to establish detailed plans and schedules; instead they must be extrapolated from the currently accepted definition of project scope. The Project Management process involves a mixture of fixed and variable elements whose ratio shifts as the maturity of the design increases. Expenditures of time and money on planning and scope definition are an investment whose return must be maximized, not an overhead cost to be minimized or eliminated. Iteration is an essential tool, not an admission of error. Value is associated with fulfillment of Customer requirements, not merely the shipment of a product. Process alone cannot be trusted to match output with expectation, a high degree of interpersonal skills are required to ensure success.

In short: The power of Project Management resides in dimensions that have no precedent in the manufacturing subset of the business life cycle.

It is small wonder, therefore, that the vast majority of commercial sector management still thinks in terms of organizational charts with boxes for Engineering, Sales, Manufacturing, Project Management, and so forth. These organizational elements usually compete for budget and incentive compensation, argue over who is to blame for problems, and interact with less than total team commitment. Despite an absolute dependence on successful project closeout, many companies simplistically consider Project Management as a cost and Manufacturing as a profit center.

This divergence, driven by misunderstanding, destroys the synergy that resulted in early success for the company and may be a key factor in the decline of productivity with scale for larger organizations (Micklethwait & Wooldridge, 1997).

The Manufacturing Tentaculture

It's not just that Manufacturing Managers often lack a personal background for understanding Project Management; there is a widespread and self-reinforcing belief system that must be addressed as well.

The 1999 Encarta World English Dictionary defines the word tentacle as: “…something that gradually or unnoticeably insinuates its way into and around things…” The word culture is described thusly: “…the beliefs, customs, practices, and social behavior of a particular nation or people…” Therefore the term “Tentaculture” is coined to describe the composite entity formed when multiple otherwise independent parties, practices, or influences collectively reinforce a set of behaviors.

The Manufacturing Tentaculture includes not only obvious players such as the Financial and Academic communities, but also much more subtle influences such as the impact of manufacturing based infrastructure tools within the company itself. The measures of value commonly found in the investment community are heavily biased toward manufacturing. Sales are considered leading indicators of profit, and market share is regarded as a measure of competitive effectiveness.

In a world that thinks of revenue volume, market share, inventory and other costs of goods sold, it is difficult to introduce a value argument for spending more resources before sale to understand a customer's true requirements, or for additional resources after sale to smoothly conclude the project. A recent Manufacturing News article (Teed, 2001) cited “reduced defect rate, reduced work-in-process inventory, increased labor productivity, and increased revenue per thousand square feet of factory space” as key improvements resulting from a Lean Manufacturing implementation. Where within those narrow measures of success would you look to justify your PM function?

Furthermore, manufacturing builds products, whose sales generate revenue, which in turn generates careers. Therefore, a disproportionate percentage of middle and senior management personnel are likely to have emerged from that subset of the business. Everyone develops a set of instincts, determined by the environment in which they operate during key periods of their career, which are then used more or less subconsciously thereafter.

Unless such manufacturing management veterans are exceptionally open minded, it is likely that today's corporate planning, measurement, and incentive systems are heavily based on their production background. Even when the organization grows to include large non-manufacturing business units, the overall culture of a manufacturing company is wired into its infrastructure.

The Systems Underground

For simple products, in fact for all products with a 100% degree of definition at time of sale, the manufacturing business model holds up reasonably well. Even more complicated products can be manufactured without consideration of the overall system environment so long as the customer is willing to act as the integrator (Moore, 1991). This leads to the dangerous illusion in growing companies that the additional expense of services such as Project Management would.

Many companies have had their first experience with Project Management forced upon them as a condition of some important hardware or software sale. Given an exclusively manufacturing oriented culture and its understandable lack of appropriately skilled resources, that first experience is seldom a positive one. First impressions are powerful, and “corporate horror stories” have great cultural retention rates as well as a tendency to grow in the telling.

Lost is the Customer's message that even a great product is only of value to them as a functional part of some larger system, and that they are seeking integration services as an essential part of the purchase. Instead, many companies decide to actively discourage such “order complications” in the future.

Ironically, the end result is that costs and risk are transferred to the Customer who then passes it back to the manufacturer either directly or through long term market influence. Sales Managers divert time to explaining alternatives and filling in the gaps. Engineers get phone calls from the Customer asking for information. Project Managers find closeout complicated by a lack of common expectations. Marketing reports with alarm that a competitor is now offering integration services.

Here and there, though, the spark will take and a Project Management skill set begins to emerge among people who recognize unmet process needs and step up to fill them. Far too often that skill set must hide in whatever gaps remain between accounting categories, function by influence instead of authority, and develop informally instead of as a valued element of the overall business engine.

Even when formal Project Management organizations are introduced, the challenge of operating within a fundamentally manufacturing process set causes a large portion of the work to be accomplished by informal methods. Note that it is exactly this “offbook, non-value added activity” that Lean Manufacturing advocates seek out and eliminate. As a result, far too much critical system analysis and support takes place by people who are scared to be caught doing it, and continuing cost and staff reductions have increased the base workload to the point where informal activities go uncovered.

Driven underground by a misunderstanding of process, the Systems skill set is being slowly starved by lack of resources. Companies are begging “empowered workers” to cover the additional tasks that cannot be allocated to formal process, but simultaneously eliminating the resources that would enable them to do so. Although deadly to the companies who currently operate this way, the situation provides enormous opportunity for competition to enter and redefine the marketplace.

Strategy

Forget the notion that manufacturing people aren't “system thinkers.” Of course they are! Running a factory requires great skill and insight. The problem is that the system they think about is different than yours. Theirs gets defined once and repeated many times. Great energy is expended to suppress or minimize external variables and change drivers.

Since the goal is both fixed and known in advance, it is possible to measure variation with great precision. The environment is deterministic, and most problems have optimal solutions that can be deduced through analysis. Because production takes place over and over again against the same fundamental rule set, incremental optimization is theoretically capable of perfection.

Project Management shares many of the deterministic attributes of the manufacturing world, but it also includes exposure to chaotic elements that must be addressed. The greater the degree of uncertainty regarding requirements (scope of work and exit criteria for example) the larger the degree of chaotic behavior that is introduced as a result of defining both question and answer within the project window. (An argument can be made that the true function of groups such as Sales and PM is to insulate the manufacturing subset from any possible real world disruptions!)

Because Manufacturing and PM share the ability to use deterministic methods, communicating through analogy is often effective. Unless you communicate that: the wonderful new contract is full of holes; holes are dangerous; and you have a strategy for filling those holes, don't expect to get the time you need to clarify customer requirements and expectations. Instead you will be ordered to begin production without delay, since that would be the correct answer in Manufacturing where 100% definition is implicitly assumed at time of order.

Yet, what factory manager would knowingly commit tooling and long-lead parts purchase budget before he or she knew what product is to be built? If the production drawing is not yet finished and approved, how confident would they want to be that the design was understood completely before beginning full rate production? Wouldn't finishing the design drawing be the highest priority? Questions like these aid in communication because they are linked to personal experience, whereas faithfully citing the value of Project Management merely reinforces existing opinions and mistrust.

Just because you can get them to acknowledge the circumstance, don't be fooled into believing that will translate into a full understanding of impacts. The sense of urgency, and accompanying resource allocation, is dependent upon being able to understand the cascade impacts that will result from missing requirements. Where within the manufacturing experience is the logical model to draw upon in order to reach this understanding? You must build not only an understanding of the issue, but also a richly developed assessment ability as well!

Conclusion

To bridge this critical gap between manufacturing and the balance of the business model, it is important to recognize and honor the power base that the Manufacturing Tentaculture represents. Your near term goal should be to build understanding, then eliminate the worst “self-inflicted wounds” which take place. Next is to extend the range of current processes to include examination of how fully defined the work actually is at any given stage, and where uncertainty exists, to acknowledge and address those limitations.

These are damage control measures, and although they will be helpful, it would be unrealistic to expect them to eliminate friction between such divergent functions.

Although beyond the scope of this paper, the long term solution lies in crafting end-to-end business models that situationally elect system or manufacturing approaches based on the definition of the task itself, not the political whims of management. Such an organization must grow from the understanding and application of System skills, not simply those encountered in the narrow special case of Manufacturing.

References

Project Management Institute Standards Committee. 2000. A Guide to the Project Management Body of Knowledge (PMBOK® Guide). Upper Darby, PA: Project Management Institute.

Micklethwait, John, and Wooldridge, Adrian. 1997. The Witch Doctors, Making Sense of the Management Gurus. New York: Random House Inc.

Moore, Geoffrey, A. 1991. Crossing the Chasm, Marketing and Selling Technology Products to Mainstream Consumers. New York: HarperBusiness.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

Proceedings of the Project Management Institute Annual Seminars & Symposium
October 3–10, 2002 • San Antonio, Texas, USA

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