Organization audit procedures and best practices

Organizational Audit

General Results of the Audit

The audit studied the way that productivity management is handled at InforMed, and evaluated some of the base systems that aid in making productivity improvements. On the whole, InforMed has many of the tools at the departmental level to manage productivity effectively. They hire good people, and in theory at least grant them the autonomy required to make improvements. However, we found that there is no overarching corporate strategy for productivity improvement. This essentially squanders the tools that they already have. Decisions are made on an ad hoc basis with no concern for the broader needs of the organization. Neither departmental managers nor front-line employees have any impetus to pursue productivity improvement. Worse, there is no system for productivity auditing in place. Many functional departments have the capacity to gather raw data, but there is little analysis conducted. These leaves managers in the position of having little idea of what initiatives are needed, what the areas of weakness are, or how to evaluate the changes that have been made for deviations or effectiveness.

Analysis of the Audit - Policy

InforMed scored moderately well on policy, hitting five of seven key components to strong productivity policy. The company does well in terms of empowering its employees to make their own decisions regarding productivity.

Employees at all levels are involved in decision-making about their jobs, and each is held accountable for whatever productivity efforts are delegated to him.

The corporate power structure supports this. Productivity management has been built into the structure at all levels - every key function for productivity management is present. In addition to each employee, each department bears the responsibility for its own productivity improvements.

At the overall corporate level is where InforMed's productivity management program becomes weak. While the company does have a productivity mission statement, and it is given priority by management, the controls necessary to follow through on the mission statement are often lacking.

For example, while superficially each department is responsible for its productivity improvement, there is no oversight. Managers do not submit plans for improving productivity to senior management nor do they report productivity results. InforMed lacks an overall strategic plan to address the issue of productivity, and therefore there is no plan to integrate the productivity strategies of each department into the broader plan for the company. Not only do they lose opportunities to learn from each other, but this evidences a lack of concrete support from senior management. Because there is no overall plan and no reporting, there is no evaluation. This results in a system where productivity improvements are ad hoc, not shared through the organization and not evaluated for any sort of strategic fit.

This marginalizes whatever productivity gains that are made.

So while the tools for strong productivity management are present at the lower levels, there is no guidance or supervision at the higher levels. The program lacks cohesion and direction. Worse, it sends the wrong signals throughout the organization about the importance of productivity management. It is not use for employees or departments to make productivity improvements if the company neither knows about them nor recognizes them, let alone integrates them into a broader, organized productivity improvement platform.

Leadership

Productivity leadership at InforMed is poor. Without the guidance that a proper productivity policy would give, management essentially ignores productivity in their day-to-day work. Foremost, management does not demand any productivity performance audit. Ideally, they would emphasize the importance of tracking productivity within the organization. However, they do not. There is no periodic productivity audit and no annual productivity report that is compiled and presented to measure productivity improvements over the year. Not only does management not know what is happening in the company with regards to productivity, they do not care.

Moreover, the systems for managing productivity are basically non-existent. Employees are neither encouraged nor challenged to improve productivity. Leadership seldom if ever promotes improvements in their employees. For example, InforMed operates a call center to support their products. This is one of the best environments in which to encourage productivity improvement because the tools for measuring the effect of new ideas are readily available. Even given that, management ignores the opportunity to engage their employees with regards to productivity. They prefer a focus on "service," not realizing that service and productivity are not at all mutually exclusive.

Teamwork is not emphasized, reducing opportunities to generate and implement better productivity-related ideas. Moreover, there is no system to reward employees for the contributions they do make. So while employees are empowered to help shape their jobs, they are not encouraged to improve productivity; such gains are not recognized when they do occur; and there is no reward system to provide incentive to address productivity issues. Moreover, from what we can determine, management still places priority on personalities over ideas - they favor the views of their favorite employees or those in certain positions, rather than evaluating new ideas strictly on an independent basis. This not only reduces the opportunity to tap the knowledge and experience of a wide swath of their workforce (most of the call center, for example) but is incongruous with the degree of input they give employees in terms of shaping their own jobs.

Yet leadership does encourage research and development. They structure work flow so that each department contributes a balanced effort. The work environment is harmonious to some extent, yet because productivity's contribution to overall strategy is not explicitly outlined in policy, it tends to be an area ignored by management.

Objectives

Productivity objectives are fairly clearly defined at the department level of InforMed. Employees generally understand what is expected of them in terms of output and goals set for each period of time. Moreover, these expectations are attainable, and provide some challenge. Employee performance in most departments is measured, sometimes to a fine level of detail.

Normally, that would form the groundwork for a strong productivity management program. However, beyond the department level there is little support for productivity initiatives. So while most employees are aware of the objectives set for themselves and their department, senior management seems unaware of how to integrate these into a broader productivity program.

Measurements are made, but this is where productivity management stops at InforMed. Managers, for example, do not have specific productivity objectives passed down from above.

Worse, the company as a whole has no system to measure the effectiveness of whatever productivity measures it implements. There is nothing in place, for example, to measure variances from objectives. They have the capacity to achieve such measurements in many of their areas, but they do not have the focus to actually do it. They have little sense of when one of their productivity plans goes wrong, and when it does they appear to have no particular sense of how to identify the problem and rectify the situation. This leaves InforMed in a position whereby they have no system in place to spearhead change, meaning that any changes are ad hoc and on the department level or lower. Then when something goes wrong and the change does not work as planned, they are lucky if they know and even then have trouble identifying the source of the problem so that they can fix it.

Inputs

In terms of inputs, InforMed scores in the middle range. Some of the base structures needed to manage productivity are present, but the company struggles with the finer details. At the base level, each department has control over its own budget. This allows them the autonomy to manage their own productivity. Flowing from this, job specifications are clearly defined, which provides the basis for productivity measurement. Resources are made available to each department on a timely basis, which gives each department ample opportunity to management their productivity without delays caused by inadequate purchasing.

However, despite each department having control its own budget, they typically do not break their budgets down to individual inputs. Senior management knows that they are spending money, but they do not necessarily have a clear picture on what they are spending that money. InforMed does not have a sufficiently robust information system to monitor resource utilization. This leaves much of the power for productivity management in the hands of department managers, who as we have established do not have any responsibility to senior management on productivity issues.

The quality of inputs is not measured against the quality of outputs. One key way of viewing productivity is that good value for dollar must be achieved. There is no consideration of the value of inputs vs. The value of outputs. If there was, the company could benchmark relative improve of outputs even as inputs vary.

Performance

InforMed scores well on its ability to establish and measure performance of each department. Its employees receive sufficient training to perform the tasks that are expected of them. Within each department, goals for employees are set in line with department goals. The goals set are designed carefully by the department managers, such that they are realistic and achievable, but require a high level of performance. Each employee is given the resources needed to achieve their goals.

Within the unit, performance expectations are identified and measured. Productivity goals are laid out, and evaluated. These results are considered by department managers as a key measure of productivity. Within the marketing department, for example, sales figures (performance) are the key measure, and are weighed against the time and money spent to acquire them. We found this approach to be typical of each department.

So, in looking at how the company views performance and how it links performance to productivity, is that they do this well at the department level.

Technology

InforMed scores moderately well on the use of technology to enhance productivity. The basic requirements are in place, but they are not necessarily used to their best. Each department, as we have found, is responsible for their own budget and that includes the technology budget. At the department level, we found that managers were attuned to making decisions about technology based more on long-term benefits than short-term ones. In some ways, this is a positive, because it keeps technology expenditures relative to productivity gains. The department managers score well on trying to achieve a balance between expenditures on technology and gains in productivity stemming from those expenditures.

However, because they operate without any strong guidance from above, and are faced with somewhat constrictive departmental budgets, the technology used is not the best available. Department managers often try to stretch their technology budgets by delaying new purchases. For example, their sales staff often works with just cell phones, even on the road. This we feel can inhibit their productivity because they are required to spend more time in the office than would otherwise be necessary.

Likewise, productivity in the call center is compromised to a degree because they are working with equipment that is near obsolete. They do the best they can to manage productivity given the equipment at their disposal, but modern call center hardware and software could yield significant productivity gains. So we concluded that for many employees, they are not operating with the best technology for maximizing productivity. The department managers do the best with what they've got, but at times they are hindered by lack of technology investment and oversight from above. Part of the investment issue is that the department heads are responsible for their own cost centers. This causes them to stretch technology for years beyond its useful life, even at the expense of productivity. There is little incentive or push from senior management to invest in technology in the name of productivity improvement.

Work Procedures

InforMed scores fairly poorly on its work procedures. As a rule, these are not designed with productivity improvement in mind. Worse, as productivity increases, the quality of work decreases. With strong productivity management systems, quality should be maintained while productivity improves.

There are several areas of weakness when it comes to InforMed's work procedures. First, safety procedures are seen to have an adverse affect on productivity. We would prefer to see a more neutral attitude, or an attitude geared towards finding ways to eliminate the negative consequences of mandatory safety procedures.

Management of workplace procedures is fairly ad hoc. Employees are empowered to help design their own jobs, yet at the same time they are not specifically empowered to make productivity improvements. In some areas of the company's operations, managers put too high a price on failure, which discourages employees from seeking ways to improve their productivity. This is especially true in the call center, which has a strong top-down structure.

The trouble is, even in departments where management takes a commanding role in terms of designing and implementing procedures, they do not measure their own success. There is no formal procedure for periodic evaluation of procedures. This has a negative impact on productivity because over time, deviations from those procedures emerge and the impacts of those deviations are not evaluated by management. Even if the managers develop tight, efficient systems, those systems will decline in efficiency over time and management has no formal structure for evaluating this. We looked at time-wasting operations and found several, yet management did not seem to be aware of how wasteful these procedures were, nor did they have an answer for eliminating them.

For a company in which the majority of work tasks are fairly regimented, managers take little active role in monitoring the procedures once they have been implemented. The employees themselves have no incentive to do so either, and the result is the development of inefficiencies that go unchecked. Productivity could be improved at InforMed just by better monitoring and regular evaluations of existing procedures, never mind developing new procedures to improve productivity.

Staff

In terms of staff commitment to productivity, InforMed is generally scores well, but with a couple notable areas of weakness. In general, they have good people, who understand the concept of productivity and are committed to improving it. For most positions, they are able to find employees who have a high level of productivity awareness. This is especially true at the departmental and front-line levels of management.

The strength in their hiring is reinforced with strong training programs that do feature some emphasis on productivity. At the lower management levels, productivity is one of the key areas of focus, and these managers are able to work with each other, and to coach their employees, to help improve productivity. In most departments, managers have some minor reinforcement programs for rewarding productivity improvements. They do not, however, always make use of these programs, and there is neither company-wide support for these programs nor a corporate-wide equivalent.

The high level of training ensures that productivity does not suffer when turnover occurs, and InforMed has created an environment that results in a fairly low level of turnover in most departments. It can be suggested, however, that despite this continuity of staff, many lower level employees lack passion for their jobs. They do not demonstrate any sort of commitment, and view productivity as an issue for management to deal with. They do not see that productivity improvements on their part will be rewarded. They feel, and we concur for the most part, that management would not be aware even if they did improve productivity, and that management would not utilize the reinforcement programs in place but would take credit for themselves.

One staff weakness we identified was in supplemental training. Despite hiring good people and giving them a high level of initial training, InforMed typically does not follow up with supplemental training. Many of the employees we spoke to indicated that they had not received training since they were a new hire, and had no incentive to undertake such training on their own. They are not committed to improving themselves, or their contribution to the company, and this is reflected in a generally ambivalent attitude towards personal contribution to productivity improvements.

Recommendations

InforMed can improve its productivity by implementing the following recommendations. They should develop a corporate-wide productivity improvement plan. They should free up more money for technology improvements. They should enhance their reward systems in order to better engage front-line employees in productivity management.

The core of InforMed's strength in productivity management is at the department level, where they have systems to measure productivity and where productivity is a specific goal of management. None of this is present at the corporate level. The attitude seems to be that if the department and functional managers do their jobs with regards to productivity, that this is sufficient. However, the message that this sends those managers is that productivity is not a high priority. Senior management must also demonstrate a commitment to productivity improvement.

To do this, they need to develop a system that ties productivity improvements of the different departments together. Corporate-wide productivity should be measured. This involves several key tasks. Productivity audits should be conducted to evaluate the different departments specifically on productivity improvements. A corporate-wide strategy for productivity management should be implemented - at present productivity-related planning in complete ad hoc within each division. A consistency of procedures, audits, measures and systems for adjustments would provide a more cohesive approach to productivity and ensure best practices are adhered to by every division. Moreover, it would provide senior management with the information they need to provide more specific productivity management guidance.

Specific corporate productivity goals should be developed, measured, and then the failures and successes should be evaluated to devise ways to consistently achieve improved productivity performance. At present, the department managers set their own goals. This should be the role of senior management. The department managers should bear the task of implementing management's objectives, not defining their own measures of success.

A more integrated system would also provide for better cross-department comparison of productivity. This creates a greater sense that each department is working for something greater than just its own success. The current system results in decisions that take only the department's objectives into account. The new system would require department managers to take the overall health of the company into account, forcing them to develop a better sense of how their department interacts with others for the benefit of the company as a whole.

The second recommendation is to free up more corporate money for technology improvements. Right now the department managers do a good job of weighing the benefits of productivity improvements with the cost of new technologies. However, because productivity is not just a department issue but a corporate-wide issue, there should be some corporate-wide monies made available to contribute to productivity enhancements. Differences in technology between departments both contributes to operational difficulties but also reduces company-wide cohesion.

The goal of corporate-wide technology funding is to put the entire company on equal footing with regards to technology. For example, we can conceive of a situation where improvements at the sales level generate an increase in orders that the development and production functions cannot match because they are not operating with the most current technology. At worst, we could see technological incompatibility.

Using corporate-wide funds for technology improvements allows for the development of increased cohesion between departments, through improved communication. Moreover, it allows for the departmental managers to focus their budgeting efforts on other areas. We have seen that these managers sometimes attempt to stretch their existing technologies out a few extra years, and one of the biggest reasons is that an upgrade will represent a significant hit on their budget, resulting in poor performance for the year. This encourages short-term thinking. InforMed on the whole is guided by long-term thinking, so we find this circumstance incongruous with the company's outlook. In order bring the company's outlook and budgeting practices more in line, while at the same time allowing for improved use of technology to improve productivity, we feel that the bulk of technology improvement funding should come from head office, not the departments.

The third recommendation is enhanced rewards systems for productivity improvements. The employees right now are not engaged in the productivity improvement process, yet those front-line workers are often in the best position to develop such improvements. Most departments already have adequate systems for measuring productivity. This means that they can evaluate improvements stemming from employee suggestions.

In most cases, the rewards systems are already in place. However, because managers do not make use of them for the most part, employees are not engaged. Moreover, managers seldom encourage employees by non-reward-based means, either. There is little training after the new hire process.