Structured vs. Operational Management – Part 3

This is Part 3 in a three-part article. {Part 1, Part 2}

  1. Combined Structured and Operational Economic Change

An example of combined structured and operational economic changes can be experienced with the employment of asset management. During the course of a vendor review, a manager deletes an entire expense item, such as janitorial services. In this case, the deletion of the item is a structural change.

An example of an operational change is where management decides to cut expenses on the purchase of certain supplies. For example, management would have to make a comparative shopping analysis of several vendors to reduce their prices. In doing so, the manager can get several vendors to reduce their prices, resulting in another relative improvement. The manager sustains this improvement by continued comparative shopping and the establishment of vendor guides to ensure compliance with agreements. The repetitive nature of the manager’s actions, as well as the discipline of updating the vendor guides, identifies the technique as an operational technique.

Economic outcomes are what separate all types of service departments. However, any of these structures will provide better economic return if management employs the appropriate operating technique with the chosen structure.

For example, advanced production techniques yield approximately 16% more production than the traditional environments. This is evidence of their structural integrity. When management becomes involved with the administration of production objectives, an operational structure, they are able to achieve even higher results or another level of improvement.

  1. Structured Techniques versus Operational Techniques

The use of production objectives in advanced production service departments provides the opportunity to examine another approach to structured techniques. The manager who manages the production objectives can often gain an additional 6% of relative improvement. That manager may use an operational technique such as 10-week hit ratios. The manager who does not complete the task often experiences no gain at all from the original design structure. This is an example of operational superiority versus structured design.

Additional Service Sales Requests (ASRs) is a technique that is useless from a structural point of view—it is the operational technique that makes the difference. The operational technique is very management intensive and requires strong management discipline and follow-up. The average 12% improvement usually associated with this technique is only sustainable by management intervention.

VII. Other Economies

The examples cited above are only just a few of the many economies that exist in service departments throughout the industry. A host of elements in the average service department can be restructured or operated in a different way to get financial results. Economies, other than structured and operational, also exist in those service departments, for example, functional, energy, and management types of economies. M5’s role has been to challenge all of the economies that exist and to return to the dealer the maximum possible return on their economic energies

Written by David Dietrich

About the Author