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The value of internal support.

Article Excerpt
EXECUTIVE SUMMARY

When supervisors of support functions put forth compelling arguments for adding staff or making capital investments, it's time to apply management engineering. The only way to know whether such expenses make sound economic sense is to determine the real value they have to your organization. If improvements don't increase production or decrease bottom-line costs, are they really improvements?

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The warehouse supervisor has finally gotten through to management. There is agreement to build a new facility to replace the one that is falling down. The warehouse supervisor prepares a recommendation for a building that is 50 percent larger and is better arranged for the work of supply management and warehouse control.

It comes to the CEO as a proposal to increase the efficiency of the warehouse operation. He is interested in replacing the warehouse, but this is more than replacement. Is there some reason he should accept the considerable expense of expanding what is working, especially as it may cut into a parking lot that is already being challenged? He hadn't planned on near-time expansions to any other facilities or increases in production quantities.

This is not an uncommon challenge, just one that is difficult to address if managers are not making use of proper performance measurement.

Instead of engineered measurements, locally developed goals and objectives with appropriate metrics are often used. A quick survey of major goals for large organizations points out the cost of this approach. Many goals with substantial associated costs can be accomplished without having any positive impact on what the organization produces. These metrics do not relate well to organizational performance and have proven generally ineffective for competent efficiency work.

First application

The immediate challenge is the lack of office-based performance measurements. The deeper challenge is in management efforts to perform efficiency engineering through people who lack training and education in this specialty. That is why there are so few good metrics for supporting organizational purposes.

Engineering analysis is straightforward and to the point. We have already solved the problem of internal support measurements. We have many examples of engineered support in production areas, and we know that performance metrics are effective in that environment. All that is necessary is to expand what we already know to the management-based situations being addressed by a three-step process:

1. Identify the challenge in functional terms. The warehouse does...

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