by Mark Hicks
You’re walking through the assembly line and you notice some things that aren’t right – a wrench laying on the floor, an open box of inventory out of place or an assembly misplaced. Do you know why these things have happened or who is responsible for them? If you do, then you likely work in an organization with 150 employees or less, according to Malcolm Gladwell, author of The Tipping Point, How Little Things Can Make a Big Difference.
One hundred-fifty people, according to Gladwell, is our limit as human beings to comfortably work with others in an informal way. In such small organizations we are able to monitor the work of others without bureaucratic reporting. We have the capacity by informal observation to know when someone’s having a bad day, to trace the source of quality problems and to judge the performance of workers. Beyond 150 persons, things are just too complex for such informal understanding and it then becomes necessary to establish a bureaucracy.
If this is true for organizational interrelationships (i.e. “personnel”), then is it not also true for inventory and production scheduling? Is there not some measure of business size, perhaps in number of products or people, which indicates that the monitoring of inventory and production scheduling should be done in a more formal manner? More specifically, is an organization with less than 150 employees truly an “enterprise” and is “Enterprise Resource Planning” an appropriate tool for such a business? Would it not be better for small organizations to monitor things informally or with simpler systems?
Companies with less than 150 persons have a distinct advantage, according to Gladwell. He writes, “when people know each other well, they create an implicit joint memory system – a transactive memory system – which is based on an understanding about who is best suited to remember what kinds of things.” Gladwell is saying that the information needed to run a small company is not in an ERP system, but in the minds of acknowledged experts. These “experts” who constitute the organization’s “joint memory system” include the owner/manager, who has personal experience with all aspects of the production process, having begun the enterprise with a “better idea” and personal drive. And it continues with a small team of operational managers – the sales manager, the engineer, the accountant, the plant manager, the buyer and the “computer guy” – who have broad areas of responsibility and make decisions based on their direct observation and experience of the company’s operations.
A small business of less than 150 persons is a “workgroup”, not an “enterprise”, and the appropriate technology for such an organization is not ERP, but rather workgroup tools which focus on giving knowledgeable employees the information they need to run the company. These tools should focus on enhancing the “joint memory system” – giving people the information they need to do their jobs – because productivity rests with the team, not the system. They should take advantage of the collective knowledge of the team by encouraging team members to share information through easy-to-use tools for entry and retrieval of information.
While these tools can provide basic MRP functionality – building and exploding bills of material, tracking orders and inventory and requirements reporting – their function should be to provide information rather than to constrain business action. Most critical is that the system should be flexible enough to accommodate the unique business practices that made the company successful in the first place. When a successful, small company abandons its competitive business practices in order to comply with a set of one-size-fits-all ERP rules it then destroys the collaborative, team-based atmosphere found in small business. Decision making is transferred from people to the system – and the “joint memory system” of the group is lost.
When a small organization can operate on it’s “joint memory system” then, Gladwell writes, “It makes the company incredibly efficient. It means that cooperation is easier. It means that you move much faster to get things done or create teams of workers or find out an answer to a problem.” And when the joint memory system of a small company is enhanced with the appropriate tools, rather than a restrictive ERP system, then employees are empowered to take full advantage of their collective knowledge. This leads to even greater speed, agility and competitive advantage.
In small business, at the end of the day, people drive business results, not the ERP system.
Mark Hicks, CPIM, has 25 years experience with a small, informally managed manufacturing company. He is now a software developer and business consultant in Austin, Texas. He may be reached at mhicks@bizmark.com
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Copyright© 2008 Mark Hicks and Bizmark Development
Articles on www.bizmark.com, except where noted, are copyrighted by Mark Hicks and Bizmark Development and are made available under the CREATIVE COMMONS PUBLIC LICENSE. The licensor permits others to copy, distribute, display, and perform the work. In return, licensees must give the original author credit.
