Planned Economy in Organisations....
Colin Thompson
Managing Partner Cavendish/Author/International Speaker/Mentor/Partner
People often fail to appreciate just how widely planned economy systems occur inside organisations.
Relatively few people have their `own` profit and loss account to provide the manager in charge with a `clear` and frequent read out of the current state of efficiency. A lack of efficiency shows up as either insufficient revenues or excessive costs.
The important mechanism of planned economy is lacking in `large` areas of the organised world. This lack occurs in special –interest organisations and of course in the tax-financed public sector, but just as much in parts of companies which deliver to some other part of the same company where the user is not free to choose another supplier. Although the IT department of a company may help to create value for customers, either through higher quality or through higher productivity that results in a lower price, this important function or support process has `no` profit and loss account of its own to inform how efficient it is. Also, the other departments which use the IT departments services, go outside the company and order those services from another supplier. The essence of `planned economy`, then is, that `top` management makes central decisions about use of resources and allocates or budgets the costs which the IT department or for that matter, Marketing, R&D and any other department that incurs by providing certain services.
In these cases the company as a whole creates value for its customers, who in turn make frequent decisions on whether to buy, not to buy or to buy from a `specialist`. Departments of the company contribute to `value` either by improving the quality of the product/service they produce or by improving productivity and then lowering the price to the customer.
The business situation in these cases is identical to that which prevails in `all` types of centrally financed organisations/associations/federations. The example is, where lead times are very long as the result of their customers`/members inertia. The same is often true of political parties and religious congregations. In such cases members can continue for quite a long time to feel that they are not getting value for their money before dissatisfaction manifests itself in falling membership and falling revenues from members subscriptions and lack of income from other services offered. Value for money is if the member believes that value is given by the services offered and the officers commitment to those services.
If the organisations capital assets are competently managed, as those of trade unions very often are, the effects of failing to deliver value to members can take a very long time to become apparent and corrective action may be taken too late. Therefore, in many cases a healthy balance sheet can act as an analgesic that lulls the organisation into a false sense of security, with the result that it does not feel compelled by financial considerations to take action that might otherwise have been desirable.
Business Process
The illustration below shows the most important business and support processes in an organisation. In some of them `value-enhanced` activities are the prime consideration, while for other processes and activities the object is to perform a function with a given level of quality at the lowest possible cost.
Support and Management Processes
领英推荐
In the accounting function, for example, the cost of making transactions should be as low as possible while reporting for control purposes should aim at maximising value.
Several methods have emerged in recent years, which focus on efficiency in component parts of companies. `Business Process Re-engineering` has gained wide popularity, but also generated a great deal of disappointment. One of the reasons for this is that its users have failed to appreciate the prevalence of `planned economy` within organised enterprises. It is important for everyone concerned to understand the theoretical background to the actions that are taken. This is quite feasible and is usually welcomed by employees, who enjoy putting theory into practice.
Economics have been trying for a long time to simulate the efficiency promoting effects of market economy by constructing quasi-commercial internal pricing systems. This has tended to encourage the growth of bureaucracy, and often to reward politicking rather than performance. The `winners` are those individuals who are skilled at working the system rather than those who are really keen to perform better.
Grow your business with the `right` people who understand `Planned Economy`!
PEOPLE=PERFORMANCE=PRODUCTIVITY=PROFIT
Do you have a?`Planned Economy`?
` Create Your Own Success Story`
Sharing information for your success from many sources.