Companies divide themselves in smaller teams and have individual goal(s) for each team.
For instance:
– We measure Sales team on Value/Volume sold.
– Marketing team on Brand perception.
– Finance team on budgets and alignment.
– Manufacturing team on Asset utilisation
– Sourcing team on how well they can buy at lowest cost.
The actions for each of these goals are many times in conflict with actions required by another team’s goals.
Outcome:
1. This builds silo mentality in companies. Managers try to ‘protect’ their turf and increase their span of influence. Picture this, Sales team is ok to give discount (because it helps their goal unit – sales) but it is in a direct conflict of marketing objectives of brand perception building.
2. Even if a company can get to the ‘best compromise’ answer to all local goals, do you think they get the best answer to the overall goal of the company?
Most measure functional costs with little understanding of trade-off costs across the vertical silos of sourcing, making, delivering and selling.
