Clean Business Cuisine
With this issue of Journal of Business Strategy we begin serializing one of the more amusing business books of recent times, even though it is about ancient times. Our thanks to authors Michael Mainelli and Ian Harris for providing this divertimento from their book Clean Buisness Cuisine.
Keywords: Literature, Business enterprises
Whether to centralize or decentralize is a perennial strategic choice. Sometimes managers follow centralization theories that lead them to standardize,seek economies of scale and eliminate duplication. At other times, managers decentralize in order to motivate local management, respond rapidly to changing customer needs or eliminate wasteful bureaucracy. Yet centralization and decentralization are not opposites, as the following tale illustrates.
Clean Business Cuisine
Michael Mainelli and Ian Harris, ISBN 1 84059 227 3, price £14.99. For further information, please e-mail: michael_mainelli@zyen.comor ian_harris@zyen.com or telephone:+44 (20) 7562-9562. Z/Yen helps organizations make better choices. The name combines Zen and Yen - "a philosophical desire to succeed" - in a ratio,recognizing that all decisions are trade-offs.
Chapter one: Confederal unity
In the beginning there was chaos. This chaos may be called decentralization. Chao Kli Ning looked down upon the chaos and thought it was inefficient. Moreover, it was adversely affecting his profit. He asked Lo Fan to summarize the underlying processes in his restaurant and laundry. Lo Fan replied "people come in, we take their money, they go away". Kli Ning was enlightened and said"you are quite right, Lo Fan, the common theme is soap and water. Henceforth we shall save both time and money. Take the clothes from this laundry and the dishes from that restaurant to the same place. There shall they be washed together to the benefit of our bottom line. And we shall name this place the Kwik Klining Duck Tea House and Laundry Sanitation Facility." Lo Fan saw the wisdom of this and replied "O master, as you speak, so it shall be done".
And it was done. Many were the savings as Chao Kli Ning had foretold. Less soap was used. Fewer buckets of water were needed. Water heating costs plummeted. Even Deng Zhou, the senior dish washer, saw the benefits of change as his once onerous workload started to decrease.
There were a few wrinkles. Some laundry customers complained of unusual stains and a slight tea color to their white garments. Others complained of missing small garments. The problem was usually temporary, as the restaurant manager almost always returned socks he found in the teapots. These complaints were trivial. Lo Fan confidently told the whinging customers that they could take their laundry elsewhere. He knew that this would have little effect on revenue. The nearest laundry was 50 leagues away. The dearth of alternative laundries was unsurprising. Chao Kli Ning's competitive business strategy included techniques that made the great general Sun Tzu a proud descendant of this progressive man.
Deng Zhou's ambitious niece, Yao Pi, had been a great help to Lo Fan in establishing the Sanitation Facility. As a junior dish washer Yao Pi had been quick to adapt to the broader tasks of sanitation. She had identified many savings and had provided her uncle with perceptive career advice. Yao Pi was appointed Head of Sanitation. One of her first acts in this new role was to streamline decision making by appointing a Deputy Head of Sanitation. Deng Zhou was encouraged to take early retirement. Yao Pi concentrated on reporting to Lo Fan and on general sanitation strategy. Yao Pi ordered her deputy to liaise daily with the restaurant and laundry on demand and capacity.
Lo Fan saw many changes ahead and sought an audience with Chao Kli Ning. Lo Fan reported the changes already made and sought guidance on roles,responsibilities and general reporting structure. Lo Fan asked "O Master, is centralization always better than decentralization?" Chao Kli Ning replied "get a detailed grip of the big picture, Lo Fan. When should the caterpillar move his third leg?". Lo Fan pondered long and he pondered hard before he saw the wisdom of Chao Kli Ning's advice.
Sanitation collected and delivered dishes in batches three times a day. The restaurant manager, Po Chu, made some minor adjustments to restaurant operations to adapt to Sanitation's routine. First, he set aside an area for storing dirty dishes awaiting collection. He also instituted a standard form for tracking batches of dishes. He found it necessary to set aside an additional area for holding returned dishes prior to sorting and storing. Po Chu often found that there were few spare dishes ready for use. Following the fateful day when there were no teapots for six hours, he decided to place an order for additional dishes. He also hired a new dish manager to take responsibility for dish planning and supply.
The laundry manager, Wan Chang, made some minor adjustments to laundry operations to adapt to Sanitation's routine. First, he set aside an area for storing dirty laundry awaiting collection. Following customer complaints,including physical threats from village elders, he also established a small bleaching room for white garments. Many clothes in the large batches dried prior to ironing. Wan Chang installed a water tank for rewetting these garments. He also hired a runner to retrieve stray socks from the restaurant.
One day Lo Fan was troubled. The bottom line had been getting worse. Lo Fan met with the laundry and restaurant managers. They both explained that there was less business in the cold winter months and that things would be better in spring. Lo Fan went to see Yao Pi, whose advice he valued. Yao Pi pointed out that costs were rising, particularly in the laundry and restaurant. Yao Pi suggested that management seek further efficiencies by centralizing other processes in the sanitation facility, such as accounts. Lo Fan pondered long and he pondered hard on this suggestion.
Lo Fan went forth and sought an audience with Chao Kli Ning. Lo Fan brought grave news of worsening results, particularly with the extra staff, enlarged space and increased consumables. Chao Kli Ning was not pleased and vowed change. Chao Kli Ning asked Lo Fan to summarize Lo Fan's proposed solution.
Lo Fan replied, "revenues down, costs up, save more money, centralize accounts". Kli Ning was struck with Z/Yen enlightenment and said, "get a big picture grip on the details, Lo Fan. Each man should be responsible for his own destiny. Henceforth laundry and restaurant shall be rent in twain. Divide this Sanitation Facility. Thus laundry shall take unto laundry and restaurant unto restaurant. And we shall name this process the Kwik Klining Duck Tea House and Laundry In-Line Product Process Streaming." Lo Fan immediately saw the wisdom of this and replied "O Master, as you speak, so it shall be done".
And so were changes made. Many forms died that day. The customers found fewer socks in their teapots and a surprisingly white wash. The restaurant found it easy to return to old ways, with Yao Pi's former deputy as senior dish washer. The laundry found that it could charge a premium for extra white bleaching. Yao Pi eventually found re-employment as junior dish washer at her uncle's retirement home.
Conclusion
There is no right or wrong choice in centralizing or decentralizing. Often the choice is a reaction against the status quo. Many businesses successfully use "pendulum management", i.e. repeating sequences of centralization followed by decentralization, in order to achieve near equilibrium over the long-term. The most costly mistakes are made by managers who think there are scientific answers to this choice.
