#TL30B: THE MISSING FUNCTION

A business is a complex creature. Most of us have difficulties in organizing our personal lives - a personal life is an organization of one. Probably even more of us find it difficult to organize our romantic relationships successfully - a romantic relationship is an organization of two (mostly!). Therefore it is to be expected that organizing a business would be even more difficult. A crude ratio might be: one in four personal lives fail (choose your own criteria); two out of four romantic relationships fail; three out of four businesses fail. Such a ratio would reflect the relative complexity of personal lives, romantic relationships, and businesses. The point is that for a business to succeed and live up to the expectations of its founders, it needs to be well organized.

There are certain key organization concepts, the application of which will increase Build Freedom's ability to become successful, to eventually grow rapidly, and to cope with rapid growth. This section deals with the "missing function" concept.

A "function" can be defined as a more or less homogeneous task (for example, typesetting), or a group of related tasks (for example translations - French translations and Spanish translations being individual tasks). "External Communication" is such a function. It includes communication lines into and out of an organization. Someone needs to be responsible for this function to exercise integrated control. It could include telephones, fax, postal procedures, modems, UPS, Federal Express.

A "missing function" is a function that is not explicitly defined, and for which no specific person is responsible. As an organization grows, certain functions which are implicitly handled in a small company (for example, personnel recruitment), need to be explicitly defined as functions, and someone needs to be designated to assume responsibility for and exercise integrated control over these functions.

The analogy of the motor car may illustrate the importance of missing function. A modern motor car contains hundreds of parts and subassemblies performing many functions. Certain functions (for example, pistons) are vital. In their absence the car won't run at all. For a car to run, a large number of functions need to be performed. For the car to run properly, function-performance needs to meet certain standards; furthermore, many functions need to be integrated (for example, sparkplugs need to spark and valves need to open and close at the right times). Any number of functions, if missing, would prevent the car from running. Nevertheless, a car can run even with bad plugs, dirty oil, and bald tires - but how well and for how long?

The development of the motor car could also serve as an analogy for the growth of an organization. Early cars had relatively few functions and performed poorly by modern-day standards. As the car became more sophisticated, more functions were incorporated and functions were better integrated, leading to improved performance. In the most modern cars, computer functions have been added to improve function-integration. From the hindsight of the modern car it is easy to see the missing functions in the Model-T Ford. From a "Model-T-perspective" it is difficult to envisage the functions that need to be added to transform the Model-T into a modern car.

An organization (as well as a car) can be regarded as a hierarchy or network of integrated functions. From the perspective of a modern organization it is easy to see what functions have been added to the crude organization of a century ago. But from the perspective of today's organization it may be difficult to spot the missing functions that need to be added to create tomorrow's more efficient, effective, and profitable organization that grows explosively - or the functions that need to be added to cope with explosive growth.

Missing function can be an insidious problem in that it is a "nothing" which is by its nature invisible. One way to identify missing functions is to adopt the perspective: to progress from A to Z we need to perform all the necessary steps (functions) in between. What might they be? The following is an extract from a memo I wrote about a mini-disaster that occurred in a company where I did some consulting work. It illustrates the kind of consequences that can result from a missing function:

"As you know, on 12/30/88 a "disk crash" erased the disk directory on the computer containing most of our foreign translations (copy of NB's memo attached). There is a strong suspicion that the disk directory was in fact erased inadvertently by something that happened while a new employee was working with a Chinese program. He may have initialized the disk, not realizing what he was doing or what the consequences would be. Valiant attempts by NB during the ensuing weekend have failed to restore the disk. If we are fortunate, we may be able to restore the disk within days; if not, we may have to re-enter the data from print-outs. The latter would probably take many man-months of work.

As a company grows, the potential for disaster also grows - sometimes the latter grows even faster than the former. This is because the combinations of factors that can cause disasters tend to grow much faster than the number of employees and the size of the organization. This may be a major factor that explains why so many companies fail within a few years, and why so few companies live up to the dreams of their founders. And this in a world where the best companies are often in many respects only slightly better than mediocre. (In the land of the blind, one-eye is IBM!)

Having discussed backups with NU and NB soon after starting my consulting project at "XYZ," I formed the mistaken conclusion that all databases were routinely backed up onto tape. As a result I didn't make personal backups. So my own work has also been at risk. On 1/2/89 I found out for the first time that each user was supposed to make his/her own backups.

Our difficulty in dealing with the "disk crash" points to three missing functions in XYZ: Data Processing Management, Security, and Personnel Induction. A properly defined, delineated, and implemented Data Processing Management function would ensure that adequate backup procedures are being followed. An XYZ Security function would include measures to ensure the security of all XYZ data. A proper Personnel Induction function would include a procedure of carefully briefing new computer users on potential disasters they could cause inadvertently. This would reduce the risk of putting a new employee in front of a computer where he or she can unwittingly wreak havoc.

Note that because of these missing functions XYZ has been subject to the risk that pressing a few buttons could wipe out many months' work... "

A more spectacular example of missing function occurred in the case of People Express. They demonstrated how rapid expansion can lead to even more rapid extinction. People Express expanded explosively - like a fireworks rocket they soared brightly into the sky - then flared brilliantly - and faded away even more rapidly. Why? What happened? What went wrong?

The early success of People Express was due to several innovations:

1. Passengers bought their tickets on the plane from stewards and stewardesses - no ticket offices.
2. All managers did their own secretarial work - no secretaries.
3. They worked as dedicated non-specialized teams - for example, the flight captain helped clean the plane.
4. They were not unionized.
5. It was easy for personnel to acquire company shares - they were highly motivated.
6. They implemented an objective personnel grading system - the most effective employees were promoted. (Actually, this may have been a flaw - for the dangers of "personnel merit" systems see Deming's principles - refer to Report #TL30A, page 1.)

These innovations increased productivity and lowered overheads tremendously. People Express could reduce airfares dramatically - on many routes it was cheaper to fly People Express than travel by train. Occupancy rates were high. Profits soared. People Express expanded explosively. They became very ambitious - the world was at their feet. Then, over a period of about ten days, they bought out and took over four other airlines. Most of the employees from the unionized "captured" companies couldn't and wouldn't adopt People Express practices - many contrary to "union rules." People Express never did develop the kind of infrastructure (system) necessary for sustained explosive growth - the kind of infrastructure that would result from implementing the key organization concepts I advocate. Within a few months of their ambitious takeovers, People Express was no more.

People Express suffered from at least two missing functions: Personnel Induction and Expansion Control. Their Personnel Induction function was hopelessly inadequate to cope with the sudden influx of new personnel from the four airlines they took over, with their different practices. Note that it was much more difficult for People Express with their radical practices to take over a traditional airline, than it would be for a traditional airline to take over another traditional airline.

If People Express had implemented the Expansion Control function, they would have:

1. Carefully planned the takeover of one small airline.
2. Made careful preparations, including beefing up their personnel induction function.
3. Executed the takeover.
4. Applied the lessons learned from that experience to improve their functional organization.
5. Developed a workable takeover methodology.
6. And only then tackled bigger "fish."

Sudden expansion can be very dangerous: both to organizations and individuals. We all know the expression. "letting success go to your head." We can learn a great deal from both our successes and our failures...

Missing function is related to a management style called "management by crisis": wait for a crisis before you try to "manage"; don't bother about organizing, until there is a sufficiently severe crisis. That is the situation the XYZ "disk crash" brought about. It did actually delay some projects by weeks. It would be folly to handle such a "problem" (it is really a symptom) as if it were an isolated case. "Murphy's law" applies with a vengeance in the computer world: "If anything can go wrong it will." Many companies have gone bankrupt because their computer systems failed.

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