Are you having trouble keeping your operations focused?

By Robert S. Huckman
Problem
Every business during the introduction and growth stage of its life cycle grows rapidly, it succeeds in developing the products or services by building its operational strengths. As it nears towards its maturity stage down the line, the business expands based on the opportunities available and as a result its core strengths atrophy and its efficiency suffers and the quality gets diluted.

Plant within a Plant (PWP)

In his classic article "The Focused Factory", Wickham Skinner proposed that manufacturers whose product lines had proliferated create specialized units, each dedicated to a distinct task. The business that has broadened its scope in to a variety of specializations can divide itself into units such that each unit is working on one distinct task. To make this economically feasible, he suggested the plant within a plant, or PWP, model, whereby an existing facility is physically and organizationally divided into autonomous operations. Though this system had its advantages, it was not easy to implement it in industries like hospitals, airlines and pharmaceuticals due to few errors made by the managers on deciding Objectives without considering how individual strategies will support the overall strategy of the firm Resources to be shared between units, managers more concerned about attaining economies of scale and do not estimate the challenges in sharing them Degree to which the talent, knowledge and practices should be shared Problems that could arise due to political strains between units

To overcome the above issues, Dr. Huckman suggested a 2 step approach 1. Understand the challenges 2. Optimize the performance

Challenges
There are 3 major challenges for the managers which affect their ability to build a proper PWP system.
a) Establishing Objectives

Instead of achieving an objective of single organization with multiple specialized units, the sub-units are created as and when the need arises without considering the overall vision of the organization.

b) Setting Boundaries

The actual concern occurs in the amount of resources like talent, knowledge that is shared between the units. It should neither be very restricting nor be very porous.
c) Managing Interactions

In order to make an organization to function effectively there needs to be proper interaction between its multiple units. This also results into an increase in the amount of conflicts that may occur due the interaction. One major reason for conflict would be that each units leader is too focused on his own units efficiency and so request most of the resources for themselves.

Optimizing Performance
The guidelines suggested by Dr. Huckman for tackling the above challenges are as following:
i) Set clear objectives

The managers should ensure the following when deciding upon the objectives. 1. Clear and distinct objectives for each unit 2. Individual objectives should collectively support the organizations strategy 3. Communication of objectives to each unit
ii) Get the boundaries right

The permeability of the boundaries should be decided based on the assessment of following 2 considerations 1. Degree to which the economies of scale will be utilized 2. Identifying the spillovers of sharing resources and deciding which should be encouraged and which should not be encouraged
iii) Establish rules for sharing

Every unit should know the basis on which the assets will be shared. Rules should be made and enforced constantly.
iv) Customize performance criteria

The performance incentives and goals for each unit should be set with respect to the work being done instead of having same criteria for every unit.

Conclusion
In order to implement a successful Plant Within a Plant (PWP) system, managers should be constantly adapting to the environment and continuously focusing on eliminating the problems arising within the organization. The PWP model if effectively implemented provides the ability to expand into new areas without losing the operational excellence built over the years.