It is not news to any executive that in vibrant companies it is natural for conflicts to break out due to the divergence of ideas and objectives between people and sectors of the company. The most curious thing is that these divergences are not exclusive to a hierarchical level, as they occur both at the strategic level, between directors, and at the operations end, between salespeople and delivery drivers.
Chiavenato (2004) and Berg (2012) analyze in their studies the most diverse causes of conflicts in organizations, among which stand out:
- Scarcity of resources: due to the limitation of financial, structural and human capital distributed among the different sectors of the company, there is a “dispute” for resources simultaneously with an interdependence between the different areas;
- Incongruity between goals: due to the level of specialization of the different functional areas of the company (result of the organizations' growth), it is common to see each area prioritizing isolated (and emergency) actions to reach its goals, to the detriment of the organization's global objectives.
In other words, if there were unlimited resources and at the snap of a finger it was possible to achieve objectives without any impact on others, conflicts would cease. The reality, however, is that no shareholder will give executives unlimited resources, nor are areas completely independent of each other. Thus, simple decisions taken on a day-to-day basis inevitably impact other business areas, generating potential conflicts. For example: the increase in the portfolio (Marketing) impairs the optimization of the factory floor (Production); negotiations of purchase lots minimizing unit costs (Supplies) make it difficult to control stock volumes (Materials); order fragmentation and fluctuations in sales (Commercial) impact order processing (Warehousing) and fleet management (Distribution). Himself mindset of each area is a hindrance for an effective coordination
Figure 1 - Mindset of the Commercial Areas
Source: ILOS
The Commercial area, for example, is very directed by value and focuses on indicators of efficacy, because it is up to her to look at the world and seek the virtually unlimited opportunities in the market. The big question for Sales is: “How much more can I sell? ”. Thus, the preferred orientation for the commercial team is the sales volume and the number of orders, even if these are not met in the most austere way.
Furthermore, as sales teams are at the forefront of the negotiation, having a sense of urgency to customers' needs, wants and desires is critical. For this reason, Sales often find themselves in an uncomfortable situation when looking at other areas and not seeing the desired speed in serving their customers. This feeling gives birth to the more wasteful nature of Sales in relation to the use of resources: everything is allowed as long as the volume necessary to reach the target is generated, even if discounts and bonuses are inappropriate, that 50% of the revenue is concentrated in the last week of the month or that 30% of orders fulfilled were not previously planned, among other commercial decisions with great operational impact.
Figure 2 – Mindset of the Operations Areas
Source: ILOS
Operations areas, on the other hand, are very focused on costs and focus on indicators of efficiency, as it is up to these areas to seek to rationalize the use of existing resources. The big question for Operations is: “How much can I still save? ”. Thus, efforts are mobilized for an optimized chaining of activities, so that changes in priority (frequent in commercial emergencies) are considered harmful, capable of threatening the rational use of available resources. Thus, it is common for Logistics and Production to conclude that it is not worth meeting the demands of the Commercial area on time. This also occurs due to the nature of the indicators commonly controlled by Logistics, in which the level of sales is of little relevance. In general, this area is measured by the parsimonious use of resources, the accuracy and speed in order processing, the occupancy of vehicles, the proximity of stock levels to the target coverage, the number of returns/returns, among many other indicators.
The problem, however, is that the figures closest to the customer and the competition are not in Operations, but in the sales team. The Operations areas do not have the necessary clarity to assess the risk associated with denying compliance with some customer demands. By handing over to the competition the possibility of serving them, leading to a loss of market share, it will become even more difficult and expensive to win back this same customer later.
The central dilemma is that organizations cannot be directed solely towards results, disregarding related efforts; nor seek the maximum locative efficiency of resources without taking into account whether the goals, objectives and missions are being achieved. Thus, although the Commercial and Operational views are meritorious in themselves, from the company's point of view, both are wrong. It is not enough to maximize sales or minimize costs, the most important thing is the relationship between the results and the resources used. It is about productivity: the quotient that paves the way for the company to reach its raison d'être.
Figure 3 - Productivity quotient of results and efforts
Source: ILOS
In today's world, however, with the speed of events and complexity of systems, decisions often have to be taken quickly and without having an accurate body of information on the issue. Without clarity in relationships, effectiveness and efficiency come into conflict with each other, and mediating them while maintaining the notions of priorities is a huge challenge (COSTA & JARDIM, 2010).
On a daily basis, there is an immense amount of decisions made locally and recklessly, focused only on the short term. For example: commercial and merchandising efforts occasionally promote an increase in local costs, but is the global benefit achieved not worth it? Or due to lack of coordination, is there no operational capacity (production/logistics) to capture the intended benefits? In the same way, a cost reduction can make the system more economical, but does this reduction mean deteriorating the value package offered to the customer, generating future sales losses? These questions are extremely difficult to answer and require alignment at the strategic, tactical and operational level between the different functional areas of the company.
It is true that companies have made a notable effort in their monthly cycles of the S&OP process to define a sales plan that contemplates the aforementioned tactical alignment. But it becomes increasingly imperative to deploy the sales planning to the operational plan (S&OE – Sales and Operations Execution), enabling a better operational allocation of resources through a clear and precise coordination of priorities.
Finally, the challenge of assessing the impact of the local decision on the global result is what forces the areas to engage in intense dialogue after the S&OP, even after the tactical plan has been agreed upon. Great opportunities are envisioned in the correct decision-making on a day-to-day basis. The key lies in reconciling efficiency and effectiveness to sustain productivity gains. After all, what Paul Krugman, Nobel Prize in Economics in 2008, said for nations, also applies to companies: “if productivity is not everything, in the long run, it is almost everything”.
Productivity isn't everything, but in the long run it is almost everything.
(Paul Krugman)
References
BERG, Ernesto Artur. Conflict management: practical approaches to everyday life. 1st ed. Curitiba: Juruá, 2012.
BURBRIDGE, R. Marc; BURBRIDGE, Anna. Conflict management: challenges in the corporate world. São Paulo: Saraiva, 2012.
CHIAVENATO, Idalberto. People management: and the new role of human resources in the organization. 2nd ed. Rio de Janeiro: Elsevier, 2004, p. 415-427.
CORRÊA, HENRIQUE L.; GIANESI, IRINEU GN; CAON, MAURO. S&OP – Sales and Operations Planning, Production Planning, Programming and Control. Atlas publishing house, 2001.
COSTA RS and JARDIM EGM: The five dimensions of operational diagnosis, NET, Rio de Janeiro, 2010.
WALLACE, THOMAS F.. Sales & Operations Planning, The How-To Handbook. TF Wallace & Company, 1999.
WANKE, P.; JULIANELLI, L. Sales Forecast: Organizational Processes & Qualitative and Quantitative Methods, Editora Atlas: Rio de Janeiro.
