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Employees at Industrial Company Cooperate and Conquer

By ensuring workers understand that their success depends on one another, a large industrial company tackles complexity and stops a decline in product quality.

When an industrial goods company faced declining quality in its products, its leadership team answered the challenge by investing more in research and development and by cutting costs in other areas. It ordered the purchasing department to reduce costs by 20% with no erosion of supply quality. But the move failed and led to finger-pointing between the department’s two main groups—the category strategists who determined how to buy raw materials, and the buyers who actually executed the transactions.

The category strategists felt that the buying unit didn’t implement the strategies properly. The buying units said the strategists cared only for their strategy and not what the buying units really needed. Meanwhile, operating units bypassed the purchasing department altogether and did their own buying, which made it much harder for purchasing to negotiate better prices later.

Reciprocity Delivers Returns

Company executives and team members looked into the problem and figured out what was really wrong: The three main groups were isolated from one another. They didn’t share objectives, and therefore their work didn’t overlap. As a result, they didn’t cooperate.

The company applied one of the core rules of Smart Simplicity—increase reciprocity. Reciprocity is the recognition by people or units in an organization that they depend on one another to achieve goals.

First, the company clarified objectives for each unit. The strategists were to develop innovative buying strategies. The purchasing units were to develop the skills of team members. Then, the two groups created overlapping objectives. The strategies had to be practical, and the buyers had to follow them. This forced the strategists and the buyers to cooperate. They formed a “community of practice” that enhanced everyone’s skills.

The company also cut the purchasing budgets of the operating units. People were then compelled to cooperate with the purchasing department, since they no longer had the resources to do their own buying. The combined effect of overlapping objectives and reduced budgets forced all the players to work together.

The result: The purchasing department met its targets for cost reduction. Just as importantly, supply quality didn’t decline.

Three Steps to Create Reciprocity

  1. Eliminate internal monopolies.
  2. Remove resources.
  3. Create networks of interaction.
Smart Simplicity
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