I just had a birthday last week and I know I am beginning to get older. I'm beginning to get quite good at remembering the past well enough to see that history may just be repeating itself. I remember when I started my consulting business in 1989. We were on the tail end of a long standardization trend that had realized a lot of value for many organizations. Consultants like myself were helping companies try to break out of their standardization mindset with processes like Total Quality Management, Reengineering, Empowerment, Entrepreneurialism, etc. I remember how threatening it was for many people to consider innovation and change.

Here in the 21st century, standardization is in again. It's in because standardization helps drive increases in top line revenue and bottom line profits through more consistency in processes/procedures/systems, improving integration and realizing greater value from strategy and market opportunities.

What's Driving the Focus on Standardization

  • Technology - rapid advancements in technology are having a significant impact on efficiency and quality. Technology is driving improvement at the wellhead, at the checkout counter, at the IRS office, etc. New technology is costly so a new technology has to be used by as many users as possible to get a good return on the investment. Maximizing use requires processes to be more common so that technology can be leveraged across the user base. Organizations are also driving value through the integration of technology and applications - enterprise suite of technology from the same vendor or even technology integration between vendors.
  • Growth - companies are 1) expanding globally with international affiliates of U.S. companies, 2) growing through replication of units - whether it's a McDonald's, a sales office or a new LNG (liquefied natural gas) plant site or 3) through acquisition. To take advantage of the growth, companies want to be able to use the same systems domestically/internationally, log into the network from any location or leverage data between the business units. Standardization can also decrease the cost of starting up a new location and it can reduce the complexity/cost of IT infrastructure/systems.
  • Sarbanes-Oxley - government regulations on reporting and attestation of internal controls is driving more standardization because control over key processes increases (and risk decreases) because audit assessment/testing improves when there is less variation. At the same time, many organizations are also pushing Six Sigma to drive efficiencies and quality in the organization. Similarly, variation must be decreased so improvement can also be controlled and monitored. Standardization becomes the friend of initiatives like Six Sigma and Sarbanes-Oxley because it reduces variation/risk and can increase control/efficiency.

Standardization and the Ford Assembly Line

Standardization is definitely not a new concept. It started with Ford's assembly line model for work which shaped the thinking of many in the baby boom generation. Many of us grew up as kids learning that the best way to make money is to take a product and make a lot of them the same way using the same process. Henry Ford was the originator of this mass production model. An article titled "Fordism, Post Fordism and the Flexible System of Production" states how Ford delivered value from mass production,

"Standardization was key to the success - standardized components, standardized manufacturing processes, and a simple, easy to manufacture (and repair) standard product. Standardization required nearly perfect interchangeability of parts. To achieve interchangeability, Ford exploited advances in machine tools and gauging systems. These innovations made possible the moving, or continuous assembly line, in which each assembler performed a single, repetitive task. The moving assembly line was first implemented at Ford's Model-T Plant at Highland Park, Michigan, in 1914, increasing labor productivity tenfold and permitting stunning price cuts -- from $780 in 1910 to $360 in 1914 (Hounshell, 1984; Abernathy, 1978)). Hence, the term Fordize: 'to standardize a product and manufacture it by mass means at a price so low that the common man can afford to buy it.'"

ExxonMobil is an excellent example of a company that has a reputation of looking for the best way and then standardizing on that practice -- to keep costs in line and utilize proven methods. A lot of people in the industry see ExxonMobil as inflexible and only doing things the Exxon way. But how can you argue with their financial success?

The Standardization Trap

Standardization helps realize value and is a key phase in an organizational maturation cycle. Those phases are:

1) Innovation

2) Developing Revenue-Producing Capacity

3) Increasing Market Share

4) Standardization

You'll note that progression from phase to phase seems like a natural one and doesn't meet a lot of resistance. But standardization does not have a next phase and we have found through our experience that the next phase after standardization is more standardization. When an organization gets really good at standardization, they are putting everything in place that will naturally resist change and innovation - consistency-oriented individuals, highly interdependent systems, smart technology, use of historical knowledge, etc.

But internal/external demand will change at some point. External customer needs may change. Internal needs may change with a new CEO that has different expectations. But will the organization be so trapped in its own standard work processes/procedures with people who are naturally good at avoiding change and inconsistency? Will the organization or function be able to break its standardization mindset to become innovative again? Refer to your history. Just ask the big U.S. automakers how difficult it was in the 1980s to break its standardization mindset to deal with the competitive challenges from overseas.

Standardization - What to Watch Out For

The Standard Way May Not Be the Best Way

Many people in larger organizations will tell you horror stories about a forced change to a standard way that turned out to be a nightmare. Maybe they lost some functionality in a software application. Maybe centralizing communication with the client (i.e. one person having all the contact with the client representatives) is more efficient but will make it more difficult for others on the team to understand the problem they are trying to solve. It is easiest to standardize on a solution that everyone can accept and this is usually a middle-of-the-road compromise solution. But unfortunately, standardizing on the middle-of-the-road solution will only make you middle of the road.

Standardization Can Go Overboard

Standardization leaders often have a process, control or engineering mindset. These mindsets create discipline and realize value from a more consistent process that minimizes risks. However, sometimes those with that mindset want to continue standardizing without considering whether there is enough value from additional standardization. A number of years ago, I remember working with an engineering project team that didn't know how to stop detail engineering and standardization. I made an observation that it seemed like they were digging a pit (digging into the detail) and even though they keep digging, they couldn't reach the bottom because, from my viewpoint as an objective observer, it seemed to me that they were digging in a bottomless pit. You can always continue to standardize, but will there be value with the additional standardization?

Centralized Control from Standardization Can Create Bureaucratic Delays

Because of global, geographic growth in many public companies, standardization often creates more centralized control over how work gets done - from the roles/responsibilities to the hiring to the work process to the technology/tools to the IT infrastructure to the data. Although standardization from a central location can create some efficiencies and reduce costs, it can also create bureaucracies. Bureaucracies are at their worst in government when they have a monopoly on the process and there is no competition for the services they provide. Cost begins to skyrocket, service begins to decline and the consumer can't go elsewhere.

Business bureaucracies usually show up in centralized functions like Procurement, HR, IT, Accounting, etc. It might be an HR policy that works in one country well but not in another country. It might be a Sarbanes-Oxley compliance procedure that gets no input from the business on the unintended consequence. It might be a delay of the purchase of a necessary application for a small number of key users because of additional approvals/analysis needed for a non-standard application with non-standard infrastructure.

When There is No Time To Consider Better Ways

Lack of time is one of the greatest barriers to innovation. Why is it that there is never time to challenge our current thinking unless there is a crisis? Is it because innovation is an undefined or difficult to estimate work stream that may or may not have any benefit? Is it also because it puts people out of their comfort zone? Or are people becoming too comfortable in their standard way and is lack of time becoming an excuse to avoid change?

Recommendations: Avoiding the Standardization Trap

I want to restate that I believe standardization is a natural and valuable phase in the maturation of an organization or function. It is difficult to compete unless you can build in efficiencies and realize value value through standardization. Effective organizations and functions build a bridge between standardization and innovation so they can avoid the Standardization Trap. The following are recommendations to avoid that Trap:

Recommendation 1: Schedule Regular Innovation Workshops

The more you standardize, the more you need to make an effort to innovate. Consider a very standard, well-executed onboarding process for new employees. Like any other well executed standard process, it begins to get to the point where people can execute the process without thinking - it becomes mindless. It doesn't require any mental energy or preparation which makes it efficient for those involved. Execution becomes machine-like and the experience for the new employee can become machine-like. This may be fine until Competitor A and Competitor B hear the complaints about your process and build a better, more up-to-date and interactive onboarding process that becomes a recruiting advantage.

Regular innovation workshops for key processes can drive change and anticipate the need to change a process like in this onboarding case, before the organization incurs a loss of strong candidates. Even if the suggested ideas are not adopted, it is an important checkpoint to ensure the process, product or service are still designed in an optimal manner.

Recommendation 2: Distribute Control Over Standardization

Most bureaucratic organizations believe that if they just have more control centrally over the areas that they have challenges with, then work will get done more efficiently. Sometimes, when control and standardization increase, unexpectedly what is lost is the human performance edge. Responsibility for standardization can be distributed through use of multi-member steering committees, stakeholder involvement in developing standards and having "performance audits" to ensure that the standardization effort is yielding an improvement in performance. Yes, it takes more time but it will make it easier to break out of the Trap when the time comes.

Recommendation 3: Learn Externally Through a Focus on Best Practices and Benchmarking

An organization or function that challenges itself through external learning will most likely avoid the Standardization Trap. The challenge is in keeping an open mind as you begin to standardize. If you let standardization limit your thinking, you can easily go overboard with standardization or standardize around a sub-par solution. Some of my clients learn by bringing in external speakers on innovative topics at their leadership offsite meetings. Some join professional organizations. Some participate in benchmarking studies. If your mind is open and you increase your knowledge, you can access that information sooner or later when innovation or change becomes necessary.

*      *      *

Now that change, innovation and "chaos" have become more normal in today's business, organizational leaders are seeing opportunities to realize value from greater standardization. The pendulum is swinging back towards greater standardization. The challenge will be in not letting the pendulum shift back too far. In my experience shifting from innovation to standardization is much easier than the painful experience of companies trapped in standardization and trying to learn how to innovate again.

© Michael R. Goodfriend, Goodfriend & Associates, Inc., 2006

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