16 April 2009
Regulations give baseline guidance on how we conduct our affairs. Regulations level the playing field by defining the minimum requirements for everyone involved. Regulations can be the motivating force behind many of our daily behaviors. Reference The ValueTree™ and let’s examine how regulations overlay it.
For many industries, such as aerospace, regulations define the product we sell and therefore touch Revenue. Regulations define our relationships with the workforce and compensation systems, therefore influencing Labor. Regulations define our relationships with suppliers, and impact Materials. Regulations give us the ground rules for Environmental, Health and Safety and impact Overhead and Workers Compensation. Regulations define how we account for the money flowing through the system with SarbOx. And these are just the obvious ones. And with each regulation there is a person who learns it and then translates the regulations into policy, procedures and work instructions. Unknowingly, these people are given massive amounts of power in defining the cost structure of the business. This point is made clearly in an exercise I do for a Maintenance, Repair and Overhaul Leadership workshop. A line is put on the floor and people must take a stand between a liberal or conservative response to regulations. Every time, there is a wide range of passionate responses with overtones of “right” and “wrong.” In one case, the story was told of a very conservative response to a regulation that initiated a chain of events leading to a $3 million dollar loss and customer dissatisfaction. The problem becomes ‘who will argue with the regulatory “expert”.’ The expert quotes paragraphs and sub-sections and states emphatically “this is what must be done.” But their personal bias introduces cost or risk. It takes a manager of steady resolve to sort through these issues while not antagonizing the expert into calling the regulatory agency for support. Regulations have broad reach across The ValueTree™ and the way we choose to respond to them is ritualized in organizational work, effort and cost. Be on guard for how people address regulations and be sure to seek a broad range of perspectives before institutionalizing your organization’s response. Value is directly tied to your approach.
Keep adding value!