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(Section C)
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3.1 Business Unit Relationships: The inter-relationships that exist among the various operating units that constitute the organization, as well as the relationship these units have with the organization as a whole. Units might be departments, lines-of-business, production plants, divisions, groups, subsidiaries, or other accountable business entities. Generally applicable Agility issues include the breadth of relationships permitted with units outside the organization, autonomy to choose and negotiate inter-relationships among units within the organization, degree and nature of centralized functions and organization-wide standards, size of operating units, reassignment of unit functions and responsibilities, outsourcing/insourcing, functional core-competency development, and acquisition.

Business unit relationships at Remmele are governed by the Strategic Policies (see Appendix) and their emphasis on empowerment, autonomy, growth, risk management, and plant-size guidelines. The top-level business units include the centralized corporate functions and the four divisions (in five plants); within the plants there is a similarly structured relationship among the program/project manager business units, and within the program management units at the Production Division there is a similarly structured relationship among focus factory cells.

Establishing a self-organizing business-unit creation environment
  • The reader is referred to Appendix D that contains an excellent and necessary description of the organizational structure and organizing principles which will not be repeated here.
  • Though Plant 30 was gained by acquisition, strong ideology at Remmele has made it difficult to add business units through acquisition: incompatibilities in culture and valuation are generally too great. This realization has come from experience and has strengthened the focus on creating an environment that generates new business units from existing ones. "We started out with machining and with automation as a single business in one plant (Plant 10). Some people ended up specializing in the parts and assemblies made for the automation group—so when more work came in and the place got crowded, these two different businesses were split and the Automation Division was spun-off (Plant 50)—with two separate P&Ls right away. But the cultural identity was still one company, just in two locations. The first real recognition of 'differentness' occurred when the third unit was formed by acquisition (Plant 30)—which created some 'we-they' feeling. Eventually Plant 30 split, creating Plant 20 when it was decided that the work-cell (Production Machining) business and the flexible equipment (Repetitive Batch) business are really very different: Work-cell equipment is specialized and may be sold off after the job goes away, whereas flexible equipment is applied to many jobs. The people are different too: different types of operators are needed for small-part-month-after-month vs. the operator who must run many different types of jobs with frequent and different setups. We have come to look at this spawning process with greater understanding and respect as each event occurs; with more decentralized autonomous empowerment concepts reflected in our Strategic Policies (see Appendix) as the years have passed."
  • "Back in the '50s Fred Remmele felt that relationships with a customer were better if a Project Manager was the single-point customer interface, who also had full responsibility for the relationship as if it was his only business. The Project Manager concept started when Remmele was only a $3 million business. As plants spun off, it became evident that Project Managers could not be centralized at Plant 10 (where everything started), and instead had to be in the plant that did their work. Eventually we recognized that Project Managers in different plants required different skills. At Plant 30 you had long-term management and little new business work, whereas the Plants 10/40 Division needed just the opposite. There were also differences in working with portable carryable parts vs a heavy or large part that needed a crane—how you schedule and manage those
  • jobs was very different. This meant we really had different kinds of project managers. Project managers have to be real self-motivated, as they are responsible for building a business without much direct management."
  • When one of the shop people involved with bringing in new high-velocity machining technology was asked: "What’s unique about this place?", the prompt answer was: "It splits into two before it gets too big. People in the weekly meetings are asking when our place is splitting and why it hasn't happened yet." Someone interpreting this answer later suggested that people in the plant can’t help but see that there is no room for the high velocity machining equipment unless some of the existing activity vacates the building—and there is a candidate business-in-the-making there that is close to striking out on its own.

Growing a new business unit to self-sufficiency and on to unit margin objectives

  • Whenever a major new type of job is secured by Remmele, whether for a new or existing business unit, a process is invoked by marketing which identifies similar types of needs and companies throughout the United States likely to have those needs. If justified, a target account program is developed and sales reps are involved in further research and market penetration activities. For some time now there has been an e-mail network specifically set up for the sales representative interactions with the company, and this network is one of the tools used to monitor and modify these market penetration programs in real-time.

Developing top management successors; developing effective customer replacement

  • Typically the head of a company in this industry is a technologist and not a marketer, most likely a machinist in background. That is not the case at Remmele, where strong marketing experience is evident in senior management. What is equally evident among senior management is natural "people-person" skills backed up by a deep visceral feeling for the values, development, and maintenance of the ideological core of Remmele. Whether consciously done or not, there is active business engineering at work here; with senior management guiding the explicit formulation and refinement from predecessors of the key corporate practices: accountable empowerment, decentralized autonomy, informed risk, project management, professionally classic sales and marketing, open communications, broad employee involvement in decisions and the annual planning activity, and so forth. Importantly, management takes an active role in helping others understand and utilize the core principles at Remmele. Though it is clear that the ideology is well understood and embraced broadly throughout the company, developing and maintaining it is a special skill that may be difficult to replace. Recently the company has recognized the need for growing management capability internally and has instituted an individualized personal development program aimed at producing the skill sets needed for Remmele's future growth and succession.
  • Customer replacement skills are especially necessary in a business that does customized outsourcing. The focused-factory cells at Plant 30 typically make sizable commitments for multiple years to individual customers and build dedicated production cells to satisfy those commitments. Contracts that run their course and don't result in renewal or next-generation succession can remove a sizable amount of monthly revenue and surplus an equally sizable amount of valued human resources. Plant 30 has recently dealt with just such an occurrence and now understands the necessity for an ongoing replacement strategy that greatly shortens the disruption period. At this writing the gap is well on its way to being filled by several new programs in new markets.

Integrating non-traditional units such as Production Machining and Corporate Information Systems

  • The Production Machining Division (Plant 30) functions quite differently from other Remmele divisions. The focused-factory work-cell concept has caused this plant to train people in numerous skills, like purchasing, maintenance, and other business functions, while machinists in other plants tend to have more traditional machinist training, not including some of those business skills. Similarly, machinists at the Automation Division (Plant 50) often gain skills in machine assembly that are not common in the other plants. Remmele's continuing growth and the changing business environments will require that such different skill sets, including information technology, be recognized and valued for the advantages they bring to the company overall, and that some of these skills will be transferred between divisions.

Fixing badly performing units

  • "Patience, Perseverance, Leadership, Teamwork" are banner slogans that graced Remmele's celebration when the Automation Division came out of its slump. Remmele stuck with this division through several very difficult years. The decision to fix it rather than close it rested on many factors. Though the company's stable employment commitment played a role, employees could have been transferred to the other growing divisions.
  • More decisive was the value placed on business diversity, and that this division provided entrée into a first-class customer base for the other divisions. Also there was a belief that the problems were of their own making and that it was possible to succeed in the business. "The business had grown up making some things that were variations of a common theme. We got good at it and kept doing it. Then markets disappeared all of a sudden, and we didn’t have anything. All of a sudden we had to succeed on one-of-a-kind jobs, and we didn’t have the necessary skills. Then we took some long-term jobs that turned out bad. We had to regroup and start over and go back to a customer base that we had disappointed. Also we had a managerial strength problem. We had the time to fix it. We knew all of those people as family and didn’t want to mess up here—we just had to find a way. All the while various things were tried, and new management was engaged and held accountable for corrective action. A conscious decision was made to get it fixed, and perseverance was practiced. The division is reborn in a different image now and quite vigorous." It is worth noting that the intense focus and concern on this division's return to health did not cause the company to suspend its principles of autonomy and empowerment while holding new divisional management accountable.

Effective access to specialty spot-use resources outside the business unit

  • Internally, Remmele provides a centralized resource that actively maintains a current knowledge base of leading-edge process and equipment technology and makes these resources available to other divisions in need of special expertise. Externally, Remmele outsources NC programming—though recognized as important, there has been no compelling reason to bring it all inside and set up dedicated capabilities.

Developing new project/program managers and divisional managers

  • The corporate Human Resources group has recently instituted an individualized personal development program for all people in management positions of any kind—from the president to the shop-floor supervisors. An outside firm with expertise in the field assists in annual one-on-one consultations to help establish objectives and strategies for personal development in the ensuing period. The impetus for this program arose with the realization that Remmele had excellent technology training programs but generally had to bring some project and program managers, as well as divisional managers, in from the outside, as there were no in-house training grounds to develop management skills. Interestingly, the Production Machining Division started its focused-factory concept in 1989, where people in the cell take on broad business management responsibilities in addition to the cell operation activities. There is no evidence that this approach has been consciously employed as a management training ground—perhaps because its operating modes are devoted to a different type of business than the other divisions. The example of employee empowerment, however, has been recognized throughout Remmele.

View Next Part: Section C-6.2

View Executive Overview: Abstract, Preface, Table of Contents

View Section A: Intro to Model | Change Proficiency Maturity Model | 24 Business Practices | Summary

View Section B: Intro to Remmele Case Study

View Section C: Integrated Model & Case Study | C-1.3: Strategic Plan Buy-In | C-2.1: Capital Investment Justification | C-3.1: Business Unit Relationships | C-6.2: Operating Metrics

Download This Report: PDF

Order Hardcopy Bound Report: An Agile Enterprise Reference Model and Case Study of Remmele Engineering

Features: Home | Library | Corp Info
Major Concepts: Realsearch ||| Enterprise Model ||| Maturity Model
                        Knowledge & Agility ||| Agile System Principles
Book: Response Ability - The Language, Structure and Culture of the Agile Enterprise
Book: Value Propositioning - Perception and Misperception in Decision Making

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