Old-School Vertical Hierarchies

As the saying goes, I wasn’t born in Texas, but I ran here as fast as I could. When I arrived, I found that the Lone Star State produces some fine beer, specifically, Shiner beer…

While I could go on all day about the merits of Shiner Hefeweizen compared to the original Shiner Bock, that’s not really the point of this photo.

What I want to discuss is how folks on large-scale construction jobs view the relationships between the prime contractors, secondary contractors, sub-contractors, and so on.

In case you haven’t figured it out yet, the construction industry typically views sub-contractor relations like this photo… with each contractor dominating the one below it and being subservient to the one above it.

An old-school rigid, vertical hierarchy. This is based on standard construction practice, which typically involves a contractor doling out aspects of the work to sub-contractors. In this arrangement, the contractor is viewed as the customer and the sub-contractor is viewed as the provider of the product or service.

This is an external customer relationship, and it’s repeated over and over again at each level of the hierarchy, so you can have dozens of external customer relationships on a job site. How fun! A bunch of people showing “respect” for their boss man above them. Old school mentality.

From a Lean perspective, I would say a collaborative model would be more effective than a rigid vertical hierarchy.

If you’ve read Gemba Kaizen, then you know about the inverted pyramid that places management below the gemba (the place where the real work is done) in a support role. Essentially, the gemba is viewed as the internal customer of management, and I would say that prime contractors should view their sub-contractors as their internal customers.

They should support them, not threaten them with punitive actions. They should identify and solve problems, not pass the buck just because the contract says they can.

I’d be interested in learning if other traditional industries are as “old-school” in their relationships with vendors/suppliers. How would you rank your industry’s level of collaboration on a scale of 1 to 10, with 1 being a rigid, vertical arrangement and 10 being a progressive, Gemba Kaizen-like approach?

All I know is that until the construction industry embraces Lean thinking and begins working more collaboratively, we’ll be doomed to mindless obedience and endless frustration. Thank goodness we have beer.

About the author: Michael Lombard is a Lean advocate and project manager at Palm Harbor Homes, Inc., based in the Dallas-Ft. Worth metroplex. He’s currently working on large-scale military construction projects, studying his master’s in project management at UT Dallas, and blogging about Lean construction management. You can view Michael’s profile here and e-mail him at mlombardjr at gmail dot com.

Adam Roberts
June 1, 2009 - 7:36 am
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Definitely. It’s been my experience (electronics industry) that suppliers are often treated as second class citizens. I wish it was Friday as I now want some beer!
Matt Stambaugh
June 1, 2009 - 8:41 am
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Nice post Mike. I am a staff member at a public university. I can say that IMHO the reverse pyramid you speak of does not exist here. In short, vendors < physical plant employees (janitors, carpenters, etc) < staff < faculty < administrators < state education board. This system follows what I like to call trickle down bitchanomics. The shit starts at the top, then rolls down the hierarchy being amplified as it falls. This is very evident with the budget cuts we are currently going through. Yes indeed, thank the gods for beer!
Mark Standeford
June 1, 2009 - 9:18 am
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Good post! I am in the Medical Device industry and I see different relationships between suppliers and subcontractors depending on the product or service required. I see that in some instances the sub-contractor is viewed as a partner and some that they are not.
My experiences is that it follows the economics model of supply and demand. If a contractor is in a market that has a large supply of others providing the same product then they are treated as you stated in your post. If they supply a rare in demand product or service then they are treated as a partner or even as you mentioned in an inverted pyramid. If I need a plastic connector I can bid that to 100 possible companies but if I need an acellular tissue matrix I have to court 1 of a handful of companies that supply it.
I think the construction trade is in an over supply position now so sub-contractors are treated poorly. When many cease to do business and the market creates a high demand that will change the relationships.
So can I help you reduce your Shiner inventory?
Michael Lombard
June 1, 2009 - 9:31 am
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Matt, not surprising that a highly structured bureaucracy like that of a university would follow that pattern. Big opportunities exist in these types of industries: government, healthcare, education, construction, etc.
Michael Lombard
June 1, 2009 - 10:30 am
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Oh Mark, we can currently work on eliminating the waste of inventory by pounding a few cold ones the next time you’re in DFW.

But that’s an insightful point you make about how the old supply & demand economics affects the way companies treat their vendors. Unless a company has fostered an organizational learning/continuous improvement/problem-solving culture, there is always the temptation to do the “rational” thing, which is to treat your vendors as good as you need to. But companies like Toyota, who probably have vendors pounding on their doors 24x7x365 don’t take this easy way out. They have such awareness of the benefits of collaborative supply chains that they still pursue the inverted pyramid approach.

That being said, there is only one Toyota. In the construction industry, everybody gets “fat & sassy” when they have work, and go to begging the next minute when they’re out of work. This leads to constant employee and sub-contractor turnover, which leads to stagnation in the innovation process. That’s why not much has changed in construction recently except now we have Blackberries!
Mark Sessumes
June 2, 2009 - 7:27 am
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While I think the question of ‘old school’ relationships with customers and vendors in the value stream is an important one, I think a larger question is the overarching philosophy of ‘customer’ itself. There are many, many industries where the concept of customer does not exist. Wikipedia defines a customer as the buyer or user of paid products. From a ‘lean’ perspective, we know the definition of customer is broader. They are the ones that specify value. To your point, what is the ‘value’ management provides to the gemba? Do they embrace the value proposition? What about other industries such as healthcare? When’s the last time you truly felt like a customer at a doctor’s visit? Dentist? And what about government offices……wow, don’t get me started. Do politicians really see us as ‘customers’? So in my experience, many industries don’t even view the folks that are supposed to be their customers as such. This fundamental philosophical gap will prevent building a spirit of improvement outlined in the book Gemba Kaizen.
Craig Scafidi
June 2, 2009 - 7:41 am
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Well said Mike….. I agree completely with the inverted pyramid management approach. As a foreman on a production floor I have done my best to provide support my entire team with some success. What has surprised me though is how unresponsive the team has been.
Adam Roberts
June 2, 2009 - 7:47 am
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Hi Craig, I am curious if you have any ideas why your team would be unresponsive? I’ve seen this myself and am just curious to hear your thoughts.
Craig Scafidi
June 2, 2009 - 10:22 am
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Having said that, I know that years of dealing with it can take it’s toll. I am spending as much time educating team members on the value of the system as I am implementing the system itself. Let’s call it a PR campaign!! Every “change” needs one.
Craig Scafidi
June 2, 2009 - 10:28 am
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Honestly Adam, when I took over the department it was one of the most underperforming in the plant. I realized almost immediately that in addition to some much needed physical changes to the department ie: 6S and Lean Management System, the guys just needed some leadership. No one had engaged them on a professional level in so long, if ever. I am happy to say that we are the cleanest and most organized department but the day to day challenges of sustaining and motivating keep me plenty busy.