Functional Agreements in Organizations

Within the body of knowledge, methodologies, processes, and best practices for asset management in many organizations, some topics stand out because they relate to how we communicate and behave as human beings, ultimately impacting business results.

Sometimes, especially in processes involving more than one company department, conflicts arise that, while not personal, can hinder the smooth and productive operation they should be.

It’s very common to hear that, for example, the Production and Maintenance departments or the Logistics and Procurement departments frequently face disagreements and/or conflicts.

It’s important to emphasize that these conflicts are perfectly normal; after all, we are human beings and we are not, nor will we ever be, perfect. These disagreements tend to arise especially when there isn’t a completely clear definition of responsibilities and scope for certain activities within a process. An employee or department might assume that a certain activity isn’t their direct responsibility, or that they don’t have the authority to make a decision, or they simply believe that another department is responsible for carrying it out.

Conversely, there are also cases where responsibility for certain activities is claimed by more than one department within the organization. These conflicts typically escalate to higher levels of the organizational hierarchy, even reaching senior management. It is usually at these levels that the scope and responsibilities are defined, bringing the conflict to a close and allowing the process to flow more smoothly. However, it is also common for these disputes to recur under the same or very similar conditions after a certain period of time. This is because, from the moment the dispute arises and is resolved, no safeguards are put in place to prevent its recurrence.

To definitively resolve any issues of this nature, “Functional Agreements” can be used. This simple yet effective tool allows us to definitively resolve ambiguities in certain processes and put an end to the problem in question. These Functional Agreements have the following characteristics:

• The disagreement should be resolved through a third party, generally someone familiar enough with the process to clearly define the scope and responsibilities of the conflicting parties. Often, the asset management department is called upon for this role.
• This person should act as a mediator and propose the best solution, ensuring that both parties are satisfied with the terms of the agreement.• A document is developed that clearly defines the scope of the parties involved. This includes not only what is each party’s responsibility, but also what falls outside of it.
• This document should also include a description of the process steps and a flowchart (similar to a Standard Operating Procedure).
• Additionally, it should contain a brief communication plan, typically presented using a RACI matrix (Responsible, Accountable, Consultable, Informed).
• Finally, a section is included listing all those involved (by name and organizational position) who must sign to officially close the agreement. Should a conflict arise again in the same context at any point in the future, the Functional Agreement document prepared in the past is reviewed, providing those involved with guidelines on how to address and resolve the disagreement quickly and effectively.

This is how these agreements are formalized through policies and processes that seek to align responsibilities, scope of work and use of assets with the company’s strategy, reducing costs, minimizing risks and improving quality and productivity; thus improving the work environment and healthy coexistence among employees.Some examples of Functional Agreements in practice

Maintenance – Production:

Production is commited to deliver the production assets and equipment to Maintenance at the date and time according to what is specified in the Maintenance Plan with no delays. In other hand, Maintenance will deliver back these assets to Production on time, clean and in goos conditions once they finish their intervention. Also Maintenance commits to clean the working area.

Sales – Operations:

If some customer asks for some new characteristics to the organization’s products portfolio, Sales must present the new scope to operations to confirm viability and capability to comply the customer’s requirements. Operations commit to Sales to deliver finished goods to the customers with an On Time Delivery (OTD) rate of 90% or higher.

Warehouse – Operations – Maintenance – Procurement:

One of the best practices when preparing for routine production assets Preventive Maintenance activities, is what it is known as “Maintenance Kits”. In this process, several departments are involved to make sure that just before work execution, maintenance technicians have all the materials they will need to perform their job with no interruptions and with a full wrench time compliance. Operations, Procurement and Warehouse work together according to previous functional partnership to have the material kit completed and fully available for maintenance execution (spare parts, consumables, hand tools, etc.)

Conclusion

Within any system in which human beings participate, the possibility of conflict is always present. Functional Agreements are a valuable tool for addressing these conflicts and finding quick and effective solutions. They also help prevent them from recurring. It’s crucial to maintain a positive attitude and willingness to engage in these processes. The maturity of those involved is fundamental to achieving a swift, smooth, and reasonable resolution, thus preventing the situation from escalating. The mediator’s role is also of paramount importance and must always adhere to the organization’s policies and philosophy. To facilitate the application of this tool, pre-established templates are available to guide the process.

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