This is the first in a series of five articles describing the challenge of managing laboratories effectively. I will be drawing from my 35+ years of laboratory management experience. The discussion will include not only commercial laboratories, but will also deal extensively with internal or captive laboratories. We will look at this issue in great depth beginning with the nature of the laboratory. We will describe how ubiquitous the laboratory has become in our modern “knowledge industry” culture and how entrenched is the love/hate relationship that exists between the laboratory and its internal and external clients. We will look at some of the major laboratory management issues and try to bring it all together in a final posting. We will follow the general outline:
- The Nature of the Laboratory
- Human Resource Management in the Laboratory
- Business Management of a Laboratory
- Technical Management of a Laboratory
- Bringing it All Together for Effective Management
The Nature of the Laboratory:
In a very general way, there are two types of labs – Commercial and Internal. The Commercial Lab does work for clients not part of their business organization. Generally this is done for a fee with the intent to be profitable. This fee can be based on time and material, but this is no longer the usual case. It has become expected that the Commercial Lab performs standardized tests for a fixed per item fee. This was not the expectation before about 1980. It was during the 80’s that we saw the emergence of the standard alone, commercial laboratory in a number of fields including:
- Clinical Labs
- Agriculture Labs
- Food and Drug Labs
- Environmental Labs
- Metallurgical Labs
- Soil Labs
- Materials Labs (especially construction materials)
- Oil and Gas Labs
Contemporaneous with the emergence of these lab industries was an explosion of method standardization. This was driven by a mix of activities coming from regulatory agencies (e.g. EPA, FDA, etc.) and industry sponsored organizations (e.g. ASTM, GPA, SAE, etc.). In a matter of a couple of decades, the Commercial Lab changed from an “expert” consulting organization to a production entity that cranked out standardized results. During this time there was tremendous upheaval in the laboratory environment as internal labs were “spun off” and new commercial businesses created. It was an era marked by mergers, re-organizations and monumental failures. Former internal technical experts often found themselves pressed into service in commercial ventures that they did not understand.
What remained behind in especially some of the larger industries and consulting firms were specialized, Internal Labs. These Internal Labs remained for several reasons. Most often they supplied specialized testing for which there was only a very limited market. Often they supplied mission critical data that could not be left to an outside firm due to critical turn-around or quality requirements that were not reliably available in the commercial market. Occasionally the issue had to do with special handling issues such as sample integrity or even sample hazards (e.g. radioactive, explosive, toxic, etc.). And finally, there often remained a need for expert testing support that was more consulting in nature. Not only was it hard to find such specialized knowledge in the Commercial Lab market, there was often hesitation to bring outside companies into these types of discussions. In other words, there often remained an R&D component to the Internal Lab.
It is a mistake to think that the dividing line between the Commercial and the Internal Lab is clear or unchanging. In fact, one of the most important decisions facing any organization is determining what type of lab exists and what type of lab is actually needed. This decision is exacerbated by the fluid nature of organizational needs, the changing expertise of Commercial Labs and the availability of internal resources. Hence:
One of the most important topics for an organization is to identify their testing needs and then compare that to what is available internally and what is available in the commercial market.
For the Internal Lab, this evaluation can be very complex and become quickly outdated. It must reach to the very fundamentals of organizational mission, whether that be new technology development or assuring that customer expectations are being met. It should be revisited at least annually in light of changing needs and changing conditions, both internal and external. This evaluation should drive budgets and HR activities for the Internal Lab. It must routinely deal with the “buy” or “make” decision of doing a procedure “in-house” versus “contracting it out.” Those kinds of decisions can only be made effectively if the mission critical tasks are well understood. Failure to aggressively and frequently evaluate Internal Lab alignment with organizational needs is a sure way to waste time, money and other valuable resources. There is no end to the numbers of technicians and expensive “toys” that can be “justified” if the Internal Lab is misaligned. As bad as such wastes could be, even worse is the mission drift that bright, energetic individuals often create when they do not understand and embrace the basic mission and values of their organization.
Commercial Labs should go through a similar exercise at least annually. This takes a slightly different turn in that it is an evaluation of their market (existing, potential and future), against their existing product/service offering. Commercial Labs must be aggressive in implementing the “right” new product/service while dumping the older, “dying” methods. Commercial Labs have similar “buy” versus “make” decisions facing the Internal Lab. These are exacerbated by strategic issues like potentially making a market for their competition by subcontracting to the competition profitable work. And finally, Commercial Labs have the added complication of trying to determine the “right price.” This is a mix of tactical and strategic issues. Tactically one would like to maintain long-term profitability for current offerings. Strategically one might wish to “buy” into a potentially profitable sector or even “price themselves out” of a dog sector.
Before moving off of this topic it would be useful to observe that many laboratories have tried to simultaneously function as a Commercial Lab and as an Internal Lab. In my career, I have seen this attempted six times. They were all abject failures. It is very difficult for the same organization to function as a flexible, time and material, expert and also be a cost effective, competitive producer of standardized test results. It is often the case that as needs and circumstances change, an organization may have to serve both roles for a period of time, but I have never seen this be sustainable for very long. We will see why this is in later discussions, but for now suffice it to say that a laboratory trying to serve in both capacities will be plagued with conflict, quality, budget and profitability issues. The only real solution is to remove the conflicts by re-organizing and re-purposing resources. That often means spinning off portions of the laboratory as a Commercial Lab or subcontracting to Commercial Labs those tests that do not fit the Internal Lab environment.
Once we get a clear picture of the differences between Commercial Labs and Internal Labs, some of the more subtle issues become clear. We can see, for example, that a Commercial Lab is a production environment. To succeed, it is necessary to implement reliable, cost effective techniques. It is also critical to maintain specified quality as measured by standardized techniques. It does no good to implement a faster/cheaper analytical technique that cannot meet the often very stringent, very specific industry quality standards. In fact, the often proscriptive standardization process frequently precludes technological advantage. Methods promulgated by such organizations as USGS, DOE, AOAC, ASTM, FDA and EPA are notoriously labor intensive and costly. Many a Commercial Lab has run afoul of regulatory agencies when clever innovations were later deemed to be non-compliant shortcuts by regulatory auditors. Often in a Commercial Lab the differentiators for success have little to do with technical innovation. More often, the application of good business techniques such as innovative selling, organizing, data management, motivating or financing have turned out to be the distinguishing success factors.
The Internal Lab is a completely different story. It has no charter other than the success of the organization of which it is just a part. Hence, all evaluation of techniques, expertise, costs, precision, accuracy, turnaround, etc., must be done in the light of mission critical goals. Contrary to some opinions, the contributions made by the Internal Lab are often critical to the success or failure of the entire organization. It is not an overstatement to say that I have seen at least five business failures that can be attributed in large part to errors of omission and commission by their Internal Labs. Dysfunctional Internal Labs are a hazard to the wellbeing of any business. Nevertheless, a well-functioning Internal Lab can be a godsend to any organization. I have been directly involved in the patenting of five innovation for my clients through my participation with their Internal Labs. Other SALLC Associates have had similar experiences. It is essential that Internal Labs have all the necessary skills, equipment, training, information and motivation to meet the mission critical needs of the organization. This is never a simple task. Furthermore, it is a moving target that must be frequently re-assessed.
SALLC specializes in the evaluation and improvement of laboratory performance. We have been engaged in setting up and managing all aspects of Commercial Labs from building buildings to running sales organizations. We have also been deeply engaged in evaluating and improving performance on mission critical tasks for Internal Labs. This has ranged from developing and validating new testing procedure, designing and building new test equipment and performing statistical evaluation of data for technology evaluation and improvement. SALLC Associates bring specific laboratory critical knowledge in the areas of HR, analytic techniques, experimental design, data evaluation, database management, sales management, cost measurement and control, sampling, project management and many other specialized skills.
We will continue this discussion in our next blog on some of the HR aspects of Laboratory Management.
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