Gary Sadavage -- [email protected] Chalk it up to good old Yankee Ingenuity! Yankee Ingenuity...

Gary Sadavage -- [email protected] Sadavage -- [email protected]

Chalk it up to good old Yankee Ingenuity!Chalk it up to good old Yankee Ingenuity!

Yankee IngenuityConsulting

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Non-Financial Measures forEffective Change Management

International Society for Performance Improvement Conference

Wednesday, April 12 2000




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Your level of success is determined by your ability to deliberately alter business practices in a timely and cost effective manner.

The real challenge of change is not just to come up with a brilliant idea - it’s to implement it.

Change ManagementChange Management

Successful change programs begin with targeted results.

Organizations worldwide are confronting more turbulent markets, more demanding shareholders,

and more discerningdiscerning customers.




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“All Organizations now say routinely,

‘people are our greatest asset.’

Yet few practice what they preach,

let alone truly believe it.”

- Peter Drucker




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The soft stuff is the The soft stuff is the hard stuff...hard stuff...

• Change is hard, personally• We all go through it• Change is never sequential• Some of us manage our transitions better than others• Change impacts different people differently

Consider the following...




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How will my jobchange?

Who will Ireport to?

How will myperformance

bemeasured?

Whatdecisions do I

have tomake?

Whatnew skills

do Ineed?

Will this change beas difficult as the

last change?

How will myco-workers be

effected?

When willthe

changeimpactme?

Whowill Iworkwith?

What’sin it forme?

They are of a very personal, individual nature.

?

?

?

?

?

?

Whyshould Icare?

What do all these questions have in common?What do all these questions have in common?

During times of change, employees focus:

1st, personal implications of the change

2nd, organizational implications

Employees may or may not ask these questions out loud, but more often than

not they are thinking them.

The process for answering the questions is as important as the answers

themselves.

PAIN...

Is Weaknes

s Leaving the Body.

www.marines.comPhoto courtesy US Marines

Graphic courtesy of United States Marineswww.marines.com




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The The CostCost of of Failure...Failure...

• Desired changes are not realized

• Change occurs only after great expense, both financial and human

• Future change efforts are compromised

• Destroyed shareholder value

• Uncontrolled loss of knowledgeable and valuable employees

• Prolonged, reduced productivity

• Lost opportunity in the marketplace

• Poor customer perceptions or worse

• Customer Attrition“It is a terrible thing to look over your shoulder when you are trying to lead. . . And find no one there.”

-- Franklin D. Roosevelt

When Change Initiatives Fail, There Are Tangible Impacts to the Business:

Source: Arthur Andersen

DDetailetail

Who wants to manage changelike a

Millionaire!

Who wants to manage changelike a

Millionaire!

According to a 1991 survey (AEA) of 300 electronics companies:

What percentage (%) of companies with a total quality program

had failed to improve quality defects by even as much as 10%?

A: 13 % B: 29 %

C: 46 % D: 63 %

According to a 1991 survey (AEA) of more than 300 electronics companies:

What percentage (%) of companies with a total quality program

had failed to improve quality defects by even as much as 10%?

A: 13 % B: 29 %

C: 46 % D: 63 %




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Successful TransformationsSuccessful Transformations

Change Management “bridges the gap” between the technical and the human sides of change. It prepares the organization to accept and embrace change.

Successful transformations can lead to: Higher morale Increased productivity

“Ownership” of new processes and systems

Accepted roles and responsibilities Increased employee knowledge Reduced re-training Reduced “post change” support Realized efficiencies and objectives

Source: Arthur Andersen

“The most daunting problems with technology (changes) have nothing to do with technology. . . The biggest problem is the lack of widespread readiness to adopt solutions. The number one error made is failure to invest adequately in change management.”

-- Michael Hammer

© Christof Spieler




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Recent Trends in E-Commerce (CRM)Recent Trends in E-Commerce (CRM)

• Integration of front and back office– market --> place orders --> order fulfillment -->

manufacturing --> logistics of delivery

• Phenomenal growth of CRM market– $1.9B (1998) to $11B (2003) source: International Data Corp

• Mergers/Acquisitions– Baun -- Aurum– PeopleSoft -- Vantive– J.D. Edwards -- Siebel

• Need for speedspeed but also to get it right




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Case Study in Change ManagementCase Study in Change Management

Baan -- Aurum• 1st ERP vendor to make a strong move into front-office arena (1997)

• Ran into financial difficulties & suffered management upheaval source: InformationWeek

Business Practices• Vision/Strategy Innovation Management• Partner Relationship Management• Process Innovation Management• Knowledge Capture

PeopleSoft -- Vantive• < 1Month after PeopleSoft bought Vantive, delivered! (2000)

source: CNET




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Critical Business Practices Critical Business Practices (some examples)(some examples)

Vision/Strategy Innovation Management Rate your organization’s capability to anticipate significant marketplace

developments (before they impact business) & develop a strategy to capture these opportunities.

Partner Relationship Management Rate your organization’s capability to engage in joint planning for the people

policies, programs, and systems required by partnership arrangements.

Process Innovation Management Rate your organization’s capability to quickly and efficiently execute

coordinated changes to your core processes (e.g., marketing, financial, manufacturing, etc).

Knowledge Capture Rate your organization’s capability to tap your workforce’s ideas and

knowledge (from anywhere in your organization) and then act on this input.




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Change Proficiency Maturity FrameworkChange Proficiency Maturity Framework

Source: RKDove, Paradigm Shift International

MetricFocusStages

WorkingKnowledge

CapabilitiesReactive Proactive

0 Accidental Examples Pass/Fail Lucky Lucky

1 Repeatable Concepts Time Safe Occasional

2 Defined Metrics Cost Confident Competitive

3 Managed Responsibilities Robust Sure Aggressive

4 Mastered Vision Scope Automatic Formidable

Consider: Ability to partner with strategic ally to offer diverse products and servicesExample: Bann &Aurum vs PeopleSoft & Vantive




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Critical Business PracticesCritical Business Practices

Vision/Strategy Innovation Management Rate your organization’s capability to anticipate significant marketplace

developments (before they impact business) & develop a strategy to capture these opportunities.

Partner Relationship Management Rate your organization’s capability to engage in joint planning for the people

policies, programs, and systems required by partnership arrangements.

Process Innovation Management Rate your organization’s capability to quickly and efficiently execute

coordinated changes to your core processes (e.g., marketing, financial, manufacturing, etc).

Knowledge Capture Rate your organization’s capability to tap your workforce’s ideas and

knowledge (from anywhere in your organization) and then act on this input.

90 SecondExercise




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Change Management Critical PracticesChange Management Critical Practices

These practices should be considered

imperatives for successfully realizing

change objectives. And they should be

planned out and executed as integrated

and focused tactics in coordination with a

larger plan.

Focusing on these practices can help

accelerate the change process.

Determine organizational readiness & build the business case for change.

Develop a compelling vision for change & create a sense of urgency

Create a strong guiding coalition of executives & generate stakeholder commitment

Establish pervasive communications

Align organizational design and performance management systems

Build individual and team capacity to change

Generate short terms wins, consolidate gains & produce more change

Align culture and change process

Determine organizational readiness & build the business case for change.

Develop a compelling vision for change & create a sense of urgency

Create a strong guiding coalition of executives & generate stakeholder commitment

Establish pervasive communications

Align organizational design and performance management systems

Build individual and team capacity to change

Generate short terms wins, consolidate gains & produce more change

Align culture and change process

Determine organizational readiness and business case for change.

Establish pervasive

communications.

Develop a compelling vision for change & create a sense of urgency.

Align organizational design and performance management systems.

Align culture and change process.

Generate short terms wins, consolidate gains & produce more change.

Create a strong guiding coalition of executives & generate stakeholder commitment.

Evaluate business environment.

Build individual and team capacity to change.

Change Process Model, © Gary Sadavage [email protected]




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Determine organizational readiness Determine organizational readiness & build business case for change.& build business case for change.

Determine org anizational readiness an d b usiness case for change.

Establish perv as ive

commun ications .

Develop a compelling vision fo r chan ge & create a sense of urg ency.

Align o rganization al des ig n an d p erforman ce management sys tems.

Align culture and change pro cess.

Generate short ter ms wins , consolidate gains & pro duce more ch ange.

Create a s tr ong guiding coalitio n o f executives & generate s takeholder commitmen t.

Evaluate b usiness environ ment.

Bu ild individual and team capacity to change.

Ch an ge Process Model, © Gary Sadavage [email protected] m




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-- Woody Allen

“More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopeless. The other, to total extinction. Let us pray we have the wisdom to choose correctly.”

Techniques from today– Use a variety of tools to get varied perspectives

You must make an explicit connection between action and outcome!




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The Four Questions• What’s changing or what needs to change in your organization?

• What factors external to your organization are causing you to make these changes (e.g., lost market share, reduced product life, increased competition)?

• What difficulties have you encountered in making changes?

• What are your organization’s strengths and weaknesses (highly flexible, dedicated employees/legacy accounting system)?

90 SecondExercise




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Develop a compelling vision for change Develop a compelling vision for change & create a sense of urgency.& create a sense of urgency.

Determine organizational readiness and business case for change.

Establish pervasive

communications.

Develop a compelling vision for change & create a sense of urgency.

Align organizational design and performance management systems.

Align culture and change process.

Generate short terms wins, consolidate gains & produce more change.

Create a strong guiding coalition of executives & generate stakeholder commitment.

Evaluate business environment.

Build individual and team capacity to change.

Change Process Model, © Gary Sadavage [email protected]




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Sony’s Articulated 1950’s VisionSony’s Articulated 1950’s Vision

Core Ideology

– Being a pioneer, not following others, but doing the impossible.

– Experiencing the sheer joy of innovation and the application of technology for the benefit and pleasure of the general public.

Envisioned Future

– Become the company most known for changing the worldwide image of Japanese products as being of poor quality. Made in Japan will mean something fine and not shoddy.

– Create products that become pervasive around the world.

– Be the first Japanese company to go into an American market and distribute directly.

– Fifty years from now, our brand name will be as well known as any on Earth.




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Sources of ComplacencySources of Complacency

Complacency

The absenceof a major andvisible crisis

Too many visibleresources

Low overallperformancestandards

Organizationalstructures that focusemployees on narrowfunctional goals

A lack of sufficientperformance feedbackfrom external sources

Internal measurementsystems that focus on thewrong performance indexes

A kill-the-messenger-of-bad-news, low-candor,low-confrontation culture

Human nature, with itscapacity for denial,especially if people arealready busy or stressed

Too much happy talkfrom senior management

Source: Leading Change © 1996 James P. Kotter




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• To what extent have you been given compelling reasons for why significant change was

necessary?• To what extent did you feel a sense of urgency about the transition and that the status quo

was unacceptable?• To what extent did your fellow workers feel a sense of urgency about the transition and that

the status quo was unacceptable?• To what extent do your fellow employees understand the potential benefits of change?• To what extent can you remember the vision coming up in casual conversation, issue

discussion, or decision making in the last week?

• To what extent do managers discuss the linkage between daily activity and the new

vision?• To what extent does your manager generate energy and urgency in others to get things

done?• To what extent does your manager create a sense of pride and trust in working with him

or her?




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90 SecondExercise

• To what extent have you been trained to understand your organizations financial

statement?

• To what extent are you provided with information about problems (e.g., profits up but

market share down?

• To what extent are you provided with information about potential problems (e.g., a new

competitor is showing signs of becoming more aggressive)?

• To what extent are you provided with information about potential opportunities (e.g.,

through technology or new markets)?




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0 20 40 60 80 100

“Needs Work” range “Does the Job” range “Absolutely Top-Notch”range

RATING SCALEAbsolutely Top-Notch...........Score 90-100Does the Job.........................Score 50- 90Needs Work..........................Score 0- 50




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• Research based not-for-profit transitioning to for-profit consulting organization.

• Flat organizational structure.• Cross-functional teamed environment.• Less than 100 employees.• Many diverse strategic partner collaborations.• Less than 10 years in operation.

Case Study: Organizational ProfileCase Study: Organizational Profile




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Organizational Concern

• Site champion motivated to distribute survey based upon concern for morale. Not sure what underlying issues are.

Desired State

• Noted that the organization is undergoing a transition from a publicly funded research organization to a commercially funded consulting group. Would like to focus direction [for people] and rally resources with minimal loss of productivity due to possible poor morale.

What issues are important to you as you What issues are important to you as you continuecontinue to build to build your organization?your organization?




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Shared VisionShared Vision

The vision, mission, and goals of your organization:

0 20 40 60 80 100

a. ...are well defined for individuals.

0 20 40 60 80 100

b. ... are accepted by individuals and used to guide their daily priorities.

Organizational understanding of the vision was not unified.Respondent Commentary:

Recent changes in strategy, make it difficult to know if

organizational goals are being addressed and achieved. Internalization of the vision was below average.

CEOCEO

CEOCEO




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Create a strong guiding coalition of executives Create a strong guiding coalition of executives & generate stakeholder commitment.& generate stakeholder commitment.



commun ications .












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Most resistance to change is a precondition for change.

“A critical mass of commitment will never be generated

without conflict escalation – the airing of differences, divided opinions,

good ideas, criticisms and the like.” Paul Taffinder

Benefits of conflict (Vliert, 1997)

• Generate motivation and energy to deal with underlying problems.

• Make underlying issues explicit.

• Sharpen people’s understanding of real goals and interests.

• Enhance mutual understanding between different groups.

• Stimulate a sense of urgency.

• Discouragement people to engage in avoidance behavior.

• Prevent premature (and therefore dangerous) resolution of problems.




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• To what extent are your department’s monthly results evaluated in light of the new vision?

• To what extent are the workforce’s ideas and knowledge being tapped to question and test

the validity of the proposed methods of operation?

• To what extent do you feel you have a real stake in improving your organization’s

performance as opposed to just your narrow job responsibilities?

• To what extent do business unit leaders act on criticisms and suggestions for

improvement?

• To what extent have you been involved in redesigning your new job?

• To what extent is your input valued for improving your job responsibilities during the

transition?




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90 SecondExercise

• To what extent was provided training adequate preparation for the new realities of how you

must now do your job?

• To what extent were you adequately trained on change management concepts and

techniques?

• To what extent was information about the transition easily understood by every member of

the workforce?

• To what extent does your manager act as if they believed the organization needed major

change?

• To what extent does your manager constantly demand new ideas and perspectives?

• To what extent does your manager sustain pressure so that people achieve more than

expected?




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Establish pervasive communications.Establish pervasive communications.



commun ications .












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• Using every vehicle possible to constantly communicate the new vision and strategies

• When communicating major change to employees, keep it simple and avoid mission statements and management proclamations – most important, give them the facts; be straight.

• Introduce the planned change face to face, not through videos, publications or vast, impersonal public meetings.

• Target supervisors: get senior managers who are involved in the change to brief small groups of supervisors face to face.

– As a consultant, spend 80% of your time concentrating efforts on supervisors

– Do briefings in two rounds – first, to explain the change and get supervisors’ reactions and recommendations, second, to explain any modifications of the planned change based on the supervisors’ feedback.




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90 SecondExercise

• To what extent do you feel the organization communicates honestly and openly about the

changes going on?

• To what extent does information about the status of the business flows freely throughout

the organization with minimal filtering?

• To what extent does information (business, industry, production, etc.) flow to the right

people, at the right time, in the most appropriate/effective medium throughout the

organization, without barriers?

• To what extent do you have access to the information you needed (daily? in the long run?)

• To what extent does useful knowledge and good ideas travel across the organization?

• To what extent do business units learn from one another (i.e., reinventing the wheel

almost never happened)?




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Seamless CommunicationsSeamless Communications

0 20 40 60 80 100

a. Information about the status of the business flows freely throughout organization with minimal filtering.

0 20 40 60 80 100

b. Your organization’s leaders continuously display decisiveness, consistency, and approachability during times of transition.

Lowest rated proficiency throughout the organization. Respondent Commentary:

“The grapevine far supplants official channels for disseminating information”.

“Information is perceived as sanitized and dumbed-down to avoid conflict and minimize

dissension in the ranks”Organizational leaders were decisive and approachable but not consistent. This lack of consistency was cited as the source of leadership ineffectiveness during times of transition.

CEOCEO

CEOCEO




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Align organizational design Align organizational design & performance management systems.& performance management systems.



commun ications .












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• To what extent is the design of your job based on the tasks that need to be performed

rather than on position descriptions, reporting relationships, and title changes?

• To what extent does your organization encourage individuals, regardless of job description,

to search for innovation?

• To what extent where you briefed on how your job impacts the goals and targets of other

department?

• To what extent are there lots of planned opportunities for talk with other departments and

joint activities?

• To what extent do you feel you receive a sufficient amount of feedback from internal and

external sources to help you improve what you do?




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90 SecondExercise

• To what extent is your performance evaluation tied to the change initiative?

• To what extent does your current performance appraisal system support/promote the new

way for doing work?

• To what extent does your current compensation system support/promote the new way for

doing work?

• To what extent does your current promotion system support/promote the new way for doing

work?

• To what extent do you understand what you must do to satisfy the customer’s needs?

• To what extent can you link your day-to-day work to satisfaction of the client’s needs?




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Knows the CustomerKnows the Customer

0 20 40 60 80 100

a. You can link your individual contributions to satisfaction of client’s needs.

0 20 40 60 80 100

b. Your organization seeks to partner with its clients on product and service conception, design, production, and evaluation.

Highest rated proficiency, valued throughout the organization.On-going relationships with internal and external clients were directly linked their feedback on “client delight”.The organization’s partnerships were cited as examples where the clients worked as a concurrent part of the project team. Respondent commentary:

We have a long term track record of being called last minute

and fulfilling these Herculean requests without fail.

CEOCEO

CEOCEO




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Build individual and team capacity to change.Build individual and team capacity to change.



commun ications .












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• Getting rid of obstacles– Skills (Technical, Management, Leadership)

• Changing systems or structures that undermine the change vision

• Encouraging risk taking and nontraditional ideas, activities, and actions




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• To what extent do you understand how your department’s performance is measured?

• To what extent is it the “norm” for you to look for problems and opportunities that might

impact the success of the transition?

• To what extent is there sufficient motivation and rewards (policies, procedures, and

methods) for encouraging people to contribute in ways that exceed their job/work

descriptions?

• To what extent is the requirement for ongoing improvement built into each job and team

assignment?

• To what extent does your organization provide ‘idea’ resources for innovation and

improvement (industry journal, internet , competitors analysis)?




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90 SecondExercise

• To what extent is decision making driven down to the lowest level possible?

• To what extent is HR a key element in the success of the transformation?

• To what extent were there specific individuals named as change agents for your business

unit?

• To what extent does the organization focus on the deliberate selection (hire or promotion)

and development of people who can embrace and thrive in fast changing environments?




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Generate short terms wins, Generate short terms wins, consolidate gains & produce more change.consolidate gains & produce more change.



commun ications .












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Generating short-term wins– Planning for visible improvements, or “wins”– Create those wins– Visibly recognize and reward people who made the wins

possible

Consolidate gains and producing more change– Using increased credibility to change all systems, structures,

and policies that don’t fit together and don’t fit the transformation vision

– Hire, promote, and develop people who can implement the change vision




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• To what extent are you kept abreast of day to day progress during the transition?

• To what extent are you able to use the vision to guide the decisions you make on a daily

basis?

• To what extent are the workforce’s ideas and knowledge used to question and test the

validity of how your department’s performance would be measured?

• To what extent are mechanisms in place to assure that new learning was rapidly

captured and disseminated throughout the organization?

• To what extent do you share innovative ideas with other departments?




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90 SecondExercise

• To what extent are the short-term goals achievable?

• To what extent is progress tracked against plans/goals and necessary adjustments made

on a real-time basis?

• To what extent is organizational action based on real-time knowledge of the transition?

• To what extent does your department adapt to unexpected problems and identify workable

solutions?

• To what extent does your organization acknowledge mistakes fast and attempt to fix them?• To what extent are training and development activities custom fit to your specific needs

vs. “out of the can”?




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0 20 40 60 80 100

Just-In-Time AdaptabilityJust-In-Time Adaptability

a. The organization is able to execute major and multiple actions quickly and efficiently.

0 20 40 60 80 100

b. Your organization supports the continuous development of individual adaptability skills (e.g., collaboration, communication, and continuous learning).

Consistently recognized as a strength and source of pride within the organization. Respondent commentary:

“We have a good record of fire fighting.”The organization strongly encourages and supports personal development (in-house training, tuition reimbursement, work release time, flexible hours).

CEOCEO

CEOCEO




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Align culture and change process.Align culture and change process.



commun ications .












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Align culture and change process.Align culture and change process.

• Change sticks only when it becomes “the way we do things around here.”

• Culture is powerful for three primary reasons (John Kotter)– New employees are selected and indoctrinated through culture.– Culture exerts itself through the actions of hundreds or

thousands of people.– All of this happens without much conscious intent and thus is

difficult to challenge or even discuss.• Two approaches to anchoring changes in an organization’s culture.

– Actively show people how specific behaviors and attitudes have helped improve performance.

– Verify that promotion and performance criteria are fostering the next generation of management that personifies the new vision (this takes time).




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• To what extent is the right data tracked so that gains or improvements could be clearly

shown?

• To what extent does your organization have a culture that seeks our ‘difference’ and

embraces challenge and self-critique?

• To what extent will lessons learned from this implementation be able to be shared

throughout the organization?

• To what extent did your organization clearly define how your performance would be

measured throughout the transition? (What were those measures?)




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90 SecondExercise

• To what extent are training and development activities keeping pace with the changes that

took place?

• To what extent have new work habits replaced the old way for doing work for you?

• To what extent are old work habits confronted, coached, and monitored to ensure that new

work habits were the only way for doing business?

• To what extent is poor performance confronted, coached, and monitored to instill

appropriate behavior?




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Evaluate business environment.Evaluate business environment.



commun ications .












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Evaluate business environment.Evaluate business environment.

1. Cost vs. Volume growth comparison over the last 3 years - plot total costs ($) vs. total product volume (units, lbs, etc.). I would use a regression analysis to compute the rate of growth (slope) for each. Costs should not be going up as fast as volume.

2. I would separate manufacturing (materials, labor, etc) costs from non-manufacturing (marketing, distribution, legal, etc) costs and perform the same analysis for the last 3 years. Looking to see how the functions (value vs. non-value adding) are accounting for costs in the enterprise.

3. Product cost trend vs. Volume growth analysis for last 3 years. Perform similar analysis to Step 1 for each product line. Need to identify which costs are shared to make comparisons meaningful.

4. I would separate manufacturing (materials, labor, etc) costs from non-manufacturing (marketing, distribution, legal, etc) costs and perform the same analysis for the last 3 years as in step 3.

5. Cost structure vs. total cost for last 3 years. Manufacturing and non-manufacturing costs will be plotted as a function of total costs.

6. Cost experience curve - for each product line, calculate unit product cost and chart by year and volume over last 3 years. Did unit product cost go down significantly as product volume went up? How did each product experience curve differ? What explains the differences? Did cost experience curves hold? Why or why not? What is the slope (hopefully downward)? Did the slopes decrease more rapidly as volume increased?

7. Cost variability analysis - use last 3 years to chart production costs by products. Did unit costs vary significantly from one production run to the next? Why? Which product exhibited the most variability in production costs? Why?

8. Value chain analysis, cost variance analysis, etc.

Gary Sadavage -- [email protected] Chalk it up to good old Yankee Ingenuity! Yankee Ingenuity...

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