McKiney-Associate Handbook

8/7/2019 McKiney-Associate Handbook

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Organization:Overview of Core Frameworks

Local Training Module For First-year Associates

Associate Handbook


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FOREWORD AND OBJECTIVE

This Organization Practice(OP) document provides an overview for use in local training

sessions for first-year associates. It is part of a series on functional areas. The objective ofthe series is to introduce McKinsey practitioners to the basics in each of our functional areas

of expertise. All the documents in the series are comprehensive in nature and describe the

current tools and frameworks in that functional area

At the end of this document, you can find a section describing a selection of the core

documents and handbooks that can give you further details on some of the frameworks

descried here. All of these documents are now on PDNet; and hard copies of them can berequested from PDNet Express, which will deliver them in 24 hours

The contents of this document have been adapted for local training sessions through

Switching Tracks OPs first-year module videotape, which communicates the basic

concepts in a concise and visual way using an actual client The Scandinavian Railroad

Company. It is 40 minutes long and should be presented in 3 short segments. Between these

segments, the faculty member runs the attached exercises, adds any commentary he/sheconsiders necessary to clarify the concepts, and provides personal experience on selected

topics. A copy of the videotape and moderators guide with exercises can be requested from

the Firm


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This document seeks to answer 4 questions

SECTION 1 Why do associates need to consider organizational issues in every engagement?SECTION 2 What frameworks do we use to help our clients improve organizational performance?

SECTION 3 What role does an associate play in organization work?

SECTION 4 Where can an associate find out more?


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McKinseys mission is to have lasting and substantial impact on our clients.

To succeed, we need to work all three of the critical elements: choose the best strategy,

develop world-class operations, align the organization.

These three elements both reinforce and constrain each other. The best strategy is only

relevant if it is operationally and organizationally feasible. The optimal organizational design

depends upon the strategic requirement and the operational methods of the client.

This document focuses on one vertex of this triangular relationship. It would be wrong,

however, to believe that you can achieve the impact we seek by focusing on one vertex. We

need to consider all three in every study.


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CRITICAL ELEMENTS FOR IMPACT

Successful

strategy

Efficient

operations

Effective

organization


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We only achieve impact when the organizations we serve are successful in implementing the

strategies and operational methods we propose.

However, a recent survey of engagements in which clients failed to implement proposed

strategies found, in three cases out of four, that the client organization was not change-ready or

even capable of implementing the strategy we proposed.

To ensure that we have impact, we need to consider organizational issues as we devise

strategies. We must choose strategies the clients are ready and able to implement orcomplement our strategy work with investment in building the organizations skills so that the

organization can step up to the challenge the superior strategy poses..


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3 OUT OF 4 STRATEGIES THAT FAIL DO SO BECAUSE OF THE

ORGANIZATIONS INABILITY TO EXECUTE

100%=340 responses

Percent

McKinseyrecommendations

flawed

Client not

change-ready or

committed

Organization lacked

the capabilities to

execute strategy

Other

17

8

40

35


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The demand for organizational work is increasing.

Trends in the marketplace and the evolving nature of our clients largely explain this increase

in demand.

The pace of change in the marketplace is accelerating . A strategic choice or an operational

innovation evokes a rapid reaction from competitor. Rarely can a durable competitive

advantage be found in these choices. Rather it is the development of a unique organizational

capability with the inherent flexibility and commitment to sustain world-class performancethat provides durable competitive advantage in these times of rapid change.

The clients we serve are changing as well. They have increasingly hired in-house strategic

capabilities. Most have built strategy shops close to the CEO. Few, however, have the in-house

capability and objectivity to do the organizational work required to make change happen.


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ORGANIZATIONAL WORK GROWING IN IMPORTANCE

Evolving marketplace

Quickening pace ofstrategic adaptation

Durable competitive

advantage often rooted in

unique organizational

capabilities

Evolving playersMany businesses acquiring

in-house strategic capability

Making change happen

remains the neglected art

McKinseys engagement mix

Percent of time

Increasing

demand for

help with

organization

issues and

change

management

Crafting the

answer

Helping

implement

change

10 years

agoToday

23

55

77

45

Source: Survey of 23 MGMs across the Firm


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The recent evolution in our clients has not been missed by our competitors. Each of our

competitors has recently introduced a branded organizational element to their portfolio. Theirorganizational expertise figures prominently in their marketing campaigns.


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COMPETITORS HAVE BRANDED ORGANIZATION TOOLS

Consulting firm Product Client example

BCG Time based competition GE

General Systems Process redesign UPRR

Booz Allen Continuous improvement Exxon

United Research Process redesign and facilitation Mobil

Delta Point Transformational change SmithKline Beecham


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McKinseys consulting approach must evolve as our clients evolve. These changes provoke a

shift in the nature of our work and an evolution of the role of the associate on engagements.

The increased demand for organizational work impacts associates directly. Associates are

drawn into leadership roles on larger teams at an earlier point in their careers. This places

greater emphasis on the need for associates to develop quite soon after joining McKinsey-

superb team leadership skills.


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EVOLUTION IN McKINSEYS APPROACH

*Survey of 23 MGMs across the Firm

From To

The answer Solving for the answer and the change

process

Managing client teams Building client capabilities

Small, analytically focused teams

average client team of 3*

Multiple, highly leveraged McKinsey/client

teams

Average client team of 10*

CEO counseling by senior people Coaching and feedback at all levels


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Before we dive into the organization materials, we should announce one critical caveat: the

frameworks you are about to see are only as good as the judgment and insight used to fill themout. The frameworks are often mere checklists, useful tools to ensure you do not overlook a

key dimension. The OP can provide interview guides and questionnaires that you can use to

flesh out the frameworks, as well as applied examples in a range of settings. However, almost

all organizational issues are situation dependent, and almost all client settings are unique.

Your judgment, insight, creativity, and organizational acumen will determine whether you add

value in the client setting .


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A CRITICAL CAVEAT

Garbage in, garbage out

Organizational

practice frameworks

Checklists

Surveys, questionnaires

Applied examples

Garbage

Good judgment, keeninsight, creativity,

organizational acumen

Garbage

Client impact

CONCEPTUAL


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A series of frameworks are available to help clients identify and address organizational limits

on effectiveness or obstacles to change. They also point toward solutions.

These frameworks help teams answer two fundamental questions:

What change is needed?How should the client implement the change?

The OP has derived a set of six attributes that characterize high-performing

organizations(HPO). By assessing whether your client organization exhibits these six

attributes, you can diagnose whether an organizational performance gap exists as well.

Additionally, the 7-Ss will help you identify strengths and deficiencies in the organization.

The 7-Ss focus teams on aligning structure, staff, systems, and style to promote behavioralchange and build skills in pivotal jobholders. By contrasting the required skill set (at both the

organization and the pivotal jobholder level) with the current skill set, you can often clarify

the organizational gap that exists.

You complete the diagnostic by filling out the change board. That exercise helps teams

understand the organizational skill deficits or resistance to change so they can deliberately

plan to build the necessary skills and willingness to change in the organization.

Once the gaps have been identified, the team needs to lay out a change program to close the

gaps. The transformation triangle highlights the three critical dimensions of any effective

change program-top down, bottom up, cross-functional. The proper balance among these

dimensions depends on the gap, the client setting, and the competitive context.

Every change program contains some mix of six fundamental energizing elements. Each must

be considered as we design change programs.

This section of the handbook will discuss each framework in turn.


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CORE FRAMEWORKS

High-performing

organization attributes

Vision Perfor-mance

CEOled

PeopleSkillsSimple

7-S framework

Winning formula Pivotal jobs Design levers

Organizationa

l structure

What change is needed? How should the client make change happen?

What gaps in organizational

performance exist?

What organizational

challenges exist?

What initiatives comprise

the change program?

How do we create energy

for the change program?

Strategy Skills

Sharedvalues

VISIONStaff

Management

systems

Leadership

style

Change board

Agend

a/platf

orm

Direction setting

Structuring

Bottom-up energizing

Transformation

triangle

Performance

management

Vision and

leadership

communication

Organizational

infrastructure

People

development

Problem

solving process

Energizing

elements


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The OP undertook a study of 10 high-performing companies, true industry leaders, that we

knew very well. The companies had sustained pace-setting performance in their respectiveindustries over 2 decades.

These 10 HPOs shared six management attributes, each of which focuses on performance. By

comparing your client organization to these HPOs, you may identify opportunities to improve

your client organization.


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HIGH-PERFORMANCE COMPANY ATTRIBUTES

Driven by leaders

Aligned by simple

structures and core

processes

Based on world-

class skills

Rejuvenated by

well-developed

people systems

Built by relentless

pursuit of before-

the-fact

strategies/vision

Energized by an

extraordinarily

intense,

performance-driven

environment

What change is needed? How should the client

make change happen?

Organizational

challengesInitiatives Energizing

elementsGaps in

performance


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The first three of the six common management attributes:

Driven by leaders. The leaders of these companies had very high performance

aspirations. For these leaders there was no such notion as good enough. At the

center of these leadership groups, we consistently found demanding, unreasonable

CEOs.

Built by relentless before-the-fact strategies/visions. HPOs spend their time

looking forward, not back. Their strategies drive relentlessly for both profitabilityand growth.

Energized by an extraordinarily intense, performance-driven environment.

HPOs have a demanding, occasionally punishing, work pace. There is real

accountability, especially at the top. HPOs, while being verygoodplaces to work,

are not always niceplaces to work.


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ATTRIBUTES OF AN HPO

Driven by leader

Very high performance

aspirations held by all key

leaders

Demanding, unreasonable

CEOsEffective working group at

top

Ability to penetrate to micro-

level of their businesses

Single-minded adherence to

simple, clear success

measures-not just financial

Productive fear of failure

Built by relentless pursuit

of before-the-factstrategies/vision

Highly motivating, if not

inspiring, end state

Frequently oriented toward

industry leadership

Consistently striving for bothprofitability and growth

Passionate defenders of core

businesses

Understanding of how

industry(s) works, what

customers want, and what

competitors can do- and how

these might change

Energized by an extraordi-

narily intense, performancedriven environment

Demanding, occasionally

punishing, work pace; on call

all the time

Real follow-through on

accountability especially atthe top

Aggressive learning from

things that do not work

good places to work but

not always nice

Performance shortfalls

change careers

Members feel rewarded by

being part of winning

institution


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The last three common management attributes focus on structure, skills, and systems:

Aligned by simple structures and core processes. HPOs align authority, accountability,

and performance challenges. Lines of communication and approval are simple and are

mirrored from one division to the next.

Based on world-class skills. HPOs are world class in at least one critical skill of their

industry, e.g., product development in high technology, risk management in wholesale banking,

direct-to-store delivery in consumer goods, best-cost manufacturing. Additionally, HPOsexhibit superior process management skills that in and of themselves become a source of

competitive advantage.

Rejuvenated by well-developed people systems. The CEO in these companies is the Chief

Personnel Officer. The CEO interacts regularly with the entire leadership group, understands

the individual development needs and goals, and leads staffing reviews.


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ATTRIBUTES OF AN HPO (CONTINUED)

Aligned by simple

structures and coreprocesses

Straightforward alignment of

authority, accountability, and

performance challenges

Uncomplicated lines of

communication and approval line to line

Similar internal structural

units and key management

processes across the

company

Minimal critical staff reviews

Regular calendar of key

management processes and

communication

Based on world-class

company skills

Do many things well, but at

least 1 functional skill at

world-class competence level

underpins strategy

Also focus on buildingcorporate skill in the way

they run the place

Company key management

processes viewed as real

competitive advantage

Rejuvenated by well-

developed people systems

CEO is Chief Personnel

Officer

Clear focus on performance

and motivation successful

long-term wealth-buildingprograms seem key

Management processes

ensure leaders have

informed view of key

contributors 2-3 levels down

CEO leads annual staffing

review best people/teamsin most critical/demanding

jobs

Bench strength is a top

priority


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The HPO research found something else common to the HPOs: all 10 were experimenting

with self-governance. Self-governance in these HPOs means empowerment withaccountability. The HPOs share the common characteristic of involving a wide range of or

broad cross-section of employees in driving for improved performance. Their goal is to

imbue every employee with an owners mind-set.

Self governance in these HPOs is different from that practiced in other engaged and

empowered companies. In HPOs the single-minded objective of empowerment is

performance.

In the matrix below, the HPOs we studied were all in the top half of the matrix (high

performance); many were reaching, in addition, for the right-hand side of the matrix(engaged

and empowered).


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PERFORMANCE AND EMPOWERMENT AT HPOs

HPOs

Performance-

focused, top-

down-driven

organizations

Performance-driven,

empowered, and

accountable

organizations

Hierarchical,

command- and

control-oriented,entitled

organizations

Activity-driven,

engaged and

empoweredorganizations

Command and control Engage and empower

High

Low

Average

Performance

Management approach


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Most large companies start out in the lower left-hand corner of the matrix (low performance

and command-and-control management approach). We discovered that HPOs that havesuccessfully transitioned to the upper right-hand corner have first achieved high performance

and then experimented with and adopted empowerment. Empowerment without first

establishing a true performance ethic in the company tends to result in continued low

performance.

If your client falls in the lower left-hand corner of this matrix, it needs to concentrate first on

building a true performance ethic. Empowerment, alone, is unlikely to yield performanceimprovement.


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TRANSFORMATION PATHPath followed by high-

performance companies

Path experienced by companies

that fail to instill performance

ethic first

Emerson

Pepsico

Sonoco

Sun Trust

VF

3M

GE

Hallmark

Johnson&Johnson

Many high perfor-

mers on the journey

Most companies BP

FP&LWallace

Command and control Engage and empower

High

Low

Average

Performance

Management approach


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As discussed above, the first phase of the organization diagnostic identifies performance gaps.

The second phase focuses on identifying organizational issues and impediments to change.

The framework most commonly used to identify organizational issues includes seven buckets

that start with S.Strategy. An integrated set of actions that deliver a superior value to a set of customers with

a cost structure allowing excellent continuing returns.

Institutional skills. End-result activities the company must be really good at in order to

deliver the value proposition.

Shared values. Simple, agreed-upon principles that say what is important around here.

Taken together, the first 3-Ss define the company s vision: an overriding goal that people inthe organization strive to achieve; that is challenging, valuable, and exciting to them; and

valuable and differentiated to the intended customer. To achieve the vision, the company must

design and align levers to guide the behavior of those holding pivotal jobs close to the front

line i.e., those who directly affect delivery of value to the customer.

Organizational structure. An orderly and predictable system to determine who reports to

whom and how tasks are divided up and integrated.

Staff. The people in the organization considered in terms of their capabilities, experience,

and potential.

Management systems. The processes and procedures through which things get done day-to-

day.

Leadership style. The way leaders focus their time and attention and the personal tone they

set.


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7-S FRAMEWORK What change is needed? How should the clientmake change happen?

Gaps in

performance

Organizational

challengesinitiatives

Organizational

challengesEnergizing

elements


Organizational

structure

Management

systems

Leadership

style

StaffStrategy Skills

Sharedvalues

VISION


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At the heart of we mean by organizational performance is a winning formula creating a

combination of strategy, skills, and shared values to carry out an organizational purpose.

What links these elements together (the overlap) is the organizations vision:

The vision is the overriding goal of the organization the place where strategy, skills, and

shared values intersect. It is the single, noble purpose that guides organizational priorities

and gives meaning to the day-to-day activity of the staff.

For example, McDonalds has a vision-driven winning formula, as described below.


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McDONALDS WINNING FORMULA

Vision :

to become the leadingrestaurant chain in the

world

Strategy

Shared

values

Skills

Convenient

Good quality

Consistent Family-oriented

environment

Fair value

Quality control over all

aspects of business

Superior site selection Continuous new product

development

Strong promotion of

products and

McDonalds image

Quality

Service

Cleanliness

price


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Organizations usually change in response to discontinuities either external shocks (such as

deregulation ) or internal changes (such as new leadership) that make it clear that the old ,grooved way of doing things is no longer winning. The successful ones will create a new

winning formula that is based on changes in strategy, newer or stronger skills, and/or shared

values.

Contrasting the new winning formula to the old formula identifies and gauges the change that

the organization is considering and defines the vision for the change program.

A change vision is a creed that summarizes what an organization is trying to become and why.As such, it guides organizational priorities by redefining and recombining business objectives,

required institutional skills ,and corporate values about what is important around here.

A change vision is at the heart of top managements role in improving performance and is

often the first step. It provides the vital bridge between the initial dissatisfaction with the

status quo and the first practical steps taken in a change program the articulation of a clear

target that represents something better that is both logically sound and emotionallyappealing.


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IMPROVING ORGANIZATIONAL PERFORMANCE

Grooved RedirectedUnfrozen

Discontinuities

External shocks

New competitors,

economics

New technologies

Deregulation

Internal changes

New aspirations

New leader

Major change through people

Strategy Skills

Sharedvalues

VISION

New

strategy

New or

stronger

skills

Sharedvalues

CHANGE VISION


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Certain key people in the organization hold positions that determine success or failure in

instituting a new strategy, skill, or shared value. These people fill what we call pivotal jobs.We will only succeed in implementing the change vision if we succeed in changing the

behavior of pivotal jobholders.

At McDonalds, for example, pivotal jobs include the centralized purchasers of all raw

materials for all stores, the store managers, and the hourly employees who take and assemble

orders.


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PIVOTAL JOBS

What people must do

What are they ?

Positions that have direct impact ondelivery of value to the customer.

Typically they

-Design the product

-Make the product

-Sell the product

Positions that must capably masternew skills

Where are they? Close to the front line


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In a recent study at a chain store retailer, the change vision included a significant improvement

in in-store convenience. Two positions were identified as pivotal jobs the store manager andthe area operations manager.

This study employed a contrast analysis in two forms. The first considered each element of

behavior and defined how the new behavior would need to differ from current practices.

A behavior contrast analysis often proves helpful in defining precisely how the pivotal job-

holders need to change.


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CONTRAST ANALYSIS

Pivotal jobs: store manager, chain retailer

Elements Old behavior New behavior

Use of time Spend majority of time on daily

routine tasks unloading trucks,

stocking shelves, etc.

Devote much more attention to

training/coaching,

evaluating/experimenting with

pricing, staffing, merchandising

Job objective Ensure that day-to day store

operations run smoothly

Manage store profitability and

implementation of new

convenience strategy

Critical skills Conscientious, responsible

Basic math and writing skills

Old skills, plus

Good instincts about how to

affect profits

Leadership qualitiesCriteria Task completion

Financial performance

Old criteria plus added emphasis

on

Customer service

Inventory management

Store appearance


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The second analysis contrasted the percentage of time spent on critical tasks under current

practices and envisioned in the future.


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CONTRAST ANALYSIS BY PERCENTAGE OF TIME SPENT

Pivotal job: area operations manager

100%

Current Proposed

35

20

40

20

15

30

10

30

Tailor products, services, pricing, andpromotion to segmentsSearch for new businessEvaluate business and customer serviceperformance

Expand one-on-one time with SM andassociates

Train and motivate face-to-face forcustomer service, inventorymanagement

Encourage SM to innovate

Clerical support should eliminate tasks

Clerical support should eliminate tasks

Short vendor contacts

Recruiting SM and pharmacistDisciplining

Balancing inventory Follow-up on telephone

messagesInventories Paperwork

Putting out fires

Monitoring compliance Policies

PlanogramsAnswering surveys

Filling out appraisals District reports

Merchant/

owner

Coach

Player

Admini-

straor


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The 3-S winning formula sets the standards, goals, and mission of the organization. How do

you get people (particularly pivotal jobholders) to actually follow those goals?

While you can dictate what skills and shared values you want , the organization must

provide guidance, motivation, and monitoring to see that the right decisions are made.

This is provided through the other Ss structure, systems, staff, and style. Collectively known

as the design levers, each of these four should be set by considering the specific skills and

shared values you want to instill in the organizations people and balancing them with other

designs that might be suggested by other specific skills and shared values needed.

Structure. Who reports to whom and how tasks are both divided up and integrated.

Systems. The processes and procedures through which things get done from day to day,

including hiring, compensation, performance evaluation, promotions policy, and training.

Staff. The people in the organization considered in terms of their capabilities, experience,and potential.

Style. The way managers collectively behave with respect to use of time, attention, and

symbolic actions.


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ORGANIZATIONAL DESIGN LEVERS AT McDONALDS


Organizational

structure

Management

systems

Leadership

style


Sharedvalues

VISION

Centralized buying to control fatcontent

Hamburger University degree

requiredPromotion from within to buildexperience

Regular inspectionsFranchise expansion based on highgrades on prior inspections

Many procedural mechanismsaimed at building employeeenthusiasm and loyalty

Hard-nosed, rigid attitude on howto run the business


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The skills and shared values must be used to determine needed changes in organizational design. For

example, McDonalds specific skill of quality control drives many organizational design decisions.

Structure 1. Centralized buying provides more than economics of purchasing. It also helps ensure that

fat content is between 17.0 and 20.5 percent and ensures that burgers are 100 percent beef.

Staff 1. Owner operators have more say on quality of operations than absentee investor-owners.

2. Training at Hamburger University ensures that managers really know how to make the

food right. It is a $40 million facility, with 750-student capacity per 2-week session, and

translation booths for foreign managers. It is the only school in the fast-food industry

accredited by the American Council of Education.

3. Promotion from within builds experience in meeting company standards and reinforcesshared values.

Systems 1. Operating systems, including job descriptions and performance appraisals, ensure that

quality of operations meets standards..

2. All franchises are inspected on a regular basis, including grades( A through F) on QSC.

3. Unlike other franchises that give rights to territories, McDonalds franchises cannot expand

unless they show a history of high quality in operations.

4. McDonalds Personnel Action Manual provides mangers with a wide array of programs to

keep crew members motivated and committed.

Style 1. Little tolerance for variance from operations standards, except as well-thought-out

improvements. No shortcuts allowed.

2. Krocs inspections. Before entering a franchisees office, Kroc would often pick up all the

trash within a two-block radius of a McDonalds restaurant and then dump it on the

franchisees desk to show a need for greater cleanliness in McDonalds vicinity.


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ORGANIZATIONAL DESIGN LEVERS AT McDONALDS


Organizational

structure

Management

systems

Leadership

style


Sharedvalues

VISION





Many procedural mechanisms

aimed at building employeeenthusiasm and loyalty



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The design lever clients exercise the most is probably structure. Too often we hope that by

tinkering with boxes in organizational charts, we can solve organizational problems. Structureis really about how to arrange people and jobs for optimum performance.

A few assertions about structure:

There is no one best structure for any company. Structure choices for a client may change

over a few years, depending on external environment, leaders strengths, and internal

capabilities.

Structural choice should be based on the desired behaviors for the organization, which arebased on strategic direction.


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STRUCTURAL OPTIONS

Strategic direction Desired behavior Structural options

1.Greater uniformityacross the

organization

CentralizationSmall span of control; many layers

Functional structure

2.Rapid adaptation to

quickly changing or

complex

environment, orgreater response to

market

Decentralization

Fewer corporate staff

Flat structures

Business unit structure to matchstrategic direction

(geographic/product/market segment)

Temporary teams across products or

functions

3.Rapid technological

innovation

Centralized technical staff for

economies of knowledge

Decentralized task force for focus,Initiative

4. Cost reduction Concentrating staff only at level where

integration is most crucial

Flatter structures; broad span of control


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The change board framework can be useful for understanding the commitment and ability to

undertake major change. For each management layer and pivotal job, it asks:

Who among the important players is able to perform is his/her part in providing the new

skill?

What do they have or lack:

Conviction that the new skill is important?

Courage - the guy willingness to do what ever it takes to develop new skills?

Individual ability that is, personal skills or talents?

Organization supports such as the necessary system support?

Investing time in a change board analysis has helped a number of leadership teamsunderstand the nature of the current gap and gain insight into the most effective skill-

building program


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CHANGE BOARD

Leadership group of

area to be changed

Down-the-linestaff affected*

External

Constituencies**

Chief executive

(or equivalent)

Skill to

be built

* Modified as appropriate for company

** E.g., customers, suppliers, trade unions


make change happen?

Gaps in

performance

Organizational


Organizational

challengesEnergizing

elements

Conviction Courage

Commitment

Individual

ability

Organization

supports/obstacle

Capability to leverage

the commitment


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Specific questions can guide you as you fill out the change board.

Will people have to

Learn new skills?

Learn new behaviors?

Reestablish priorities?

Delegate/assume decision making responsibility?

Build new working relationships?

Compromise other agendas?

Do people have the capacity to make all these changes?

Have people had positive or negative experiences with past change efforts?

Is the change consistent with existing cultural norms?

Beliefs /values

Behaviors

A retail chain provided this example of a completed change board.


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CHANGE BOARD CHAIN RETAILER EXAMPLE

Topmanagement (6)

Intellectuallyconvinced, but

Distant fromfield realities

LBO pressures

Fair to strong Strong, except COO lacks fieldexperience HR position

vacant

Little support No performance measures

on in-store History of top-down

customer service programs

OtherOfficers/ownersHome office (15)Field (8)

Lip service Make the field

do its job H.O. does not

understand whatit is asking for

WeakModerate

Fair to strongFair

Few support Segmentalist rivalry

among functions Inadequate operating

systems Can do style (do not

admit weakness)

Area operationsManagers (125)

Suspicious, buteager to believe

Strong Fair to weak Overloaded: span ofcontrol=60-80

Store managersandassistants (3,200)

Cynical (yetanother program)

Fair: ready tofollow clearorders fromabove

Fair: most trainedas task masters

Horizontal priorities(unrealistic number of tasksassigned)

Associates

(30,000)

Mixed , but many

natural supporters

? Surprisingly

strong, on average

Turnover increasing; too few labor

hours for full service

CourageConviction

Commitment

Individual

ability

Organization

supports/obstacle

Capability

Diagnosis

Delivering

in-storeconvenience


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A completed change board often suggests the actions that may be necessary to build thecommitment and capability required to implement change within your clients organization. Inthe chain retailer case, actions included:

1. Lock in support

COO as champion Full time change leader (facilitator) Line accountability 3-year commitment

2. Create shared responsibility for progress Three skill teams, each headed by a field baron District entrepreneurship: each district manager to experiment with two to three

initiatives and then share lessons3. Build a success model from below

Focus on one pilot area (14 stores ) Use full-time task force of high-potential area managers (eight managers, 3-to 9-

month tours ) Trained area managers return to home districts to lead pilot area process there

4. Force awareness of realities

Quarterly workshops to assess progress on skills Close observation of pilot area ( If we cant make it work in one area, theres nopoint in talking about company wide programs )

5. Restructure field organization Store staffing standards AOM span of control, supports New recruiting/selection Link to pharmacy strategy/skill gaps


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CHANGE BOARD CHAIN RETAILER EXAMPLE

Topmanagement (6)

OtherOfficers/ownersHome office (15)Field (8)

Area operationsManagers (125)

Store managersand assistants(3,200)

Associates

(30,000)

CourageConviction

Commitment

Individual

ability

Organization

supports/obstacle

Capability to achieve change

objectives

Strategy

Delivering

in-storeconvenience

1.Lock in

support

2.Create shared

responsibility

for progress

3. Build a success model from

below

4. Force

awarenessof realities

5. Restructure

field

organizatio

n


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To answer the question, How should change happen? , the OP developed the organizational

transformation triangle that summarizes the three basic management tasks when dealing withchange. Their relative emphasis may vary, but all three of them have to be managed to achieve

fundamental behavioral change.


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Energizing

elements


make change happen?

Gaps in

performance

Organizational

challenges initiativesEnergizing

elements

TRANSFORMATION TRIANGLE

Top

management1. Top-down direction settingProcess design, target,

communications, etc.

2. Front-line performance improvement

Unit-by-unit, team-oriented, problem solving

3. Cross-functional initiatives

Link activities and information

in new ways for break-through

performance

Operations

Staffs


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The well-known GE workout! change program included elements from each dimension of

the transformation triangle.


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GE WORKOUT!

1.Top-down direction

setting/culture shaping

No.1 or No.2 in every

business

speed, simplicity, self-

confidence

Delayering

Best practices workshops

2.Bottom-up performance improvement

Town meetings: 2- to 5- day interactive sessions

Brand name quality processes

Operations: unit-by-unit redesign

3. Core process redesign Project teams to identify cross-

functional issues

Process mapping


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The client should seek an appropriate balance across all three dimensions of the

transformation triangle. Overreliance on any dimension will impede change.


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BALANCE ON 3 DIMENSIONS IS KEY

Requirements Dimension Potential risk from overreliance

Energizing vision

Customer/shareholder/emplo

yee triad

Clear performance targets

Lack of commitment

Confusion

Cynicism

Performance winsRelevant knowledge and

skill building

Expansion expectation

Unfocused effortsIgnored or undermined by

management

Cross-functional opportunities

missed

Discontinuities addressedClearly understood process

installed

Old systems/structure/

processes eliminated

Overly complexBeyond existing skill and

capabilities


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OVERVIEW OF 5 PERFORMANCE CHANGE APPROACHES

A B C D E

Description Structuredprocess-Driven

problem

solving

(compliance)

Empoweredopportunity-

driven

innovation

Values-drivenadaptive

improvement

Cross-functional

process

redesign

Top-down,skill-driven

building/

improvement

Transforma-

tion emphasis

Example TOP/AVA Breakthrough TQM CPR Corporate

skill teams

When

appropriate

Step change

needed quickly

Entitledculture

Change-ready,

flexible

organization

Approaching

theoretical limits;

performance ethicand capability in

place

Cross-

functional

redesignneeded

New basis for

competitive

advantageneeded

Typical goals 40% of

compressible

costs (imposed)

Up to each

team; typically,

stretch targets

in quality, cost,

etc.

Continuous

improvement

Quicker,

cheaper,

better

Lasting

competitive

advantage


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No matter what change program is selected, the following six energizing elements should be

addressed. By addressing each one, the client builds the energy required to make organizationschange.


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ENERGIZING ELEMENTS

Ambitious,

measurable objectives

Reinforcing feedback

Consequences

Winning formulaWinning leadership

group

Doer-driven

Fact-based

People-intensive

New mind-set

New skills, behavior

Systems and process

Structure

Roles

Build commitment

Establish 2-way flow

Manage expectations

Inspire action


make change happen?

Gaps in

performance

Organizational


Energizing

elements

Performance

measurementCommunications

Vision and

leadership

Problem

solving processPeople development

Organizational

infrastructure


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The OP has a wealth of experience and research to support the design of each element of a

change program.


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World benchmarks

Project performance indicators frameworkPerformance maps

Performance contracts pro forma

Best practice examples

Leading for success

CEO time-leverage

manual

Analytical tool kit framework

Analytical problem solving workshop

data to chart video and workbooks

Client advocacy videos

Skill/will/diagnostic

Continuous improvement principles

workshop


Core process redesign

Example role description

7-S checklist

Communications coordination

team-job specificationsCommunications channels audit

Stakeholder analysis

Communications plan

Communications workshop


POSSIBLE ACTIVITIES/TOOLS

Framework for designing skill-building programs

Discrete training modules management skills (MFS),

leadership skills(LFS), building high-performing teams, project

management guide, designing ongoing improvement

Discrete tools RJDs, time-usage logs, change-readiness

surveys, signaling change tool kit, how to run a training

workshop

Beliefs/behavior-prompt sheet staff activity survey


Performance

measurementCommunications

Vision and

leadership

Problem

solving processPeople development

Organizational

infrastructure


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A packaging company applied these energizing elements as they built the skill they called

value-based systems selling (VBSS):

With a clear vision and leadership settled, the company decided on a problem solving

process that involved six multinational skill teams, each with a credible leader.

Theirperformance measures were narrowed to two aspects: in terms of input, they

measured account plans created and number of plans created and number of people

trained; in terms of output, they measured price and market share.

To communicate the message, the president embarked on a road show to

manufacturing and sales locations; the senior managers attended workshops; and a

newsletter/bulletin about VBSS was begun.

The organizational infrastructure was modified to establish account teams, global

account managers, and an account planning function.

On the people development front, an action learning program was begun to teachpeople more about account planning.

All these tools and activities were focused on achieving a new level of excellence in the core

skill of VBSS that the company knew was critical to its strategy.


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Account-based

action learning

program

Multinational skill

teams with 6 credible

champions

Pilot effort with

leadership to get buy-

in and advice

The leader skill

for becoming $1

billionPresident as

sponsor

Input

Account plansPeople trained

Outputs

Price

Share

Awareness building Presidents

road showSkill building through workshops

Reinforcement through VBSS

network bulletins

Account teams

Global account

managersAccount planning

Performance

measurement

Communications

Vision and

leadership

Problem

solving process People development

Organizational

infrastructure

VBSS


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Associates will often step up to manager roles on engagements that address organization

issues and/or implement change. These engagements often involve multiple client teams.Associates assume responsibility for managing one or more of these client teams. These

engagements also seek the active support of a broader set of client managers. Associates

assume responsibility for developing influential relationships with critical client managers.

Engagements which focus on organization issues therefore provide exceptional opportunities

for associates.


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ASSOCIATES ASSUME MANAGER ROLES IN

ORGANIZATION ENGAGEMENTS

Traditional view of team roles

ED/DCS Associate

Client

Client

team

AssociateEM

Team roles on organization engagements

ED/DCSAssociate

Sr.

client

exec. Associate

EM

Client

manager

Client

manager

Client

team

Client

manager

Client

manager

Client

team

Clientteam

Client

team


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The effective associate manager serves three functions:

1. The associate manager builds and sustains effective client teams that define, plan, and

implement the change .

2. The associate manager leads problem solving on multiple client teams.

3. The associate manager forges a consensus of support for the change vision among

critical client managers and ensures that managers maintain the energy level required

to effect the change.

All three functions are critical to success. However, in engagements that address organization

issues and /or implement change, building and sustaining an effective team is often the

necessary precondition to success in the other functions. The client team provides the critical

insight, knowledge, and skills required to solve the organizational problem. The associate /

manager needs to build an effective team environment to tap into the essential client input.

The client team should hold the confidence of the critical client managers. Once the associatemanager has earned the endorsement of the client team, the support of the client manager is

much more likely.


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Client

involvement

Problem

solving

Team

dynamics

Consensus

builder

Chief engineer

Focuser Structurer

Quality controller

Devils advocate

Coach and team

developer

MANAGERIAL ROLES


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PRINCIPLES OF TEAM BASICS Coach and teamdeveloper

Small

numbers

Meaningful

purpose

Clear

performance

goals

TEAM

BASICS

Mutual

accountability

Complementary

skills

Well-defined

Working

approach

Source: The Wisdom ofTeams


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A teams potential is defined by the quality of its membership. The associate manager should,

whenever possible, participate actively in the selection of team members. Recent research bythe OP has found that most successful change programs were driven by a few impassioned

leaders. These real change leaders exhibit a common set of characteristics. Look for these

attributes as you consider which client people to include on the team.


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REAL CHANGE LEADERS

People with a reputation for improving performance through people and for exceeding

expectations along the way *

Commitment to a better way

Courage to challenge existing power bases

Personal initiative to go beyond defined boundaries

Motivation of themselves and others

Caring about how people are treated and enabled to perform

Staying under cover

A sense of humor about themselves and their situations

* RealChange Leaders


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.

Once the associate manager has assembled the right team and built an effective team

environment, solving the problem should be easier. The principles of good problem solving donot change for engagements that address organization issues and/or implement change. The

way the associate participates does change, however. Here are a few recurrent themes taken

from interviews with associates after their first organization engagement

Let the team solve the problem. You won t have time to solve the problem yourself when

you have multiple teams to manage. More importantly, the team will feel more

ownership for the solution if you let them solve the problem.

Teams should be productive. Focus the team on action and work. Define specific end

products.

If you have assembled the right team, every member has an important part of the answer.

Engage the entire team in solving the problem. Every team member should have a

challenge piece of the problem.Meetings are necessary evil for effective teams. Keep them to a minimum. Prepare

meetings carefully so that they are a constructive use of team time.

Listen. Especially on organization problems, the client often knows the answer but needs

help recognizing it.


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SOLVING THE PROBLEM

Chief engineer

Focuser

Structurer

Quality controller

Devils advocate

Structure the problem, then let the team solve it

Focus the team on action and work not process, talk, and

review

Keep the entire team engaged

Prepare brief, high impact meetings

Listen


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If you have the consensus of the team, it should be easier to sustain the support of criticalclient managers. A few basic principles merit emphasis:

You need to begin building credibility with client managers early in the study. Talk to themearly and often. Engage then in defining the issues and prioritizing the work. This ensures

that their issues will be addressed.Managers have specific interests and motivations; these interests explain much of theirbehavior. You will be more effective at influencing managers if you spend a few momentstrying to understand their interests. Before each discussion, consider how yourrecommendations impact the client manager s interests.

When issues or concerns become apparent, address them squarely. There is little value inavoiding and issue; it will come out eventually. Many issues evaporate when explicitly

discussed. Many others can be resolved by specific analysis. Issues that persist need to befactored into the team s thinking.

Whenever appropriate, include key team members in important discussions with criticalclient managers. Then client manager will get to know the team members better and placemore trust in their advice. When you include team members, the client manager can sensefirst-hand the strength of the team consensus. As an added benefit, team members appreciatethe opportunity to interact with managers, and they can help you interpret the client

manager s feedback.Good written materials are always useful in client manager discussions. Preparing themforces the team to explicitly agree on the content. After presentation they serve as a solidrecord of what was said.

The opportunity to interact with client managers in one of the more attractive elements oforganization work. Associates can use this interaction to develop client relationship skills thatwill be vital in the years ahead.


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We hope that you take away four major points from this session:

Performance is the point of our consulting work, which involves an integration of

strategy and organization.

Inevitably, at the heart of all our work is change. And at the heart of change is a respect for

and understanding ofpeople.

To understand organization performance and bring about lasting change, it is as important to

problem solve forhow ( the engagement process ) as what ( the engagement issues).Organization work provides associates an opportunity to stretch theirpeople-management

skills early.


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WHAT WE HOPE YOU TAKE FROM THIS DOCUMENT

1. Winning performance is based on the integration of strategy and organization

2. Respect for and understanding of people is at the heart of all change

3. Problem solving for process is as important as problem solving for issues

4. Associates have a significant and rewarding role to play in organization work


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WHERE CAN AN ASSOCIATE FIND OUT MORE

Selected core documents and handbooks

The overview of core of frameworks in Sections 1 and 2 of this document describes the basics

and provides a template to better understand client organization issues, which should provehelpful in almost any engagement because no matter what the focus of an engagement is, a

basic understanding of the process of change is necessary to focus on the priorities of the

client

Once you are assigned to an engagement of this kind, you may need to read more about some

of these frameworks or gather handbooks about the topic. As you may know, PDNet contains a

large array of documents that may be useful to you. You can get hard copies of suchdocuments in 24 hours using PDNet Express through your local library

However, there are thousands of documents in the Firms databases; therefore, the key for

efficient data gathering and getting smart fast will be to access only a limited and targeted

selection of documents when you need them. This section provides you with some hints on

key, core documents of the organization practice and related disciplines


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Appendix

This appendix contains:

1. HPO bulletins2. Glossary of7-S framework

3. Organization transformation triangle

4. Energizing elements


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GLOSSARY OF 7-S FRAMEWORK


Organizational

structure

Management

systems

Leadership

style


Sharedvalues

VISION





Many procedural mechanisms

aimed at building employeeenthusiasm and loyalty




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STRATEGY Organizationalstructure

Management

systems

Leadership

style


Sharedvalues

VISION

What is it? An integrated set of actions to deliver a superior value to a set of customers

with a cost structure allowing continuing excellent returns

What is it

important?

Gives direction and purpose to organization activities

Strongly influences what skills the organization needs, what values arestressed, and how it should be designed

Provides benchmark for measuring organizations success and redirecting

its activities

What must I

know about it?

Balance between strategic thinking and capability to execute often

unmanaged

Strategy formulation must consider the complexities of externalenvironment (e.g., discontinuities gaining ) balanced with internal history

and capabilities

Increasingly, superb performers frequently win not by inventing it first,

but by doing it best

In highly uncertain environments, institutional skills may help dictate

strategy

INSTITUTIONAL SKILLS


O i ti l


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INSTITUTIONAL SKILLS Organizationalstructure

Management

systems

Leadership

style


Sharedvalues

VISION

What they are? End result activities the company must be really good at in order to

deliver the value proposition

Why are they

important?

To help people focus on the 2-4 skills critical to delivery of the value

proposition They drive organization design other organization elements must be

designed to build needed skills

What must I

know about

them?

Institutional skills are organization capabilities, not just abilities of

managers or other staff

Strategy work is incomplete without explicit consideration of the

institutional skills required to execute the strategy Institutional skills increasingly are the primary basis for achieving

sustainable competitive advantage

SHARED VALUES


O i ti l


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SHARED VALUES Organizationalstructure

Management

systems

Leadership

style


Sharedvalues

VISION

What they are? Simple terms that say, What is important around here?

Why are they

important?

Provide means to achieve value proposition through

Aspirations, pride, emotion, and energy

Focus, guidance, and learning orientationSolution space/ tie breakers

What must I

know about them?

Shared values are probably the hardest S to influence

But ignore at your peril. Any strategy consistent with deeply grooved

shared values will never be implemented

The leadership team must articulate, believe in , and be credible on

shared valuesShared values are shaped by obsessive, persistent communication from

leaders

VISION


Organizational


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VISION Organizationalstructure

Management

systems

Leadership

style


Sharedvalues

VISION

What is it? An overriding goal that people in the organization strive to achieve; that is challenging,valuable, and exciting to them; and valuable and differentiated to the intended customer

Why is itimportant?

Strategy and tactics are for the battlefield, but the battle must be fought for a purposeof value to society Genichi Kawakami, Yamaha Corporation

Provides meaning, motivation, and source of pride to attract and retain customers andable employeesHelps drive long-term strategy formulation and development of needed skills and valuesSupplies courage in the face of the unknown by providing sense of stability and enduringthemes

Guides and inspires daily behavior, reducing need for bureaucratic rules and systems

What must

I knowabout it?

Leader must set and live by vision for it to permeate institution

Best visions are simple, easy-to-understand, and demand nothing short of long-termexcellenceFinancial goals (e.g., increase SOM, increase shareholder wealth ) are not visions; theydo not excite the organizations people or provide enough competitive differentiation toserve as standard for behavior

Vision is extremely difficult to change significantly without creating discontent, reducedeffectiveness, and even abandonment of institution by its best people and customers

However, visions can and must be constantly challenged and changed at the margin to

adjust for the institutions changing environment

PIVOTAL JOBS


Organizational


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PIVOTAL JOBS Organizationalstructure

Management

systems

Leadership

style


Sharedvalues

VISION

What is it? Positions, close to the front line, that have direct impact on delivery of

value to the customer (e.g., those who design the product, make the

product, and sell the product )

Why is it

important?

Successful implementation of any change hinges upon the pivotal

jobholders acquiring new skills

Thinking about the new skills these pivotal jobholders must acquire

pushes the depth and rigor of our thinking

What must I

know about it?

Relationship between microskills of pivotal jobs and macroskills of the

organization

Contrast analysis compares microskills required after a major changeprogram to those currently required in the organization

Reverse-engineer the organizational design start with the results you

expect; identify the behavioral change needed to achieve those results;

then shape the other Ss to influence pivotal jobholders to perform as

required

STRUCTURE


Organizational


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STRUCTURE

What is it? An orderly and predictable system to determine who reports to whom

and how tasks are divided up and integrated

Why is it

important?

Facilitates coordination and integration

Symbolizes prioritiesFocuses organization attention

What must I

know about it?

Design should support needed skills and shared values

Structure is most powerful tool for energizing change

Structuring is not simple

Key structural issues include

Types of structure

Span of control

Centralization vs. decentralization

Organizational

structure

Management

systems

Leadership

style


Sharedvalues

VISION

STAFF


Organizational


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STAFF

What is it? The people in the organization considered in terms of their capabilities,

experience, and potential

Why is it

important?

Staff composition and productivity are important determinants of

current and future strategic successThe people who make and sell the product/service collectively

determine if the client delivers superior value

What must I

know about it?

Front-line positions require detailed attention to specific skills and

shared values

Key issues can include who to hire, how to train and coach them, howto motivate and reward them, and what information to give them

Support positions must reflect the needs of the front-line people

Organizational

structure

Management

systems

Leadership

style


Sharedvalues

VISION


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STYLE


Organizational


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STYLE

What is it? The way people focus their time and attention. There are tow types

Personal tone (e.g., supportiveness, argumentativeness )

How people spend time, what questions they ask, settings they appear in

Why is it

important?

The key lever in shaping values and reinforcing strategy

What must I

know about it?

What people do means more than what they say

The best leaders use style to emphasize a few simple values

While personal tone is hard to change, managers can more easily adapt

how they spend time, questions they ask, and settings they appear in

g

structure

Management

systems

Leadership

style


Sharedvalues

VISION

McKiney-Associate Handbook

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