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TRANSFORMATIONAL CHANGE

BUSINESS EXCELLENCE

B EST PRACT ICE REPORT

Making it Last

2 ©2014 APQC ALL RIGHTS RESERVED

TABLE OF CONTENTS

PROJECT TEAM 3

ACKNOWLEDGEMENTS AND STUDY PARTICIPANTS 5

PROLOGUE FROM THE SUBJECT MATTER EXPERT 6

FOREWORD BY RESEARCH CHAMPION 8

INTRODUCTION 9

EXECUTIVE SUMMARY: THE BEST PRACTICES 11

THE BEST-PRACTICE ORGANIZATIONS 12

CHAPTER 1: SETTING THE STAGE FOR CHANGE 13

CHAPTER 2: MANAGING THE TRANSFORMATION 20

CHAPTER 3: EVALUATING THE IMPACT AND CONTINUOUS IMPROVEMENT 26

CONCLUSION 33

APPENDIX: CASE STUDIES 34

Baker Hughes 34

Booz Allen Hamilton 44

Optum Technology 56

Underwriters Laboratories 64

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©2014 APQC ALL RIGHTS RESERVED

PROJECT PERSONNEL

Project Team

Jonathan Kraft, project manager, APQC

Holly Lyke-Ho-Gland, project team member, APQC

Cindy Hubert, senior advisor, APQC

Subject Matter Expertise

Dr. David Shaner, CEO, Connect Consulting

Jeff Varney, senior advisor, Business Excellence, APQC

Research Champion

Grant Thornton LLP

Contributing Authors

Cindy Hubert,

Jonathan Kraft

Holly Lyke-Ho-Gland

Jeff Varney

Editor

Paige Leavitt

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COPYRIGHT

Membership

For information about how to become a member of APQC and to receive publications and other benefits, call 800-776-9676 or +1-713-681-4020 or visit our website at http://www.apqc.org.

Copyright

©2014 APQC, 123 North Post Oak Lane, Third Floor, Houston, Texas 77024-7797 USA. This report cannot be reproduced or transmitted in any form or by any means electronic or mechanical, including photocopying, fax-ing, recording, or information storage and retrieval. Additional copies of the report may be purchased from APQC by calling 800-776- 9676 (U.S.) or +1-713-681-4020 or online at www.apqc.org. Quantity discounts are available.

ISBN-13: 978-1-60197-208-8 • ISBN-10: 1-60197-208-3

Statement of Purpose

The purpose of publishing this report is to provide insight into the processes and practices associated with cer-tain issues. It should be used as an educational learning tool and is not a ―recipe‖ or step-by-step procedure to be copied or duplicated in any way. This report may not represent current organizational processes, poli-cies, or practice because changes may have occurred since the completion of this study.

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ACKNOWLEDGMENTS AND STUDY PARTICIPANTS

APQC would like to thank all of the participants in this collaborative benchmarking study. The sponsor repre-sentatives provided valuable input throughout the study by helping to design the site visit discussion guide and detailed questionnaire, participating in the site visits, and providing feedback to develop the knowledge trans-fer session.

A special thank-you is extended to the representatives from the four best-practice organizations who took time out of their busy schedules to participate in this study. The representatives received no compensation or reimbursement for their time or travel. Each member of the best-practice organizations went out of his or her way to guarantee the success of this study.

Sponsor Organizations

Best Practice Organizations

Data Only Partners

NEC

Newfield Exploration

PepsiCo Mexico

Rockwell Collins

US Navy (Carrier Team 1)

Booz Allen Hamilton

Optum Technology

Baker Hughes

Underwriters Laboratories (UL)

Organization A

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Because the big meeting often goes like this:

The leader expresses her belief in the organization. All that ability, she says, is needed now because the firm is

facing extraordinary challenges. The economy, overseas competition, and [insert your own hurdles here] have

mounted enormous pressure on the company, and as a result, numbers are down and quality is slipping. Change

needs to happen yesterday.

To meet the new challenges, the best and brightest consulting firm on the planet has reviewed the situation and

blessed the company with their five-step prescription to thrive in today’s market. Via a company-wide

presentation, the leader Power-Points the magic initiatives. Now, she concludes, it is up to everyone to team up

and dig in. The organization is going to make it! Employees walk out with a sense of urgency and vitality that might

last the afternoon. For the moment, they believe they won’t lose their jobs.

The following day, everything settles to the status quo. The sparks of urgency and vigor dim. Some employees

realize they don’t understand the new plans and are frustrated. A few resent that outsiders dictated the plan of

action. Others are apathetic. The unified vision of change begins unraveling, one emotion and one action at a time.

And so this is the progression of the common story: The leader expresses the need for change. The people don’t

buy it, get it, or care about it. And the change never happens.

Changing How You Change

Nearly every study of organizational change over the past two decades indicates that companies fail to make the

change they intend approximately 70 percent of the time. And so the question forever being raised is: Why do

change initiatives flop far more often than they fly? Volumes are written on the subject every year. Yet most don’t

answer the question correctly, if at all. Allow me to put this rub to rest right away:

Change efforts fail when the mind or spirit of a company remains the same.

A leader might be right about everything—the need to change, the reasons for change, and the timing of change.

She might be extremely convincing in her pep talk. But if the leader doesn’t understand where change begins, then

change won’t happen, no matter how urgent it is.


PROLOGUE FROM THE SUBJECT MATTER EXPERT During this study, APQC was fortunate enough to have a subject matter expert in transformational change share his

thoughts leadership and insights. To begin this report, this expert offers his unique view on the importance of effectively

managing the transformational change process. Here are those insights.

WHY IS MANAGING THE CHANGE PROCESS SO IMPORTANT?

By Dr. David Shaner, study subject matter expert and CEO of CONNECT Consulting LLC

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Before organizational change can succeed, it must first occur at the subtle mental, or even spiritual, level in the

individuals of the organization. That’s because the spirit is the foundational source of energy that runs through

our bodies and gives our lives meaning. Your spirit is the sum of your beliefs, your convictions, your moral

codes, and your standards. All lasting transformation must begin there because, ultimately your spirit and mine

is the primary driver of all our behavior.

Without grounding at the spiritual level, the change process becomes a cooked-up breadbasket of external

tactics that never takes hold. Employees might do as they’re told for a time, but they will eventually default to

the behaviors driven by their spirits. In short, without tapping into the defaults of organizational behavior,

people’s behavior remains the same. It always has and always will.

The bottom line is that, despite how technological and automated organizations have become, at their core

they remain a collection of human energies that are merely being applied in an organized environment.

Resurrecting and guiding that human core of your organization is the secret to leading and sustaining change.


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LASTING ORGANIZATIONAL CHANGE STARTS WITH INDIVIDUAL BEHAVIOR

By Chris Jacobs, Grant Thornton LLP Business Advisory Services Director

Successful organizational change begins and ends with individuals. In fact, the single biggest reason these initiatives fail is that organizations often don’t spend the necessary time to influence and mold individual behavior in a way that builds the foundation for lasting, successful transformation.

For an individual to truly transform an organizational element, he or she must be deeply involved in the change process. In turn, the change process should center on the individual. To achieve this, four core steps should help drive any organization’s change initiative.

An organization’s ability to effectively execute key initiatives drives its growth and success. By focusing on each individual’s contribution to a successful enterprise-wide transformation, organizations can differentiate themselves from their competition and achieve their growth objectives.


FOREWARD BY RESEARCH CHAMPION

“The world as we have created it is a process of our

thinking. It cannot be changed without changing our

thinking.” ― Albert Einstein

Understand the impact on the individual. Using business role definitions and a logical approach, an organi-

zation should capture and define the specific impacts of a change on the day-to-day business lives of the individ-

ual.

Leverage the impacts. The specific impacts should then be categorized by impact, risk, and frequency to

identify the most important consequences. With this information, an organization can focus the change manage-

ment plan appropriately to the areas that are most important to the individual and to the overall change initia-

tive.

Focus training on the individual’s new tasks. An organization can then focus training on the tactical chang-

es that specific individuals need to execute their critical business processes. For the individual to be successful,

an organization should acknowledge the current state and the specific tasks that will change and any challenges

in performing new tasks. An individual’s natural anxiety over new responsibilities and tasks can be eased by ad-

dressing their specific job tasks within the training rather than addressing a general description of tasks.

Help the individual understand “What’s in it for me?” It is important to define how new processes and

structures will benefit the individual and then tailor communications and training to emphasize these benefits.

For example, there might be fewer keystrokes to generate a report or more visibility into critical information.

Ultimately, defining the WIFMs for their business role increases the individual’s buy-in and accelerates ac-

ceptance of the transformation.

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Across the range of APQC’s research we continually hear how change management is an essential component of any improvement. Whether focused on process, quality, or innovation, or implementing best-practice capabilities for knowledge management, HR, finance, enterprise risk, or procurement, our studies typically include discussions on the need to manage change to achieve significant and lasting results.

Research indicates only 30 percent of organizations consider their change management programs successful. Organizations that successfully implement and sustain changes to their business processes tend to get ahead faster and stay ahead longer. But organizations face challenges such as engaging diverse management styles, achieving consensus for cross-functional change, and helping employees make the changes part of their daily routines.

In APQC’s 2005 study Realizing Change: Knowing When and How to Successfully Change, we identified the necessary conditions that best-practice organizations have successfully met in their change journeys, including:

These are similar to the key points in the numerous books available about change and popular change approaches such as Kotter’s eight-step change process detailed in his 1996 book, Leading Change (Harvard Business School Press).

As we began this current research, APQC considered what might influence transformation within a

business. Our hypotheses centered on a systematic and balanced effort to engage people, provide a vision of the future, and improve processes and technology to enable a new way of getting work done.

We focused on transformation rather than transition. It is simpler to transition from one system to another—to include a new step in a process or to a new organizational chart. These are the mechanical steps necessary, but transition may miss the critically important aspects of how people think and behave. Transformation, on the other hand, adds those dimensions to the change. We felt that many of the failed change initiatives were due to following a checklist approach to change management rather than understanding why the organization functions as it currently does and then designing and supporting changes that shift the basic thinking and flow of effort.

An organization’s strategic initiatives and improvement activities—while appropriately focused on products, technologies, or how the organization operates—always affect the underlying business processes and the behaviors of our workers. Often, we focus on change management techniques to support these activities, such as providing the “checklist for change,” communications and deployment planning, training, and rewards. But to truly implement lasting change—that is, to transform how work gets done—we must understand how work gets done in the flow of daily activities and design our change activities to create an environment that not only encourages adoption but also evaluates compliance and makes adjustments if things don’t work as planned.


INTRODUCTION

commitment to change from the very highest

levels in the organization,

alignment with the core strategy,

a strong model or methodology to guide the

journey, and

the ability to effectively and efficiently com-

municate the strategic message of change and a

change culture.

http://www.apqc.org/knowledge-base/documents/realizing-change-knowing-when-and-how-successfully-change

http://www.apqc.org/knowledge-base/documents/realizing-change-knowing-when-and-how-successfully-change

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Our workers are influenced by many factors:

Effective change management must evaluate many factors to design a deployment and sustainment approach that supports the workers as they transition to a new work flow.

This research examines the conditions concerning common change management practices to understand what elevates them beyond just steps in a transition. What enables making a significant change from how business is done to a new, often innovative way of getting work done and delivering value.

How things are currently done

Available technology

What their managers are watching for

Collaboration with their peers

Ease of compliance

And more...


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This research study was designed to uncover trends from the transformational change journeys among a select group of best-practice organizations. The APQC research team identified six findings and 12 associated best practices that characterize what is critical in setting the stage for change, managing the change, and sustaining the change.

Being the impetus isn’t enough. Senior management should drive the change within the

organization.

1. Ensure executives are accountable for the transformational change.

2. Leverage top-down communications to set the groundwork for transformational change.

Build a holistic framework, not just a road map.

3. Employ a hybrid method to tailor the tactics and solutions to the people, processes, tools, and infrastructure

components of transformational change.

4. Build phased rollouts into the transformational change plan.

Combine centralized governance with decentralized implementation.

5. Use a centralized team with project and change management skills to manage transformational change, and use

business unit implementation teams to execute the change.

Engage employees throughout the change journey.

6. Combine communication and engagement plans to create buy-in and overcome barriers to change.

Build reviews and accumulative measures into the process.

7. Create flexibility and enable timely problem solving by using incremental reviews and measures.

8. Start with the end-state in mind, and then identify the measures that will indicate success at different stages.

9. Evolve measures of success as the organization matures during its transformational journey.

Reinforce change through ongoing training, modified performance expectations, and

continuous improvement programs.

10. Provide ongoing training to reinforce the new culture, behaviors, and necessary skills.

11. Incorporate the desired behaviors into employee evaluations and rewards.

12. Use continuous improvement programs to monitor and refine transformation for sustainable change.


EXECUTIVE SUMMARY : THE BEST PRACTICES

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Brief overviews follow of the four best-practice organizations that participated in this study. Each was identified through secondary research conducted by APQC and were selected by the sponsor organizations from a larger candidate pool. The best-practice organizations completed a detailed questionnaire and hosted half-day site visits, either virtually and in-person, which were attended by the sponsors, other best-practice organizations, and members of the APQC study team. More details on each organization and its transformational change jour-ney can be found in the case studies created as part of this project.


THE BEST PRACTICE ORGANIZATIONS

Baker Hughes

Baker Hughes Inc. is an oilfield service company that delivers solutions for the identification, develop-ment, and management of oil and gas operators’ reservoirs. In 2009, when Baker Hughes dismantled and recreated how its business and process were being run, its enterprise engineering group devel-oped a matrix. The matrix is a collection of networks, processes, programs, and workshops that reinforce the new behaviors required of a unified organization and support Baker Hughes' goal of establishing a cul-ture of innovation and collaboration. All of the com-ponents of the matrix have three things in common: communication, collaboration, and innovation.

Booz Allen Hamilton

Booz Allen Hamilton Inc. provides professional ser-vices primarily to U.S. government agencies, as well as corporations, institutions, and nonprofit organiza-tions. Booz Allen created a transformation life cycle (TLC) to manage its and clients’ transformation efforts. The TLC is not a road map but instead a holis-tic framework of methodologies, processes, and doc-uments for organizing transformational change at each component and stage.

The following four items are the components of the TLC and make up the major components of change:

Optum Technology Group of UnitedHealth Group

Optum Technology Group is a division within Unit-edHealth Group that offers infrastructure services, application services, and global solutions. Optum Technology employed a multifaceted approach to drive its transformation involving:

UL

Underwriters Laboratories Inc. (UL) is a global safety science company with 10,000 employees in 39 coun-tries. UL created a ten-year transformational change called “21st Century UL” to become a more custom-er-focused organization. UL transformed its organi-zation using a three-phased approach that allowed it to lay the groundwork for sustainable change by em-bedding new cultural norms and behaviors and train-ing leadership to spearhead the change. Additionally, the use of Lean management techniques to assess and reform its processes to be customer-centric ena-bled it to meet two of its goals: financial stability and a customer-centric focus.

People

Process

Technology

Physical infrastructure

Lean management to increase operational effi-

ciency and maintain customer-centric focus,

Quality operating systems to breakdown silos

across the organization,

Supervisor training and leadership academy to

prepare leadership to drive change and foster

cross-functional team work, and

An employee engagement team to create and

communicate on the organization’s change and

improvement initiatives.

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CHAPTER 1: SETTING THE STAGE FOR CHANGE

BEING THE IMPETUS IS NOT ENOUGH. SENIOR MANAGEMENT SHOULD DRIVE

THE CHANGE WITHIN THE ORGANIZATION.

Ensure executives are accountable for the transformational change.

Executive leadership and senior management are often the impetus for transformational change. However, just being the impetus for change is not enough to drive the change within the organi-zation. More often than not, executives at best-practice organizations are also accountable for the transformational change (Figure 1.1). Many of the sponsor organizations report that functions are more likely to be held accountable for change, which runs the risk of decreased adoption by other functions. So it has to be seen as an enterprise-wide initiative, and that means it has to be the responsibility of senior management. Furthermore, because transformational change often includes a cultural and behavioral shift, it’s important to en-sure leadership supports and drives the change to ensure consistent communications. One way to ensure leader-ship drives the change is to make them ultimately accountable for its success.

All of the study’s best-practice organizations reported a high level of senior management involvement in change efforts, as indicated in Figure 1.2. This involvement includes preparing the organization for change, providing di-rection, and leading by example.

Who is Ultimately Accountable for Change?

Chapter Findings:

1. Being the impetus isn’t enough. Senior management should drive the change within the organization

2. Build a holistic framework, not just a road map.

Figure 1.1 Source: APQC Detailed Questionnaire

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Leverage top-down communications to set the groundwork for transformational

change.

To initiate change, senior management needs to communicate the current state and the need for change in a way that reaches all employees. The message must be something that all employees can comprehend and rally behind.

At UL, an impetus for change was its net promoter score (NPS), and the impact it was having on the business. The score measures customer satisfaction as the difference between promoters (i.e., loyal enthusiasts likely to recommend a business, product, or service to a peer) and detractors (i.e., unhappy customers likely to spread negative word-of-mouth about the organization). The net promoter score, as well as some negative customer feedback was communicated throughout the organization, drove the need to change. UL leadership worked to transform how each employee interacted with customers in order to drive a better customer experience and change how business within UL was conducted.

Leading by example and communicating the right message requires that an organization prepare its manage-ment team to adopt the skills and behaviors necessary to support the new vision for that organization. In order to make sure leaders have the appropriate information, 80 percent of the best-practice organizations created mandatory leadership training classes customized based on individuals role in communicating the message downward within the organization.

For example, UL University created three leadership training programs, displayed in Figure 1.3, to change its management style, empower employees with decision rights, and embed the new culture and preferred behav-iors within its leadership that would enable them to communicate the right messages and lead by example.

Senior Management’s Level of Involvement



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Optum Technology uses a Quality Leadership Academy designed for senior leaders as one example, to drive change and quality across the entire organization by having leaders work on cross functional challenges or op-portunities such as systems defects in order to solve real business problems. The goals of the Quality Leadership Academy are to:

Optum Technology reinforces the importance of “not compromising quality for schedule” and enabling employ-ees to action upon this approach. The academy for instance, instills an understanding that leaders can direct this information flow and manage the process with people rather than just managing the people.

BUILD A HOLISTIC FRAMEWORK, NOT A ROAD MAP.

Employ a hybrid method to tailor the tactics and solutions to the people, processes,

tools, and infrastructure components of transformational change.

Transformational change extends to all parts of the organization. To address this, best-practice organizations use a hybrid approach to manage change throughout their organizations (Figure 1.4). All of the best-practice organizations realized that in order to achieve full transformational change, there is a need to change the be-haviors (or culture that is expressed through behaviors) to match the new vision or business model, and a single change method would not accomplish that.

Program Management Essentials Global Leadership Program Executive Leadership Program

Description A series of on-demand, virtual

courses

Interactive, four-week course in

four regions: China, the United

States, Italy, and Japan

A series of three, two-week ses-

sions conducted in partnership

with Yale University

Goal

The course introduces the ideas

and concepts about coaching

and mentoring, as well as intro-

duces the participants to UL’s

leadership culture.

The team-based class allows participants to solve real-life work issues and challenges and to build cross-functional and cultural awareness and skills.

Executives improve business

acumen and critical behaviors

regarding integrity, a competi-

tive spirit, and collaboration.

Participants New manager or new to a super- High-potential management Future executive leaders

Program Graduates 800 managers 350 leaders 75 leaders

UL Leadership Training Programs

Figure 1.3 Source: UL Case Study

drive motivation—employees must care about quality (communication);

share skills—employees must see how this will affect quality and what needs to be don (process, knowledge,

and learning); and

drive empowerment—employees must see that they can do something to improve quality (accountability and

metrics).


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Best-practice organi-zations combine change management methods to guide the peo-ple components with pro-cess improvement methods to support their transforma-tional change plans.

For example, Booz Allen uses its transformation life cycle (TLC) to manage its and clients’ transformation efforts (Figure 1.5). This is not a road map but instead a holistic framework of methodologies, processes, and documents for organiz-ing transformational change at each component and stage. According to Ron Lear, Corporate Quality Director, the TLC frames one’s thinking about the change and its transformation aspects and enables Booz Allen to tailor a solution with the right balance of people, processes, tools and infrastructure.

The four dimensions outline the complexity and different dimensions to consider when creating a change plan.

1. People—includes the organizational structure and human capital management aspects of a transformation

(e.g., training, leadership development, rewards/incentive systems, and behavioral models).

2. Process—includes the business activities of the organization and their related rules, content, and measures.

3. Technology—includes the technical infrastructure, information systems, and applications.

4. Physical infrastructure—includes the physical environments where employees conduct work.

Change Methodologies Used


Transformation Life Cycle Overview

Figure 1.5 Source: Booz Allen Case Study


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Effective transformation requires addressing all four components and tailoring the TLC to each unique situ-ation. If an organization focuses on only one compo-nent, it then risks creating something that no one will use or something that has to have additional invest-ments or rework before it will be adopted. For exam-ple, organizations will build a technical solution with-out taking into account the processes its supports or the functions (people) who will adopt the technology. When this happens, the organization will often end up with a technology that doesn’t address the actual problem (i.e., shelfware). A key lesson according to Booz Allen is that “you need to take the people and processes along for the ride.”

Process Groups

Booz Allen’s TLC also includes three process areas, each with 14-16 sublevel processes, that when per-formed collectively achieve the transformation.

As indicated in Figure 1.6, when examining the pro-cess component, the majority of the study partici-pants link their change methodology with project and process management to help reduce the complexity of transformational change.

Booz Allen’s TLC also outlines five transformation stages, with supporting process areas (each with 14-16 sublevel processes), that take an organization from defining where it wants to go to implementing how it’s going to get there.

1. Envision—This is the initial stage of the transfor-

mation. It focuses on stakeholder engagement by

developing an enterprise-wide vision of the future

and a transformation strategy to achieve it.

2. Define—During this stage, the organization devel-

ops the concept of operations to achieve the capa-

bilities needed for the future state. This includes

requirements, a transformation road map or plan,

high-level solution architecture, and the change

management plan.

3. Design—During this stage, the organization ex-

pands the requirements to include resource alloca-

tions and an implementation plan.

4. Develop—During this stage, the organization de-

tails the people, process, and physical infrastructure

designs; tests and builds the technology and capabil-

ities; assesses the organization’s readiness for

change; and begins the de-

ployment of new capabili-

ties.

5. Deploy—During this

final stage, the organization

initiates the implementa-

tion plan, monitors the

implementation and organi-

zational performance, and

adjusts the implementation

plan where needed.


1. Capability development—defines, builds, and

deploys future-state capabilities to achieve the

organization’s vision.

2. Ownership building—secures management and

stakeholder sponsorship, involvement, and com-

mitment to drive change.

3. Program stewardship—provides guidance and

program management that drives, integrates and

coordinates the transformation.

Practices Integrated with Change Methodologies


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The stages provide guidance in two ways: it helps the organization track where it is in the transformation, and it enables the organization to integrate the right set of capabilities. According to Lear, it is analogous to having an organizational GPS so that even if some-thing causes a change in direction, Booz Allen can make real-time course corrections, either internally, or when applied to a client change problem. This has been especially true in Booz Allen’s consultative work, because organizations frequently come to them for help at different points in their transfor-mation.

Optum Technology has a similar approach using its organizational integrated change framework (OICF). This framework combines an end-to-end process, for the transformational change, with a change road map; all change leaders (those responsible for spon-soring or managing a change initiative) must be certi-fied on the change framework. This method allows leaders to achieve results that are tied to its process release framework. The six steps for this organiza-tional change readiness and management process are:

1. Form a change management team.

2. Clarify the needs and challenges of the change by

working with the owners of the change to identify

their and other stakeholder’s needs and concerns.

3. Establish a change plan using a defined change

framework.

4. Prepare people and the environment; this includes

an understanding that the change road map is the

summation of stakeholder needs plus customer

needs.

5. Implement the change.

6. Evaluate and monitor progress.

The change road map outlines the change while in-corporating relevant people and business environ-ment conditions and roadblocks. Change leaders use the change road map to validate each step of the organizational change process (which includes stage-gate reviews) to monitor, track, and measure large-

scale initiatives.

This approach:

Optum Technology encourages change leaders (those responsible for sponsoring or managing a change initiative) to be knowledgeable on the OICF which includes developing acumen in financial man-agement, business knowledge, change management, and consultation.

Build phased rollouts into the transfor-

mational change plan.

UL leveraged a multistage rollout focusing on its mis-sion and customer-centric view that required a ten-year transformational change called “21st Century UL.” UL has progressed through its two- to three-year phases since 2005. Figure 1.7 outlines the tim-ing and phase goals for “21st Century UL”.

provides simple, streamlined, and actionable tools;

integrates with process, projects, and programs;

enhances knowledge, skills, and capabilities;

embeds standardized artifacts into operational

plans;

provides human capital partner to accompany the

project lead; and

includes an intranet landing page and leader guide.

“21st Century UL” Transformation Plan

Source: UL Case Study Figure 1.7


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1. Fix the Core—focused on preparing the organization for change, ensuring financial stability, and creating a cul-

ture that aligned with its new goals. In other words, the goal was to inverse the culture – moving from a risk

adverse, command-and-control culture to one ready for change. According to UL this corresponded to John

Kotter’s steps of “Create a Sense of Urgency, Form a Guiding Coalition, and Paint the Vision.”

2. Multi-Platform Service Provider—focused on growing the customer base, establishing new business units

to match evolving customer needs, and integrating newly acquired organizations. In phase two UL adjusted the

structure of the company with business units aligned to customers and their needs, with new capabilities. These

changes enabled UL’s core team to execute on the next parts of Kotter’s model – “Communicate the Vision,

Empower for Action and Create Short Term Wins.”

3. Indispensable Partner—focuses the back office, providing and standardizing the infrastructure (i.e., tools and

resources) to secure widespread customer loyalty. The key point here is that the tools and technology did not

lead the change, but actually served to “cement” the change. In Kotter’s model, this was “Consolidating Gains

and Anchor the Change.”

UL staggered its phases, so it could plan each sequential phase to build on the success of the previous one. For example, UL used the financial savings from the first phase to fund the training and program development re-quired in the second phase.

In another example, during the deployment of its Vision 2020 components, Booz Allen waited six months between the implementation of its new organizational model and the initiation of its new people model. It incorporated this multistage rollout plan for a few reasons.

Key Lessons

In summary, here are some key lessons for setting the stage for transformational change.

Drive top-down communication from the executive leadership in a way that individuals can understand and get behind.

Ensure executive leadership is accountable for and an active participant in transforma-tional change

Plan the phases so that each builds on the success of the previous one.

Ensure new behaviors and expectations are adopted and internalized before asking peo-ple to take on more.

Create short-cycles of changes to engender a sense of urgency, not only for the pro-grams but also for the organization as a whole.

Leverage a phased approach, and celebrate a series of short-term wins to help maintain

It enabled each phase to build on the success of the previous phase.

It ensured people understood their roles in the change.

It allowed the organization to set short-term goals and celebrate a series of wins, which also fostered early

buy-in for the change.

It ensured people were not overwhelmed by the change and rolled out change in proportion to their ability

to adopt new roles, processes, and behaviors.


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COMBINE CENTRALIZED GOVERNANCE WITH DECENTRALIZED

IMPLEMENTATION.

Use a centralized team with project and change management skills to manage

transformational change, and use business unit implementation teams to execute the

change.

The key components of the management of any project, especially one that encompasses an entire organization, are ensuring it has the necessary resources (including people with the right skills), it uses a standardized approach, and it can be monitored holistically across all work streams. Best-practice organizations typically use a centralized team, which includes representatives from the functions affected by the change, a program management office (PMO), and an executive sponsor (Figure 2.1). This team develops the transformation plan and manages the implementation of the organization’s transformational change, while decentralized implementation teams execute the plan.

UL created a centralized team from its executive management and enterprise PMO to manage the change. It created business unit-specific teams of business leaders and business implementation teams to execute its transformational programs.


CHAPTER 2: MANAGE THE TRANSFORMATION

Chapter Findings:

1. Combine centralized governance with decentralized implementation.

2. Engage employees throughout the change journey.


Who is Responsible for Implementation?

21

To ensure seamless interaction between the groups, UL established specific responsibilities for each group. UL found this approach necessary for two reasons.

1. Transformations are complex—affect several

functions and had many new processes and

responsibilities for each function. Centralized

governance provides a holistic perspective on all of

the moving parts.

2. Each business unit within UL had its own culture.

Decentralized implementation teams allow the

organization to incorporate each businesses needs

into the implementation plan.

In another example, to support its goals of solidarity and standardization, the executive leadership at Baker Hughes decided to create a centralized department, its enterprise engineering group, to create a standardized product development and management process. However, each business unit has its own product development team—aligned by product lines that manage and execute the day-to-day innovation processes—and a program manager and project management office (PMO) that reports into the enterprise engineering group. In addition, each business segment is supported by a technology group and a project management office (PMO). Each PMO has membership to the Enterprise Project Management Office council that is chaired by the enterprise engineering team. The product line leaders, technology leaders, and PMOs manage the product development process and transformations within their business. This structure allows Baker Hughes to provide standardization and governance over its product development and management (PDM) process and transformational change projects while still maintaining accountability and technical expertise within the product lines and business segments.

In summary, best-practice organizations combine centralized management with decentralized implementation for a number of reasons.

1. Centralized management provides a consistent

implementation plan, creates a holistic perspective

on the change, and enables top-down, bottom-up

monitoring.

2. Decentralized implementation teams create

accountability within the business units for the

adoption of new behaviors, processes, and

responsibilities. It also helps generate buy-in

through change agents, tailor the implementation to

meet each business unit's unique characteristics or

culture, and integrate business-specific goals (such

as market and P&L responsibilities) into the plan.

3. The inclusion of executive and business leader

sponsors establishes buy-in from the top down and

provides access to the resources necessary to

support the transformation.

4. The inclusion of PMOs, change management

experts, and/or project managers in the centralized

management team ensures the transformation

includes the necessary project and change

management skills.

ENGAGE EMPLOYEES THROUGHOUT

THE CHANGE JOURNEY.

Combine communication and

engagement plans to create buy-in and

overcome barriers to change.

APQC’s article Unraveling Buy-In defines a change journey as the five steps that an individual progresses through during change, similar to the stages of grief. The steps begin with awareness and end with adoption. During the awareness stage employees should be able to provide a comprehensive summary of the change, whereas during the adoption stage employees should consistently display the behaviors used in the new process. To ensure adoption and move employees through the change journey, an organization’s core and implementation teams need to identify and address the common barriers to change through aggressive communication and engagement tactics.

Best-practice organizations report that common barriers to change such as flavor of the week initiatives, change in leadership, a lack of funding, and unwillingness to change are typically not obstacles for their change management efforts and that time and organizational resistance are only moderate barriers to change (Figure 2.2).


http://www.apqc.org/knowledge-base/download/301387/K04716_Unraveling_Buy_In.pdf

22

Best-practice organizations understand that barriers such as flavor of the week change, the willingness to change, availability of funding, and ensuring change leadership throughout the organization reflect the level of acceptance or buy-in with senior management and employees. Establishing buy-in involves transparent communications, personalizing what the change means, and interactive engagement. Employees’ capacity to change is in part managed through staggered deployment, as Chapter 1 notes. However, the staggered deployment approach only works if an organization builds in two-way communications and deploys engagement tactics (e.g., focus groups, work groups, and surveys) to capture feedback and monitor the acceptance of change through the adoption of new behaviors.

For Baker Hughes, addressing the people component during organizational change is related to two things: culture and communication. To address the softer issues of people and culture, the enterprise engineering group developed the matrix of networks, processes, programs, and workshops that reinforced the new behaviors required of a unified organization (Figure 2.3). The matrix also drove the cultural shift within Baker Hughes because


Impact of Barriers to Change

Figure 2.3 Source: Baker Hughes Case Study

Baker Hughes Matrix


23

it engaged employees in developing and executing the transformation and reinforced the use of new behaviors. All of the components of the matrix have three things in common: communication, collaboration, and innovation.

1. Leadership councils—These are regular meetings

of senior management based on responsibilities (e.g.,

PMO council, product line councils, and business

segment councils). The purpose of the councils is to

promote collaboration and improve performance,

by pulling common disciplines together across

divisions that might not speak together but are

responsible for the same things.

2. External networks—These networks include

formal and informal relationships with external

groups (e.g., functional and discipline-based

associations and universities). The purpose of the

networks is to promote innovation and capture new

ideas and best practices from external sources.

3. Knowledge networks—These networks are

communities of practice on a wide range of topics

(e.g., technologies like materials science or

nanotechnology and disciplines like product

management, project management, Lean Six Sigma,

and product lines). The purpose of the more-than

50 communities of practice is to share information

and best practices, as well as support cross-business

collaboration, problem solving, and improved

performance.

4. Innovation workshops—Brainstorming sessions

address a specific challenge that can be technical,

product, business, or process focused and are

organized on an as-needed basis.

5. Distinguished lecturers—Monthly presentations

by external experts are recorded and posted on the

intranet. The purpose of the lecture series is to

expose employees to new ideas and foster

innovation.

6. Crowdsourcing—These projects are similar to

the innovation workshops, because they broadly

inquire for solutions to a specific challenge or

problem. However, they are typically virtual

contests that span a few weeks. For example, Baker

Hughes conducted a three-week contest open to

the entire organization looking for solutions to a

challenge. There were more than 1,000 unique ideas

submitted and four winners, who then got to spend

a year in the development of the solution.

7. Strategy workshops—These multiday workshops

create and define the product or businesses

strategy.

According to Ron Sonnier, director of product development and management at Baker Hughes, the leadership councils are instrumental in addressing the challenge of buy-in through top-down engagement. During the leadership councils, any current transformations in the discipline are discussed and planned, with resources allocated. Afterward the council’s leadership members enlist their middle managers to embed the change within the business.

Baker Hughes' strategy workshops, crowdsourcing, and innovation workshops engage employees throughout the organization to provide input on the changes and solve challenges. For example, the participants in the strategy workshops include 50-100 participants that range from senior leaders to front-line employees and include representatives from all relevant stakeholders (e.g., sales, supply chain, and marketing). This balanced mix of strategic and tactical perspectives ensures representation of the customer perspective, market expertise (macro-economic trends and market analyses), and technological expertise.

Booz Allen used training to build awareness, engage employees, and set expectations on the new people model component of its transformational change. For example, Booz Allen developed two virtual training courses on the new model.

1. Foundational training—Mandatory training for all

employees outlined the core elements of the new

model. It explained why the change was necessary

and what it meant for all of the stakeholders (i.e.,

individuals, the firm, and the clients.)

2. Career managers training—Thirty-minute

modules were available to all employees but only

mandatory for career managers. During the

modules two groups of career managers discussed

the new people model. One group asked questions

about the new people model, and the other group

of career managers provided answers and advice for

the questions. Career managers then applied this

learning directly in their interactions with their

teams, which helped to solidify the foundational

training.


24

Booze Allen’s training approach ensured the communications on the new people model were deliberate and the information was suited for each audience and used employee engagement by leveraging career managers to providing training and communication from a peer’s perspective.

Most organizations understand that communications play a vital part in any transformation; they help establish expectations, create transparency, and promote early buy-in. Best-practice organizations report higher levels of effectiveness for the same methods than their peers in other organizations (Figure 2.4).

Best-practice organizations spend equal time on engagement and communications and embed engagement tactics within their communications. These feedback mechanisms enable employees to develop a sense of personal ownership in the transformation.

Optum Technology created an employee engagement team to communicate results of its transformation initiatives throughout the organization. The employee engagement team is composed of approximately 40 employees selected by leadership from different businesses, who commit 8-10 hours per month in addition to their full-time jobs. The employee engagement team is responsible for communicating results of the transformation initiatives throughout the organization, as well as developing improvement initiatives for gaps identified in its annual employee survey, which leadership asks employees to provide feedback on how the organization can improve business outcomes.

For example, in 2012 and 2013 the employee engagement team identified two improvement areas.

1. Operating discipline—simplify and streamline processes and plans

2. Performance support—improve how system and process changes affect employees' ability to their jobs

Optum Technology created a process release management function to address these improvement areas. The process release management function is responsible for streamlining and simplifying key technology processes and tools deployment, as well as improving change readiness and stakeholder impact by centralizing process releases.


Communication Method’s Effectiveness


25

The employee engagement team is renewed every year to match the right people and skill sets to the current phase or projects of the transformational change. The project team identifies a list of key characteristics or skill sets necessary for a current project and asks senior leadership to nominate approximately four people from each Optum Technology business unit for the team. The project team then selects the individuals for the employee engagement team that year.

Key Lessons

Key lessons on using communications and engagement to develop buy-in and overcome resistance follow.

Use a combination of cascading and cross-functional approaches to communications. Provide leader-ship with the information it needs to communicate to their direct reports and lead by example. It’s also important to manage the cascade of information; because if it is left alone, it will break down.

Keep communications open and honest. Be transparent, even when conveying bad news. Employees respect the honesty, and that in turn creates the trust necessary to facilitate change.

Be deliberate about the purpose and target of the communications. All information will not be rele-vant to everyone within the organization, and over-communication can result in people ignoring im-portant information.

Leverage peer catalysts. Identify and leverage natural centers of influence within the organization who are natural change agents. These agents are not always managers. They help communicate infor-mation and create buy-in from the bottom up.

Close the loop. Always provide updates on what is done with people’s questions or feedback. This serves two purposes: it lets employees know the organization listens to them and respects their thoughts, and it answers similar questions that other employees have.

Engage employees in the process. Use interactive communication tactics such as focus groups, war games, social media, crowdsourcing, and employee-led training. This engagement approach not only helps create buy-in but also allows the organization to tap into the expertise and ideas of its employ-ees for the transformation.


26

BUILD REVIEWS AND ACCUMULATIVE MEASURES INTO THE PROCESS.

Create flexibility and enable timely problem solving by using incremental reviews and

measures.

Best-practice organizations keep the emphasis on change objectives through structured reviews and targeted measures of progress that help reach long-term goals (Figure 3.1). This enables the organizations to pinpoint and address any changes in the business environment and develop solutions for issues or roadblocks during the imple-mentation.

Baker Hughes uses a scalable, stage-gate process with standardized reviews and scorecards to track the ROI of its projects and enable problem solving (Figure 3.2). Standardization and measurement are vital components of the stage-gate approach. So at each gate, the project team is responsible for producing and updating four deliverables (a business case, a statement of requirement, a project plan, and a launch plan) to review the progress and viabil-ity of the project.


CHAPTER 3: EVALUATING THE IMPACT AND CONTINUOUS IM-PROVEMENT

Chapter Findings:

1. Build reviews and accumulative measures into the process.

2. Reinforce change through ongoing training, modified performance expectations, and continuous

improvement programs.


Transformational Change Measurement Approach

27

The stages for product development and process improvement follow.

1. Define—Develop the business case for the project (process, program, tool, or product). The project’s technolo-

gy readiness level (TRL in Figure 3.2) is based on its risk, complexity, and importance, which determines the rigor

of its management and consequently which stage-gate process it will go through.

2. Evaluate—Assess the project through a conceptual design review (CDR). During this stage, the review commit-

tee assesses the project‘s business case a balanced scorecard with five categories.

TRL 9 projects involve a core competency or are the equivalent of incremental innovation products or pro-

cess improvements.

TRL 7-8 projects are the equivalent to adjusting a product for adjacent markets or moderate process improve-

ments.

TRL 1-6 projects are the equivalent of disruptive innovations or new-to-the-organization processes or tools.

Figure 3.2 Source: Baker Hughes Case Study


Financial rewards—What are the financial benefits (e.g., cost-savings or revenue)?

Market attractiveness—What is the market growth, market size, or potential market share?

Competitive advantage—What unique benefits will the project create?

Probability of success—How likely is the project going to be successful? This in an inverse of the project’s risk or

complexity.

Strategic alignment—Does the project meet or support the product strategy or organization’s goals?


28

3. Design, verify, and accept—Develop the new

project. Once the project is designed, it goes

through a detailed design review (DDR) to deter-

mine if it is ready to be accepted (RTA) for devel-

opment. The project then is refined until it is ready

to launch (RTL).

4. Launch—Roll out the project within the business

or market. The launch stage includes the develop-

ment of a formal launch plan, periodic reviews, and

formal post-launch assessment a year later. The

post-launch review is chaired by the PDM team

with product line and technology gatekeepers to

review whether or not the project created the val-

ue it was supposed to deliver, such as profitability,

cost-savings, reduced cycle time, or reliability.

5. Lifecycle management—Product line manage-

ment or the process owner is responsible for mon-

itoring the product during its life cycle (the growth,

maturity, and decline of

the revenue life cycle).

At this point, the project

or product is monitored to

determine when continu-

ous improvement efforts

should be made or the pro-

ject/product should be re-

tired because it no longer

has an acceptable ROI.

Standardization and measure-ment are vital components of the stage-gate approach. For example, at each gate the project team is responsible for producing four delivera-bles.

1. A business case—

outlines the project and

includes its background,

benefits, scope, and risk

assessment.

2. A statement of requirement—outlines the nec-

essary resources (time, people, and budget).

3. A project development plan—includes the

project schedule and risk management plan.

4. A launch plan—details the project rollout to the

market or organization. For complex process pro-

jects, an organizational change management repre-

sentative joins the project team to manage the AD-

KAR portion of the plan.

The stage-gate process is one way of taking a struc-tured approach to managing transformational change. Stages 1 and 2 ensure the organization is picking the best projects for its strategic goals. Stage 3 ensures execution. Finally stages 4 and 5 build in the ability to identify performance targets and use data to monitor and identify root-causes to any problems. This metric-based approach uses deviation or variance and data tagging to support a continuous improvement model and react swiftly to any roadblocks or issues.

Booz Allen combines a simple four-stage continuous improvement process with five assessments (e.g., quality, program management, and customer satisfac-

tion) to measure the implementation and success of its Vision 2020 components throughout the transfor-mation (Figure 3.3). The four stages follow.

1. Monitor and assess—Measure the implementa-

tion against key goals and measures. Assess differ-

ent aspects (e.g., compliance, and risk management)

of the change by five different groups.




29

2. Analyze, report, and plan—Analyze the imple-

mentation assessments to report on progress,

identify any barriers or issues, and plan the next

steps.

3. Identify and implement– Determine the appro-

priate corrective or preventive actions for barriers

or issues, and integrate them into the implementa-

tion plan.

4. Evaluate and develop—Assess the transfor-

mation to capture best practices, pinpoint areas for

adjustment in the process, and update the process

accordingly.

This approach ensures the organization shares best practices, manages risk, identifies problems, and pro-vides preventive or corrective actions in a timely manner. Furthermore the five assessments use crite-rion that link back to the 2020 Vision and the corpo-rate quality management program. For example, it measures the goal for closer alignment between sen-ior management and clients by tracking their partici-pation in projects. These assessments have the addi-tional benefit of building voice of the customer, through the client satisfaction assessment, into the transformation monitoring process.

Start with the end-state in mind, and

then identify the measures that will indi-

cate success at different stages.

As the beginning of this report notes, transformation-al change is characterized as a complex remodeling that spans multiple functions, requires end-to-end process re-engineering, and affects the culture of the organization. Hence, transformational change re-quires multiple long-term goals carried out in several phases and work streams. Best-practice organizations combine phase-specific and enterprise-wide goals with bottom-up monitoring to track the implementa-tion and resolve any issues through root-cause analy-sis.

UL combines enterprise-wide measures to assess high-level goal attainment and phase-specific metrics to monitor the implementation of its phases. For exam-ple, over six years, UL’s “21st Century UL” transfor-mation has made progress toward many of its high-level goals.

During phase one of the transformation, UL priori-tized cultural and financial stability. Hence its meas-ured employees against UL’s performance using typi-cal operating metrics: revenue, operating margin, and cash flow. Therefore, regardless of how an individu-al’s business unit performed, incentives were deter-mined by the overall company performance.

From a culture perspective, UL uses UL University and its three leadership training programs to gauge the cultural shift and adoption of new behaviors by em-ployees. While this is not a formal metric, the pro-grams provide valuable feedback to the core team.

As the transformation moved into phases two and three the ePMO measured the programs progress based on their:

Finally, as UL moves through phase three (back office standardization) it uses to process owners to assess at how efficient and effective are the processes. UL is just starting to look at the order/quote rework rate and examine how often a quote is placed on hold be-cause a missing piece of information is preventing the quote from being processed. UL is also looking at days sales outstanding and A/R metrics as well. These measures are still in their infancy, but UL was able to leverage a lot of metrics that come from their Oracle

Improved its customer-centric perspective, meas-

ured by its NPS. Over the last five years UL’s NPS

has increased by 46 points (from –26 percent to

+20 percent).

Improved its financial stability, measured by reve-

nue. Over the last five years UL’s revenue has in-

creased by 41 percent.

Grown globally, measured by its number of staff

and geographic footprint. UL has increased in the

number of employees by 40 percent and more than

doubled the number of laboratories worldwide

over he last five years.

adherence to budget, scope, and time;

alignment to customer needs (effects on NPS and

revenue); and

process improvement benefits like integration,

flexibility, simplification, and cost savings.


30

implementation without having to make any coding adjustments.

In another example, Booz Allen sought to drive new business from intellectual capital developed in functional communities. It developed measures through three stages of the goal’s implementation.

1. Volume of staff participating in functional communities

2. The number of pilot programs

3. Revenue generated by its intelligence community and ideas developed in the strategic innovation group (SIG)

and functional communities

Because this goal directly connects with the development of intellectual capital and new ideas from Booz Allen’s SIG and functional communities, the first step in goal attainment is the development of its communities. The first measure of success of the goal is the volume of staff engaged in the functional communities and the intellectual capital developed and shared through them. The SIG then takes the ideas developed in the communities and cre-ates pilot programs to test their commerciality. As these ideas become commercialized, the organization begins measuring the amount of revenue generated from the functional communities.

The study team found that even more important than reporting metrics to stakeholders is the need to include con-text. Without context, an organization risks reacting too quickly to a shift in data and instituting unnecessary cor-rective measures. Context includes taking a broader look at what external factors affect the data. For example, adoption curves might decrease in the short term if there is an organizational change or someone new takes over a role. This context is important and must be communicated to stakeholders to set expectations on what they are monitoring. This ensures that the stakeholders are aware of what the shift in their dashboards means so they can track it and take corrective actions if the issue persists.

Evolve measures of success as the organization matures during its transformational

journey.

All of the best-practice partners noted that organizations need to view transformational change as a continuous journey, which requires new goals and measures as it matures. That is not to say that they cease to monitor origi-nal goals and measures. Instead, each organization’s definition of success and associated measures becomes more sophisticated.

For example, now that the Baker Hughes had met its initial product development and management goal and measures concerning increased revenue from new products, it's now moving on to the next step: addressing the margins of the revenue. The PDM team analyzed the PDM projects and found that on-time delivery was still prob-lematic even though product revenue was increasing. So the next phase of improvement is to reduce the cycle-time of the process and conduct a root-cause analysis to determine why project teams miss their launch dates.

REINFORCE CHANGE THROUGH ONGOING TRAINING, MODIFIED PERFOR-

MANCE EXPECTATIONS, AND CONTINUOUS IMPROVEMENT PROGRAMS.

Best-practice organizations sustain change using people-focused tactics (Figure 3.4). Many of these tactics are in-tegrated into the management, implementation, and review processes (e.g., process documentation, continuous monitoring, and communication and awareness) and are noted in other sections of this report. But it is important to note the three primary tactics best-practice organizations have found for sustainability: continuous improve-ment, ongoing training, and modified performance expectations.


31

Provide ongoing training to reinforce the new culture, behaviors, and necessary skills.

Again, 80 percent of the best-practice or-ganizations include a university in their organization. This is because a university provides ongoing training on new skills and reinforces new behaviors more readily than one-off training sessions. The university struc-ture allows the organizations to instill priori-tized behaviors in new employees and im-merse them in the organization’s culture. Fur-thermore universities provide ongoing training in skills that support an organization’s new model such as leadership, Lean, change man-agement, technical skills, and business acumen (e.g., finance or consultation).

UL felt that relying on Lean techniques alone would prioritize the development of tools ra-ther than focus the organization on cultural transformation. So it developed the UL Universi-ty, a program providing technical and leadership training. Furthermore, UL uses the UL University and its three leadership training programs to gauge the cultural shift and adoption of new behaviors by employees. While this is not a formal metric, the programs provide valuable feedback to the core team.

One of the goals of Booz Allen’s Vision 2020 is to expand into the technical systems engineering space. Historically 70 percent of Booz Allen’s revenue came from its management consulting, and its capabilities reflected that focus. So the new people model had to provide Booz Allen with the skills and expertise necessary to provide technical solutions. It accomplished this by creating new career paths—such as technical engineers—and providing employ-ees with the opportunity to train and develop their skills in this area.

Incorporate the desired behaviors into employee evaluations and rewards.

All the best-practice organizations use some re-ward system to reinforce the adoption of new be-haviors by their employees (Figure 3.5). The most common practices are the use of new behaviors as key performance indicators (KPIs) in performance reviews and through public recognition. However, best-practice organizations also factor in the use of new behaviors in promotions.

For example, UL uses its people management pro-grams to monitor and embed its new culture. UL pinpointed eight critical behaviors that align with its new culture and reinforce UL’s high-level goals. In addition to qualifications and expert technical skills, HR uses these eight critical behaviors for re-cruitment, performance management, and ap-praisals, as well as succession. They form the basis for UL’s career management system and subse-


Long-Term Adoption Tactics


Rewards for Behavioral Changes


32

quent employee development action plans.

Use continuous improvement programs to monitor and refine transformation for sustaina-

ble change.

For all of the best-practice organizations, transformational change has become synonymous with a continuous im-provement mindset. Each organization embedded continuous improvement in its culture and uses this focus to drive how they interact with external customers and en-gage and reward employees.

Baker Hughes’ enterprise engineering group uses cross-functional steering committees (Figure 3.6) to ensure each project formalizes its continuous im-provement. The steering committees meet once a month to assess projects and discuss:

1. Is the new project working well? The com-

mittee checks to ensure that people are trained

and educated to support the projects and verify

that each step of the new process or program

adds value.

2. How is the project performing? The commit-tee looks at the project’s data to evaluate and address any deviations.

In 2013 UL introduced a governance process giving global process owners oversight responsibility for each enter-prise process. In addition, UL plans to create a network of process experts to help drive formal changes to the pro-cess as needed, or as the technology supporting the process changes. Finally, UL has tasked an internal audit group to monitor process adoption in the business units. If the internal audit group sees that a business is not adopting the process or has reverted to the previous way, then its ePMO will con-tact the executive lead-ership to reinforce adoption of the new process.


Baker Hughes PDM Steering Committee

Key Lessons

Key lessons follow from best-practice organizations on the benefits of including incremen-tal reviews and measures and reinforcing change through long-term adoption tactics.

Track macro measures to assess the change, and use bottom-up measurements (of in-dividuals or business units) to pinpoint the root causes of any issues.

Provide stakeholders with context on internal and external factors that can influence metrics.

Combine rewards with ongoing training and mentoring to ensure enterprise-wide adoption of new behaviors.

Stay cognizant of the organization’s goals, and be prepared to adjust measures of suc-cess as the organization matures.


33

Transformational change is not formulaic; it is not just a methodology and checklist you can follow. Transforma-tional change is more than just implementing a new system, process, or organizational structure. Transformational change shifts the mindset and behaviors of the work force, from leaders down to individuals in their everyday efforts.

Transformation can occur within a team, business unit, or across the entire organization, but it must address the balance of people, processes, and technologies that affect how work gets done and value is realized. To truly achieve transformation across these elements, leadership must:

The findings and best practices identified in this report highlight what must be done throughout a change journey. The best-practice organizations that shared their experiences during this research study exhibit these characteris-tics of strong transformational change and are reaping the benefits of their improved ways of conducting business. Leadership within these organizations set the stage, built momentum through active engagement, and reinforced the new ways of thinking and behavior. These lessons are essential to change the course of an entire organization as they have done. But they are also applicable for more tactical and transitional type change activities we see in our organizations every day.


CONCLUSION

define the vision;

encourage participation;

support changes to roles, processes, and supporting technologies;

define and reinforce new behaviors; and

realign needs and expectations as the journey continues.

34

ORGANIZATIONAL BACKGROUND

Baker Hughes Inc. is an oilfield service company that delivers solutions for the identification, development, and

management of oil and gas operators’ reservoirs. With more than 60,000 employees in more than 80 countries,

Baker Hughes reported $22.3 billion in revenue for 2013.

CASE STUDY: BAKER HUGHES


35

Baker Hughes is an innovation-focused organization with a broad portfolio of products and services that support the entire oilfield lifecycle, from well site exploration to plugging and abandoning well sites. However, several of its product lines were attained over time through acquisitions, ultimately contrib-uting to some fragmentation and lack of collabora-tion.

In addition to the challenges created by a growth through acquisition strategy (e.g., lack of holistic cus-tomer perspective, multiple value propositions and branding, and cost and process inefficiencies), Baker Hughes identified two motivators for change.

1. Decreased performance—the percentage of

revenue derived from new product/service launch-

es, one of Baker Hughes key innovation perfor-

mance indicators, steadily declined for three years

in a row

2. New opportunities—a need in the market for

end-to-end oilfield services solutions providers

In 2009 Baker Hughes' executive team developed the “One Baker Hughes” initiative to better align itself with customer needs. This initiative’s goal was to consolidate the organization into an integrated com-pany with five business segments—reservoir devel-opment services, drilling and evaluation, completion and production, pressure pumping, and industrial services—all aligned with the oilfield lifecycle.

ORGANIZATIONAL RESTRUCTURE

The overarching goal of the One Baker Hughes initia-tive is to ensure solidarity, standardization, and effi-ciency throughout the organization. This required centralization of Baker Hughes’ innovation, back office, supply chain, and sales departments. Howev-er, due to Baker Hughes' focus on product and ser-vice development, it prioritized the establishment of a single product development and management pro-cess for all businesses segments.

To that end, the executive leadership decided to cre-ate a centralized department, enterprise engineer-ing, to create and govern a standardized product development and management process. The enter-prise engineering group was comprised of subteams to facilitate standardization across all business units engaged in product development. The enterprise engineering team is composed of a centralized chief engineer’s office, a product development and man-agement (PDM) team, and a project management team. Members of the PDM team follow.

A dedicated product development and

management (PDM) director—provides di-

rection, socializes proposed changes, and pro-

motes the possibilities.

Dedicated PDM process managers—are re-

sponsible for process governance and metrics and

collaboratively work with stakeholders on poten-

tial process changes.

Dedicated PDM managers—manage the PDM

process for each product line as integrated busi-

ness partners, lead PDM steering teams that iden-

tify and implement continuous improvement op-

portunities, and train stakeholders on the process.

Organizational change management (OCM)

staff—promotes acceptance and adoption of

changes to key stakeholders.

The dedicated enterprise engineering staff provides assistance with product strategy and governance of the innovation processes (i.e., process compliance and improvement).

SETTING THE STAGE FOR EFFECTIVE CHANGE


36

Each business segment has its own product develop-ment teams, which are aligned by product lines that manage and execute the day-to-day innovation pro-cesses. In addition, each business segment is support-ed by a technology group and a project management office (PMO). Each PMO has membership to the En-terprise Project Management Office council that is chaired by the enterprise engineering team. The product line leaders, technology leaders, and PMOs manage the product development process and trans-formations within their business. This structure allows the organization to provide standardization and gov-ernance over its product development and manage-ment process while still maintaining accountability and technical expertise within the business segments and their product lines.

Due to its success in developing a single PDM process, measured by its ability to quantify the product portfo-lio and maximize return on investment, the engineer-ing enterprise team has evolved over the last five years from an organization focused on product devel-opment and management to include business process improvement, project management, and knowledge management responsibilities as well.

As Baker Hughes continued to centralize and stand-ardize the rest of the organization, it discovered that many of the other functions like HR, finance, and IT did not have standardized processes to holistically manage and maximize the returns on project invest-ments. Hence, the executive leadership decided to extend the PDM planning, execution, and benefit re-alization capabilities to large-scale, transformational change efforts in other parts of the organization.

These large-scale efforts, defined as any change that will happen across multiple regions or levels of invest-ment, are called transformational and/or strategic programs.

Regardless of whether the project is product develop-ment or a transformational/strategic program, the PDM team uses the same framework to manage all of its projects.

1. Develop a strategy and secure an executive

sponsor—The team works with the business units

to develop their change strategy and secure spon-

sorship and resources. This begins with the devel-

opment of a multigenerational product (a product

that will go through phased changes to keep its ap-

peal with customers and market share) or process

road maps (i.e., what it is doing now and ideas for

what to do in the future). The PDM team then

helps rank and prioritize these ideas, using a bal-

anced scorecard, for entrance into the next step

and to secure resource allocation.

2. Leverage the PDM process–The team manages

the change through a stage-gate review and devel-

opment process.

3. Develop a launch plan—The team assists in the

creation of a launch plan for the products, process-

es, and programs. For products this includes prod-

uct marketing, messaging, value proposition, collat-

eral, tradeshows, and training and development

needed for sales and field engineers. For process

projects the launch plan includes the communica-

tion plan, training plans, and post-launch reviews. It

also includes an organizational change management

plan using the ADKAR Model.

According to Ron Sonnier, director of product man-agement, one of the key factors that made the devel-opment of the enterprise engineering team successful was its support and sponsorship by the executive team. The executive team ensured the group had the authority, titles, and resources to implement its pro-cess and ensure its success. Representation on the executive team, through the vice president of enter-prise engineering, also helped generate buy-in on the team's processes and services in the business seg-ments and support functions.


37

MANAGE THE TRANSFORMATION Sonnier states that, the effectiveness of a transforma-tional change project can be understood by the equa-tion: effectiveness = quality of the solution x ac-ceptance of the solution.

The quality of a solution can be gauged by an organi-zation's ability to develop the right solution matched to the problem and culture. The acceptance of a solu-tion is more difficult because it ties to the people component. Getting the people part right means gen-erating widespread buy-in through education, aware-ness, and convincing them of the value of the change.

PEOPLE

In many cases addressing the people component during an organizational change is related to culture and com-munication.

The Matrix

When the Baker Hughes’ organizational structure was changed, employees went through a period of shock. The way people conducted business (e.g., their pro-cesses) and their networks were dismantled and rec-reated. In response, the enterprise engineering team worked with other teams to develop a collection of networks, processes, programs, and workshops that reinforce the new behaviors required of a unified or-ganization. This matrix supports Baker Hughes' goal of establishing a culture of innovation and collaboration (Figure 1). According to Sonnier, the matrix addresses many of the softer issues concerning change and drove the cultural shift within Baker Hughes.

All of the components of the matrix have three things in common: communication, collaboration, and inno-vation.

1. Leadership councils—These are regular meet-

ings of senior management based on responsibilities

(e.g., PMO council, product line councils, and busi-

ness segment councils). The purpose of the coun-

cils is to pro-

mote collaboration and improve performance, by

pulling common disciplines together across divi-

sions that might not speak together but are respon-

sible for the same things.

2. External networks—These networks include

formal and informal relationships with external

groups (e.g., functional and discipline-based associa-

tions and universities). The purpose of the net-

works is to promote innovation and capture new

ideas and best practices from external sources.

3. Knowledge networks—These networks are

communities of practice on a wide range of topics

(e.g., technologies like materials science or nano-

technology and disciplines like product manage-

ment, project management, Lean Six Sigma, and

product lines). The purpose of the more-than 50

communities of practice is to share information and

best practices, as well as support cross-business

collaboration, problem solving, and improved per-

formance.

4. Innovation workshops—Brainstorming sessions

address a specific challenge that can be technical,

product, business, or process focused and are orga-

nized on an as-needed basis.

Figure 1

The Matrix


38

5. Distinguished lecturers—Monthly presentations by external experts are recorded and posted on the intranet.

The purpose of the lecture series is to expose employees to new ideas and foster innovation.

6. Crowdsourcing—These projects are similar to the innovation workshops, because they broadly inquire for

solutions to a specific challenge or problem. However, they are typically virtual contests that span a few weeks.

For example, Baker Hughes conducted a three-week contest open to the entire organization looking for solu-

tions to a challenge. There were more than 1,000 unique ideas submitted and four winners, who then got to

spend a year in the development of the solution.

7. Strategy workshops—These multiday workshops create and define the product or businesses strategy.

According to Sonnier, the leadership councils are instrumental in addressing the challenge of buy-in through top-down engagement. The leadership councils promote knowledge sharing and getting everyone on the same page in a matrix organization. During the leadership councils, any current transformation in the discipline is discussed. Leadership then cascades this down to their middle managers who are then responsible for embedding the change within the business.

Strategy workshops

The strategy workshops are multiday workshops, conducted annually or biannually, to develop the strategic imperatives and initial action plan for the next one to two years. Baker Hughes uses these strategy workshops for both its product lines and for process improvements for the support functions. The workshops combine scenario planning and war gaming techniques and are facilitated by an enterprise team member to manage time and ensure every participant has an equal voice.

Prior to the workshop, the product line leader assembles the participants list, background information on competi-tors, and business analysis. The leader also selects the scenarios (i.e., situations likely to occur over the next 6 to 18 months). Each workshop has 50-100 participants that range from senior leaders to front-line employees and in-clude representatives from all relevant stakeholders (e.g., sales, the supply chain, and marketing). The important guidelines for selecting the participants list is to ensure a balanced mix of strategic and tactical perspectives and ensure representation of the customer perspective, market expertise (macro-economic trends and market anal-yses), and technological expertise. The schedule follows.

1. Competitive environment assessment—The goal of day one is to predict how competitors will react

to the selected scenarios. The participants divide into work groups, each representing a different competi-

tor. The groups then go through each scenario and anticipate how their competitor organization would like-

ly react.

2. Scenario analysis—The goal of day two is to brainstorm potential strategies and solutions for the select-

ed scenarios. The work groups address the same scenarios from Baker Hughes perspective.

3. Strategy definition—The goal of day three is to identify the strategy for the next year. The participants

engage in a discussion about each scenario and rank and prioritize the solutions developed during day two.

At the end of the three-day strategy workshop, the participants leave with the strategic imperatives and high-level action plans for the next one to two years. Although everyone may not agree on the end-results, the approach and facilitation ensure structure and overall consensus on the results. The strategy workshops have the additional ben-efit of creating buy-in on the proposed project with senior and middle management, because they worked through


39

PROCESS

The product development and management team uses a stage-gate process (Figure 2) to manage its product development and process improvement projects. It uses a stage-gate process because the structure is scalable, uses standardized reviews, and facilitates the measurement of ROI.

The stages for product development and process improvement follow.

1. Define—Develop the business case for the project (process, program, tool, or product). The project’s tech-

nology readiness level (TRL in Figure 2) is based on its risk, complexity, and importance, which determines the

rigor of its management and consequently which stage-gate process it will go through.

TRL 9 projects involve a core competency or are the equivalent of incremental innovation products or

process improvements.

TRL 7-8 projects are the equivalent of adjusting a product for adjacent markets or moderate process

improvements.

TRL 1-6 projects are the equivalent of disruptive innovations or new-to-the-organization processes or

tools.

2. Evaluate—Assess the project through a conceptual design review (CDR). During this stage, the review com-

mittee assesses the project‘s business case a balanced scorecard with five categories.

Financial rewards—What are the financial benefits (e.g., cost-savings or revenue)?

Market attractiveness—What is the market growth, market size, or potential market share?

Figure 2

Stage-Gate Process


40

Competitive advantage—What unique benefits

will the project create?

Probability of success—How likely is the pro-

ject going to be successful? This is an inverse of

the project's risk or complexity.

Strategic alignment—Does the project meet or

support the product strategy or organization’s

goals?

3. Design, verify, and accept—Develop the new

project. Once the project is designed, it goes through a

detailed design review (DDR) to determine if it is

ready to be accepted (RTA) for development. The pro-

ject then is refined until it is ready to launch (RTL).

4. Launch—Roll out the project within the business

or market. The launch stage includes the development

of a formal launch plan, periodic reviews, and formal

post-launch assessment a year later. The post-launch

review is chaired by the PDM team with product line

and technology gatekeepers to review whether or not

the project created the value it was supposed to deliv-

er, such as profitability, cost-savings, reduced cycle

time, or reliability.

5. Lifecycle management—Product line manage-

ment or the process owner is responsible for monitor-

ing the product during its life cycle (the growth, ma-

turity, and decline of the revenue life cycle). At this

point, the project or product is monitored to deter-

mine when continuous improvement efforts should be

made or the project/product should be retired because

it no longer has an acceptable ROI.

Standardization and measurement are vital compo-nents of the stage-gate approach. For example, at each gate the project team is responsible for producing four deliverables.

1. A business case—outlines the project and includes

its background, benefits, scope, and risk assessment.

2. A statement of requirement—outlines the nec-

essary resources (time, people, and budget).

3. A project development plan—includes the pro-

ject schedule and risk management plan.

4. A launch plan—details the project rollout to the

market or organization. For complex process pro-

jects, an organizational change management repre-

sentative joins the project team to manage the AD-

KAR portion of the plan.

The stage-gate process is one way of taking a struc-tured approach to managing transformational change. Stages 1 and 2 ensure the organization is picking the best projects for its strategic goals. Stage 3 ensures execution. Finally stages 4 and 5 build in the ability to identify performance targets and use data to monitor and identify root-causes to any problems. This metric-based approach uses deviation or variance and data tagging to support a continuous improvement model and react swiftly to any roadblocks or issues.

TOOL

The enterprise engineering team uses an array of tools to manage the process. According to Sonnier, the success of the One Baker Hughes initiative is tied to its

ability to put all its projects into a single system of rec-ord. The tool it opted for is Clarity operational manage-ment software, but there are other available tools that work as well. The important part is to choose a com-prehensive tool that manages projects from infancy of an idea, through development, and until retirement of the product. The system should have all project data (e.g., project details, project review scores, costs and benefit plans, resource planning, and deviations) in one place and enable data tagging and alerts. This enables the organization to manage the entire project portfolio as one company since everything is in a single system of record.


41

EVALUATE THE IMPACT AND CONTINUOUS IMPROVEMENT

As noted, measuring the success of transformation projects is part of the stage-gate process. The enterprise engi-neering team requires project teams to include an outline of the benefits and measures of success for each pro-ject that goes through the process. The balanced score cards and reviews ensure project metrics are monitored.

For example the primary goal of the PDM initiative was to improve new product revenue (NPR), which is the per-centage of revenue generated from new products. The product development and management team tracks the revenue of each new product launched and aggregates the data up to the product line, business segment, and organiza-tional level. This enables the group to monitor the success of its efforts—compared to past performance and performance targets—toward the organizational goal (Figure 3) and drill down to identify the root cause of any deviations.

The enterprise engineering team has learned that transfor-mation is an ongoing journey, which requires new goals and measures as it matures. That is not to say that it ceases to monitor its original goal and measures. Instead the organiza-tion’s definition of success and associated measure become more sophisticated.

For example, now that the PDM process has met its initial goal and measures concerning increased revenue, Baker Hughes now moves on to the next step of addressing the margins of the revenue. The PDM team analyzed the PDM projects and found that on-time-delivery was still problematic even though product revenue was increasing. On-time delivery metrics were established, and im-provements were made using data to analyze root causes of projects missing launch dates. However, there is a tension between achieving on-time delivery and project cycle time, so the next phase of improvement is cycle-time reduction. Data tagging and root-cause analysis will help Baker Hughes identify opportunities for improve-ment. The PDM team conducted benchmarking on industry standards for the percentage of products that get to gate on time and set a goal of 80 percent (Figure 4).

Figure 3

Figure 4

Percent of Revenue from New Products

Percent of Products to Launch Gate on


42

CONTINUOUS IMPROVEMENT

In addition to the lifecycle management stage of the stage-gate, the enterprise engineering team uses cross-functional steering committees (Figure 5) to ensure each project includes continuous improvement.

The steering committees are led by the business segment’s PDM manager and include representatives from each relevant function. The PDM manager provides enterprise-wide perspective and oversight, while the representatives are accountable for the businesses' contributions to the project.

The steering committees meet regularly to assess the project(s) data and discuss:

1. Is the process lean enough? The committee assesses the process to ensure that it is working how it’s

supposed to, verifies people are trained and educated to support the projects, and ensures there is value

in every step of the process.

2. How is the project performing? The committee looks at the projects data to evaluate any deviations,

identify the root-cause of the deviations, and develop a plan to address any deviations.

The steering committee creates status reports to update senior management on the progress of process improvement efforts.

According to Sonnier, continual adjustment is something an organization should be prepared for in a trans-formation. This requires continually monitoring its process and being prepared to make adjustments when data identifies an issue. As the organization matures, its needs and the sophistication of its solutions change; some solutions may no longer be relevant and the organization should look at new ways to address its shifting needs.

Figure 5

PDM Steering Committee


43

The organization’s “One Baker Hughes” initiative is an ongoing journey as of 2014. However, it has shown success in developing a systematic approach to transformational change, which is evident by its ability to meet the goal (i.e., improve the percentage of revenue contribution from its new products) of its product development and man-agement initiative.

Baker Hughes' success is tied to a few key points. First, it established clear process ownership and stability by cre-ating the centralized enterprise engineering team. This group and the standardization of processes and tools laid the foundation for change. Second, Baker Hughes supported its organizational change with toolkits, like the ma-trix, which engaged employees in the process and embedded new norms and behaviors. Finally, Baker Hughes un-derstands that change is an ongoing journey. An organization will mature as it goes through the change journey, and it needs to establish mechanisms to monitor the organization and establish a mindset of continuous improve-ment.

CONCLUSION


44


Booz Allen Hamilton provides professional services primarily to U.S. government agencies, as well as to corporations, institutions, and nonprofit organizations. Booz Allen’s consultative services provide functional knowledge in strategy and organization, technology, operations, engineering, and analytics. With more than 23,000 employees, Booz Allen reported $5.86 billion in revenue in 2012.

CASE STUDY: BOOZ ALLEN HAMILTON


45

In early 2012 Booz Allen came to the realiza-tion that, although it had experienced double-digit growth for more than a decade, the mar-ket and its business environment were chang-ing. Furthermore other challenges concerning customer needs started to emerge. So the or-ganization opened up a dialogue among the top 2,000 people within the organization to determine what service offerings it should pro-vide to clients, what were options for change, and where the organization should be. This discussion was the impetus for the develop-ment of its 2020 Vision project.

A Vision 2020 core team, with representatives from senior management and corporate quality manage-ment, assessed the market and organization to un-derstand the organization’s current state and identi-fied options for a new Booz Allen. The assessment was conducted through three work streams.

Current state—Assess the business and the

market.

Future needs—Map out where the market is

heading and the evolution of client needs,

Benchmarking programs—Conduct a broad

comparison of people programs within and out-

side its industry.

The core team found that Booz Allen had strong core values and a decisive competitive advantage from its consulting and technical expertise, collaborative strength, and client relationships. However, the mar-ket was shifting, the needs of its stakeholders (clients, staff, and investors) were changing to in-clude an offering in the technical engineering space, and its business model was outdated. The team, along with other senior management, used this in-formation to develop a plan to transform the organi-zation over the next ten years. The components of the plan are outlined in Figure 1.

BUILD THE FOUNDATION FOR SUSTAINA-

BLE CHANGE

To ensure Booz Allen created change that would last, it prioritized three key activities: addressing cost is-sues, developing a new operating model, and align-ing its businesses with the changing market. These initial priorities would ultimately support sustainable change by freeing up resources to fund the transfor-mation and streamline the people and process as-pects of Booz Allen’s businesses.

Traditionally Booz Allen had been a matrix organiza-tion organized by:

market ( responsible for revenue),

capabilities (responsible for cost management),

and

geography (clustering people, resources, and cli-

ents by location)

Booz Allen found that these three axes were not equally balanced, which splintered its decision mak-ing, capabilities, and resource allocations. And in sev-eral ways, it created unintentional organizational tension that could interfere with client and firm ob-jectives. When an organization is experiencing rapid growth the matrix organization works fine, there is


Figure 1

VISION 2020 COMPONENTS


46

little conflict between the axes because cost isn’t rel-evant at that time. However when growth slows there is a greater demand on the market people to generate revenue—which usually results in a request for more resources. The capabilities axis typically pushes back on additional costs because they aren’t being balanced by incoming revenue. Furthermore this approach also creates an arbitrary bucketing of capabilities by three groups and does not encourage the full utilization of Booze’s competitive ad-vantage—its people – across markets and across functional solutions for clients.

To address these issues Booz Allen simplified its or-ganization to a market-aligned model, outlined in Figure 2. This new model combined three vertical clusters or market groups (i.e., defense, security, and civil) with three horizontal or operational groups (i.e., executive management, functional capabilities, and strategic innovation).

In addition to the restructure, Booz Allen introduced two additional components to its business model: a single profit-and-loss (P&L) structure and the crea-tion of a Strategy Innovation Group (SIG). The single P&L removes obstacles associated with competing agendas and facilitates adoption because the organi-zation is focused on shared goals. The SIG was creat-ed to improve the firm’s ability to find innovative new ways to grow and was tied to fulfilling the organ-izations future vision. The new group was staffed by lever-

aging its internal resources into cohesive work

and teams, the people in Booz Allen that were al-ready creating innovative work.

The new structure created a fluid approach to man-aging Booz Allen’s competitive advantage by:

aligning its people with clients,

supporting collaboration,

focusing on innovation, and

creating greater agility within the organization.

To complement the structural reorganization, Booz Allen had to re-evaluate its decision rights, as its cen-tralized, top-down structure did not support the new market-aligned model. This structure and the need to empower employees to provide exemplary service led Booz Allen to distribute decision making and re-sponsibilities within the business.

Once the framework for the change (particularly the organizational and business model restructure) was complete, Booz Allen moved onto the next inter-locked components of its transformation: a new peo-ple model and establishment of functional communi-ties.

New Organizational Structure

Figure 2


47

Booz Allen’s new people model was focused on align-ing its people with the new structural organization. As stated, Booz Allen’s people are at the core of its busi-ness and their skills and expertise are its primary com-petitive advantage. Hence the new people model had to enable the growth and development of its diverse talent and use multiple programs to enable their suc-cess. The new people model included the following goals:

Supporting a full range of skillsets within the

organizations—A more fluid approach to career

development encourages and rewards growth of

expertise and capabilities.

Broaden and clarify the expectation of

roles—Create clear definitions concerning roles,

responsibilities, and multiple development paths.

Empower staff to manage their careers—

Ensure staff can chart their career development in a

way that aligns with the business needs.

Provide staff with timely, personalized feed-

back—Ensure staff understand where they are in

their career journey, and provide the ability to

move horizontally or vertically.

Enable efficient and effective ways for staff to

identify opportunities—Provide career develop-

ment support, recruiting, and training.

Improve the organization’s understanding of

people needs and trends—Map out talent gaps,

understand attrition by role, and create strategies

to fill the gaps or manage migration.

To accomplish these goals, Booz Allen developed three core elements of its new people model.

1. A flexible career model—Define how staff navi-

gate their career in three areas: career tracks, func-

tional roles, and titles.

2. Clear performance expectations—Defines the

career path and its expectations, and provide ongo-

ing, collaborative communication on progress.

3. Differentiated, functional communities of

practice—Align people by their capabilities, main-

tain/improve intellectual capital, and support pro-

fessional development.

Booz Allen’s previous people model, based on func-tional clusters, often unintentionally resulted in silos and restricted the ability of people to share knowledge and best practices across the organization. The functional communities, on the other hand, are voluntary communities of practice; people can join multiple communities based on their skills, interests, or even aspirations. This structure makes the func-tional communities a vital component of the transfor-mation because they have also helped the organiza-tion map the current capabilities of its staff, pinpoint gaps for investment, and support collaboration.

PROCESS AND TOOLS: THE TRANSFOR-

MATION LIFE CYCLE

Booz Allen uses its transformation life cycle (TLC) to manage its and clients’ transformation efforts. The TLC is not a road map but instead a holistic frame-work of methodologies, processes, and documents for organizing transformational change at each compo-nent and stage. Booz Allen provides a textbook worth of detailed procedural and related information con-cerning the cycle. According to Ron Lear, Corporate Quality Director, the TLC frames one’s thinking about the change and it’s transformation aspects and ena-bles Booz Allen to tailor a solution with the right bal-ance of people, processes, tools and infrastructure. Figure 3 outlines the TLC, its four dimensions of change, process areas or groups, and transformation stages.

MANAGE THE TRANSFORMATION


48

Transformation Life Cycle Overview

Figure 3

Transformation Components

The following four dimensions are the linchpin of the TLC and make up the major components of change:

1. People—includes the organizational structure and human capital management aspects of a transformation (e.g.,

training, leadership development, rewards/incentive systems, and behavioral models).

2. Process—includes the business activities of the organization and their related rules, content, and measures.

3. Technology—includes the technical infrastructure, information systems, and applications.

4. Physical infrastructure—includes the physical environments where employees conduct work.

Effective transformation requires addressing all four components and tailoring the TLC to each unique situation. If an organization focuses only one component, it then risks creating something that no one will use or something that has to have additional investments or rework before it will be adopted. For example, organizations will build a tech-nical solution without taking into account the processes its supports or the functions (people) who will adopt the technology. When this happens, the organization will often end up with a technology that doesn’t address the actu-al problem (i.e., shelfware). A key lesson according to Booz Allen is that “you need to take the people and processes along for the ride.”

Process Groups

Booz Allen’s TLC also includes three process areas, each with 14-16 sublevel processes, that when performed collec-tively achieve the transformation.

1. Capability development—defines, builds, and deploys future-state capabilities to achieve the organization’s

vision.

2. Ownership building—secures management and stakeholder sponsorship, involvement, and commitment to

drive change.

3. Program stewardship—provides guidance and program management that drives, integrates, and coordinates

the transformation.


49

Transformation Stages

Finally the TLC emphasizes that it takes a disciplined approach to lead change. The TLC outlines five stages that

take an organization from defining the where it wants to go to implementing how it’s going to get there.

1. Envision—This is the initial stage of the transformation. It focuses on stakeholder engagement by developing an

enterprise-wide vision of the future and a transformation strategy to achieve it.

2. Define—During this stage, the organization develops the concept of operations to achieve the capabilities

needed for the future state. This includes requirements, a transformation road map or plan, high-level solution

architecture, and the change management plan.

3. Design—During this stage, the organization expands the requirements to include resource allocations and an

implementation plan.

4. Develop—During this stage, the organization details the people, process, and physical infrastructure designs;

tests and builds the technology and capabilities; assesses the organization’s readiness for change; and begins the

deployment of new capabilities.

5. Deploy—During this final stage, the organization initiates the implementation plan, monitors the implementa-

tion and organizational performance, and adjusts the implementation plan where needed.

The stages provide guidance in two ways: it helps the organization track where it is in the transformation, and it enables the organization to integrate the right set of capabilities. According to Lear, it is analogous to having an organizational GPS so that even if something causes a change in direction, Booz Allen can make real-time course corrections, ether internally, or when applied to a client change problem. This has been especially true in Booz Allen’s consultative work, because organizations frequently come to them for help at different points in their transformation.

STAGED DEPLOYMENT

Booz Allen found it beneficial to stagger the deployment of its Vision 2020 components. Booz Allen waited six months between the implementation of its new organizational model and the initiation of its new people model. Booz Allen used a multistage rollout plan for a few reasons.

It enabled each phase to build upon the success of the previous phase.

It ensured people understood their roles in the change.

It allowed the organization to set short-term goals and celebrate a series of wins, which also fostered early buy-

in for the change.

It ensured people are not overwhelmed by the change and rolls out change in proportion to their ability to

adopt new roles, processes, and behaviors.

CHANGE MANAGEMENT

Booz Allen leverages its employees who have earned certification from its change management advanced practi-tioner (CMAP) certification program to support its and clients' transformation efforts. The CMAP is a partnership effort between Booz Allen and Georgetown University's McDonough School of Business. Certified change manage-ment advanced practitioners are facilitators of change in complex environments, are versed in a suite of change capabilities (using 14 methods), and know when and how to apply each to help leaders successfully drive change.


50

COMMUNICATIONS

According to Booz Allen, communications are a vital part of any transformation. They help establish expectations, cre-

ate transparency, and promote early buy-in. And using feedback mechanism enables employees to develop a sense of

personal ownership in the transformation. So the organization spent equal amounts of energy on engagement and its

communications plan.

Booz Allen used multiple approaches to build awareness of the drivers for the transformation in order to create buy-in,

keep employees aware of the changes as they were occurring, and set expectations about what was coming next. Booz

Allen’s communication approaches include multiple channels, including interactive sessions like roadshows, focus

groups, crowdsourcing, social media (e.g., Booz Allen internal social intranet “Hello” and Yammer), and training to push

communications such as emails and monthly bulletins.

Key Lessons Learned

Use a combination of cascading and cross-functional approaches to communica-

tions. Provide leadership with the information its needs to communicate to their direct reports

and lead by example. However, Booz Allen also found it important to manage the cascade of

information, because if it is left alone it will break down. Communicating cross-functionally pro-

vides a means to monitor where potential breakdowns occur and serves as an organization

cross-check to ensure consistency in the messaging.

Keep communications open and honest. When there was bad news or some problem oc-

curred, Booz Allen was transparent on the issue and informed employees about actions to ad-

dress the issue. Employees respect the honesty, and that in turn creates the trust necessary to

facilitate change.

Be deliberate about the purpose and target of the communications. All information

will not be relevant to everyone within the organization, and over-communication can result in

people ignoring important information.

Leverage peer catalysts. Booz Allen leveraged natural centers of influence within the organi-

zation, not always in management, who are natural change agents. They helped communicate

information and create buy-in from the bottom up.

Close the loop. Booz Allen shared what was done with people’s questions or feedback. This

served two purposes: it let employees know the organization listens to them and respects their

thoughts, and it answered similar questions that other employees had.

Engage employees in the process. Booz Allen used interactive communication tactics like

focus groups, war games, social media, crowd sourcing, and employee-led training. This engage-

ment approach not only helped create buy-in among Booz Allen’s employees but also expanded

the organization’s ability to tap into the expertise and ideas of its employees for the transfor-

mation.


51

Booz Allen used training to build awareness and set expectations on the new people model. Creating the training had

been difficult, said Marcy Darby, strategy and change communications, because employees spend so much time on-site

with clients. So the organization used two virtual training courses.

1. Foundational training—Mandatory training for all employees outlined the core elements of the new model. It

explained why the change was necessary and what it meant for all of the stakeholders (i.e., individuals, the firm,

and the clients.)

2. Career managers training—Thirty-minute modules were available to all employees but only mandatory for

career managers. During the modules two groups of career managers discussed the new people model. One

group asked questions about the new people model, and the other group of career managers provided answers

and advice for the questions. Career managers then applied this learning directly in their interactions with their

teams, which helped to solidify the foundational training.

Booze Allen’s training approach used many of its key lessons for communications. The two training courses ensured

the communications on the new people model were deliberate and the information was suited for each audience. It

used peer catalysts and employee engagement in the career managers training. Finally it closed the loop on requests

by employees, from the annual survey, who had requested more training from a peer’s perspective.


52

Booz Allen uses a mixture of communications platforms and formal feedback mechanisms to track and measure the implementation of Vision 2020 and its goals. For example, the core team for the Vision 2020 initiative con-ducts road shows at each of Booz Allen’s sites to push information on the transformation’s initiatives and solicit feedback from employees on how the new approaches are working, including any feedback from clients. It facili-tates feedback by planting change agents within the audience with seed questions on the transformation to initi-ate the conversation and get feedback in the areas the implementation team needs feedback on. Other communi-cations methods like e-mails, social media, and notices or bulletins on the latest updates for the Vision 2020 in-clude a link where employees can submit feedback and questions.

Booz Allen also uses formal tools like its annual employee and pulse survey, to track the success of the transfor-mation. The survey includes the typical employee assessment questions but also asks specific questions related to Vision 2020 and its components. For example, the survey has gauged whether the functional communities are beneficial or what employees think about the new organizational structure and people models.

In addition to its qualitative and quantitative feedback mechanisms, Booz Allen uses specific measures to track the progress of its transformation initiatives. The measures should match and be traceable to the goal the measure of success will shift over time, depending on the stage of the initiative. Booz Allen recommends organizations start with the end-state in mind and then identify the measures that will indicate success at different stages. Two exam-ples follow of goals from Vision 2020 and the measures Booz Allen used to track its progress during the subse-quent steps.


Example One:

Goal: Drive new business from intellectual capital developed in functional

communities.

Measures: It developed measures through three stages of implementation.

1.Volume of staff participating in functional communities

2.The number of pilot programs

3.Revenue generated by its intelligence community and ideas developed in the SIG and functional

communities

Why: Because this goal is directly connected with the development of intellectual capital and new ideas from Booz Allen’s SIG and functional communities, the first step in goal attainment is the development of its communities. Hence the first measure of success of the goal is the volume of staff engaged in the functional communities and the intellectual capital developed and shared through them. The SIG then takes the ideas developed in the communities and creates pilot programs to test their commerciality. As these ideas become commercialized, the organization can begins measure the amount of revenue generated from the functional communities.


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CONTINUOUS IMPROVEMENT

Booz Allen combines a simple four-stage process with five assessment methods to measure implementation of the Vision 2020 components and create continuous improvement throughout the transformation (Figure 4).

Continuous Improvement Approach

Figure 4

Example Two:

Goal: Increase revenue from its technical solutions offering.

Measures: For the first stage of implementation, it measured the number

of staff with prerequisite skills. For the second stage, it measured the

revenue generated by technical solutions offering.

Why: One of the goals of Vision 2020 is to expand into the technical systems engineering space.

Historically 70 percent of Booz Allen’s revenue came from its management consulting and its

capabilities reflected that focus. Hence the new people model had to provide Booz Allen with the

skills and expertise necessary to provide technical solutions. It accomplished this by creating new

career paths—such as technical engineers—and providing employees the opportunity to train,

develop, and leverage their skills in this area. Hence, the initial measure for this goal is the number of

staff with specific skills or capability by a set date. Once this is accomplished, Booz Allen can measure

the amount of revenue it generates in through its technical solutions offering.


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The four stages follow.

1. Monitor and assess—Measure the implementation against key goals and measures. Assess different as-

pects (e.g., compliance, and risk management) of the change by five different groups.

2. Analyze, report, and plan—Analyze the implementation assessments to report on progress, identify

any barriers or issues, and plan the next steps.

3. Identify and implement– Determine the appropriate corrective or preventive actions for barriers or

issues, and integrate them into the implementation plan.

4. Evaluate and develop—Assess the transformation to capture best practices, pinpoint areas for adjust-

ment in the process, and update the process accordingly.

This approach ensures the organization shares best practices, manages risk, identifies problems, and pro-vides preventive or corrective actions in a timely manner. Furthermore the five assessments use criterion that link back to the 2020 Vision and the corporate quality management program. For example, it measures the goal for closer alignment between senior management and clients by tracking their participation in pro-jects. These assessments have the additional benefit of building voice of the customer, through the client satisfaction assessment, into the transformation monitoring process.


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Booz Allen spent 2012 creating awareness and implementing training for the new people model, and it is now im-plementing the adoption of new behaviors. Its success to date is based on a few key points.

Create a foundation for sustainable change by focusing the organization on one set of goals, by using a single

P&L model, and by establishing the infrastructure of change in its organizational remodeling.

Use the TLC to apply a flexible methodology that matches the right tools and processes for the needs of each

stage.

Combine staged deployment, change and quality management practices, and employee engagement for long-

term change, and embed new behaviors and roles within the organization.

CONCLUSION


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UnitedHealth Group is a diversified health care company in the United States serving more than 85 million individuals around the world. UnitedHealth Group’s 133,000 employees are located in its operations in all 50 states and 20 other countries. Revenue for fiscal year 2012 was $110 billion, and UnitedHealth Group is currently No. 17 on the Fortune 100.

UnitedHealth Group is comprised of two distinct platforms:

1. UnitedHealthcare, which provides health care coverage and benefits services, and

2. Optum, which provides IT-enabled health services.

This case study focuses on UnitedHealth Group’s Optum Technology organization, which includes:

infrastructure services,

application services, and

global solutions.

CASE STUDY: OPTUM TECHNOLOGY


http://unitedhealthgroup.com/Businesses/Optum.aspx

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In the late 1990s and early 2000s the company ac-quired multiple businesses. As is common with this strategy, the organization faced challenges as it inte-grated the systems, people, and departments of its acquisitions. From 2002 - 2007, UnitedHealth Group focused on improving efficiency and fully integrating its acquisitions. Changes in the healthcare market-place, technology advancements, and serving cus-tomers in new ways for example, through mobile devices, were a few foundational transformational business drivers for Optum Technology.

Like many organizations, UnitedHealth Group’s busi-ness environment was affected by consumers’ access to information in the digital age, the Affordable Care Act, and shifting consumer expectations. In particu-lar, consumers expect all interactions, from the dis-tribution of benefits explanations to customer ser-vices, to be timely and 100 percent accurate. That meant UnitedHealth Group was going to have to continue to improve operational efficiency and focus on the consumer and their experience. In order to accomplish this, the organization prioritized the de-velopment of technology to deliver a differentiated experience that was defect-free, reduced cycle time, cost less, and delivered in the context of a values-based culture that drives business outcomes for the organization.

The UnitedHealth Group values-based culture em-phasizes five core values.

1. Integrity—Honor commitments and never com-

promise ethics.

2. Compassion—Walk in the shoes of the people it

serves and works with.

3. Relationships—Build trust through collabora-

tion.

4. Innovation—Invent the future, and learn from

the past.

5. Performance—Demonstrate excellence in eve-

rything we do.

With cultural values as a foundation, the Optum

Technology 2014 priorities as noted below provide

context into the transformational agenda.

1. Growth and innovation—focusing on commer-

cialization, innovation, health care regulatory and

compliance, and enterprise data

2. Advancing the business—stability, software and

product engineering, enterprise architecture, and

information security

3. People and culture—employee engagement,

work force performance, and organizational effec-

tiveness

Optum Technology employed a multifaceted ap-proach to drive transformation including:

implementing a quality operating system to im-

prove quality in process and software delivery,

using Lean management techniques to increase

operational efficiency and maintain a customer-

centric focus,

Providing supervisor training to prepare manage-

ment for change and a leadership academy to pro-

mote systems thinking with cross-functional team

work, and

organizing employee engagement teams to create

feedback loops and communicate to the organiza-

tion’s change actions and improvement initiatives.



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Figure 1

Optum Technology realized that its waterfall project approach alone, characterized by a linear series of steps, would not support experimenting with differ-ent solutions to improve delivery. Instead Optum Technology developed a more flexible approach to manage processes and projects, including the use of pilot and prototypes. Figure 1 includes some of the transformational change components most relevant to this study; including the use of change leadership to bring them all together.

PROCESS: ORGANIZATIONAL INTEGRAT-

ED CHANGE FRAMEWORK

In 2011, Optum Technology created the organization-al integrated change framework (OICF). The OICF methodology allows leaders to achieve business re-sults that were tied to the process release framework. The OICF combines an end-to-end process with a change roadmap. The six steps for this organizational change readiness and management process are:

1. Form a change management team.

2. Clarify the needs and challenges of the change by

working with the owners of the change to identify

their and other stakeholder’s needs and concerns.

3. Establish a change plan using a defined change

framework.

4. Prepare people and the environment; this includes

an understanding that the change road map is the

summation of stakeholder needs plus customer

needs.

5. Implement the change.

6. Evaluate and monitor progress.

The change road map outlines the change while incor-porating relevant people and business environment conditions and roadblocks. Change leaders use the change road map is used to validate each step of the organizational change process (which includes stage-gate reviews) to monitor, track, and measure large-scale initiatives.

This approach:

provides simple, streamlined, and actionable tools;

integrates with processes, projects, and programs;

enhances knowledge, skills, and capabilities;

embeds standardized artifacts into operational

plans;

provides a human capital partner to accompany the

project lead; and

includes an intranet landing page and leader guide.

Transformational Change Components


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Optum Technology encourages change leaders (those responsible for sponsoring or managing a change initia-tive) to be knowledgeable on the OICF which includes developing acumen in financial management, business knowledge, change management, and consultation.

To support organizational change, Optum Technology leverages workforce capabilities, learning tools, and train-ing solutions for leaders and employees in addition to the OICF tools. Preparing change agents, training supervi-sors, and maturing the change framework tools have been key enablers to achieve transformational change.

For example, Optum Technology developed a computer-based change readiness training module for supervisors in partnership with its knowledge and learning group. The training module provides a learning and training solu-tion for leaders and employees to share instructional knowledge on implementing technology changes. The su-pervisor change readiness learning module outcomes are to:

understand the importance of change readiness;

understand the difference between the two types of change management;

learn how management supports the business;

articulate the benefits of Optum Technology’s process release management;

understand how the corporate culture supports organizational change; and

see the link among the annual employee survey, change readiness, and change management.

TACTICS AND TOOLS

Quality Operational System (QOS) and New Basics

QOS is the result of collaboration between infrastructure services and application services that has been rolled out and embedded into the technology organization and UnitedHealth Group. The goal of QOS is to get beyond the typical 99 percent availability for software systems and continuously improve quality. The QOS reinforces quality is foundational, and it leverages a Six Sigma, closed-loop feedback system of measurement, analysis, im-provement. Quality assurance and quality controls are key aspects to this addressing shifting customer and envi-ronmental needs, with a strong transformational emphasis on improving quality through processes, metrics, and value.

Leadership Academy

An organizational emphasis has been on high performance and technical capability. To prepare leadership to spearhead the transformation, Optum Technology decided to train its leadership on the capabilities and skills to support its new vision, business acumen (i.e., moving beyond technical capability), cross-functional collaboration to support innovation, and focus on a quality customer experience).


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To accomplish this, Optum Technology uses a Quality Leadership Academy designed for senior leaders as one example, to drive change and quality across the entire organization by having leaders work on cross functional challenges or opportunities such as systems defects in order to solve real business problems. The goals of the Quality Leadership Academy are to:

drive motivation—employees must care about quality (communication);

share skills—employees must see how this will affect quality and what needs to be done (process,

knowledge, and learning); and

drive empowerment—employees must see that they can do something to improve quality (accountability

and metrics).

Optum Technology reinforces the importance of “not compromising quality for schedule” and enabling employ-ees to action upon this approach. The academy for instance, instills an understanding that leaders can direct this information flow and manage the process with people rather than just managing the people.

Lean as a philosophy, not just a toolset

As noted, the Optum Technology organization decided to use Lean methodologies to improve its operational efficiency and customer focus. However, when Optum Technology evaluated using Lean, it found the effective-ness of its transformation would be limited by relying on Lean alone. To explain this, Gary Jeter, vice president end user technology and operational excellence shared the following formula.

The immediate opportunity and challenge for Optum Technology was acceptance of change across the organiza-tion. The technology group realized leveraging just Lean was not going to be enough to drive transformation; it needed to embed three elements of the Lean framework to support its transformation, which include:

1. Go Lean - focus on continuous improvement and set the stage for change.

2. Lean enterprise - secure leadership’s vision and commitment to lean, establish clarity on the initiatives, in-

vest in training, and ensure total employee involvement.

3. Process focus - emphasize lean process management and a standard accountability process.

In mid-2013, Optum Technology applied these Lean elements to approximately 14 projects across the organiza-tion. The goal was to show that although Lean techniques can help manage projects, performance is the key to success. Using this rollout process established a cyclic application of Lean throughout the organization for these projects.

The continuous improvement team was instrumental in partnering with Optum Technology Human Capital Part-ners, to incorporate quality principles including control and measures to strengthen the change framework tools for leaders. For example, Voice of Customer metrics were embedded into the OCIF to further evaluate change

initiative effectiveness and monitor progress.

Q*A=E

where Q = quality, A= acceptance, and E = effectiveness.


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Employee Engagement Team

To ensure a sustainable transformation, Optum Tech-nology needed to engage the workforce in the change and tap into their expertise to help pinpoint opportuni-ties to improve operational efficiency and customer satisfaction. To this end an employee engagement team was established. The employee engagement team is composed of approximately 40 employees se-lected by leadership from different businesses, who commit 8-10 hours per month in addition to their full-time jobs. The employee engagement team is responsi-ble for communicating results of the transformation initiatives throughout the organization, as well as de-veloping improvement initiatives for gaps identified in its annual employee survey, which leadership asks em-ployees to provide feedback on how the organization can improve business outcomes.

For example, in 2012 and 2013 the employee engage-ment team identified two improvement areas.

1. Operating discipline—simplify and streamline

processes and plans

2. Performance support—improve how system and

process changes affect employees' ability to their

jobs

Optum Technology created a process release manage-ment function to address these improvement areas. The process release management function is responsi-ble for streamlining and simplifying key technology processes and tools deployment, as well as improving change readiness and stakeholder impact by centraliz-ing process releases.

The employee engagement team is renewed every year to match the right people and skill sets to the cur-rent phase or projects of the transformational change. The project team identifies a list of key characteristics or skill sets necessary for a current project and asks senior leadership to nominate approximately four peo-ple from each Optum Technology business unit for the team. The project team then selects the individuals for the employee engagement team that year.

INNOVATION

UnitedHealth Group and Optum Technology were able to bring transformational change to life by leveraging a number of techniques to engage the work force and

drive innovation across the enterprise. Two examples follow.

1. Innovation Day are annual, enterprise-wide events

that build on the innovation fundamentals. During

the event, which includes a virtual component for

employees, leaders provide displays, demonstrations,

and presentations on current product and business

innovations. This event spotlights UnitedHealth

Group innovators and is used to demonstrate how

employees across the enterprise are contributing

new ideas and solutions in healthcare or technology.

2. Innovation Challenges are generally two to three

week long virtual challenges that tap into 150,000

employees with diverse backgrounds and experienc-

es to solve today’s problems with their ideas and

innovations. A business leader or group submits a

problem or opportunity via a forum-style, social me-

dia application where employees can submit ideas or

solutions and vote on the submissions. The origina-

tor of the problem or opportunity then identifies

three to four submissions for review by executive

management for further development. These chal-

lenge events identify new growth strategies, build

innovation capabilities, accelerate collaboration, and

provide the organization with a way to engage and

publically recognize employees for innovation.

Brian Landwehr, director of innovation and R&D, shared that adapting to changes, developing relation-ships, and taking risks with new ideas are factors to Optum Technology’s innovative culture. UnitedHealth Group and Optum Technology are successful, he said, because innovation is not seen as a one-time event. Rather, the environment to innovate is supported throughout the year in many forums, through its core values and locally sponsored by the respective leader-ship teams.

COMMUNICATIONS

Optum Technology’s communication for its transfor-mational change is customized based on the individu-als’ role in the organization. The customized approach uses multiple communication channels to ensure the messages are embedded in, and shared across, the or-ganization. For example, leaders are provided toolkits, scripted dialogue talking points, and attend nationwide quality road shows to stay informed. Employees re-ceive communication using more traditional channels, including e-mail, staff meetings, newsletters, and the intranet.


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As Optum Technology continues to manage transfor-mational change, one of the key lessons is that the change doesn’t have to happen all at once. There is still a desire to keep change leadership, innovation and quality as technology priorities to keep pace with the changing marketplace. In Optum Technology, the acts of engaging leaders and employees and developing the culture of innovation and quality tie back to operation-al and transformative solutions that affect the bottom line. To be successful, the organization must balance the need to drive change and measure operational ex-cellence.

To continue to drive innovation and transformational change, UnitedHealth Group has recognized that quali-ty and innovation is a key differentiator. The company can now showcase what they are doing for consumers, and two examples follow of what Optum Technology has accomplished by using technology and innovation to improve the customer’s experience. The first exam-ple, when fully released, will drive innovation to assist their employees, and the second one is focused on changing the health care industry.

WORKSPACE AS A SERVICE

A strategy for Optum Technology in 2014 and 2015 is to allow employees to strike a better work-life balance by using technology to allow employees do their work from any computer that has an Internet connection. This provides an increased amount of flexibility for em-ployees, but this offering also brings a commercialized solution to the health care market place as a secure and reliable solution. This innovative solution is an ex-ample of how Optum Technology is preparing the or-ganization for change, as well as driving innovation within the industry.

MYEASYBOOK

One of the company’s new offerings is called “myEasyBook,” which is an online health care shopping service that makes it easier and more affordable for consumers to make appointments with local health care professionals. Using a test market in Arizona, it was found that consumers with a high deductible in-

surance plan are willing to purchase certain health care services and book their appointment online. This pro-vides the patient with a seamless experience and pro-vides the doctor’s office with upfront payments and the ability to improve schedules. The “myEasyBook” is an example of how Optum Technology successfully used a pilot program to educate members, facilitate a market for in-network services, and engage and engen-der trust in its consumers. Results included an overall savings of services on the pilot site of 46 percent, 37 percent booked within 2 days with 50 percent re-booking services on the site.



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Optum Technology was able to successfully manage transformational change in a complex environment using a variety of channels.

Prepare leadership to drive change-raised awareness and provide tools to more effectively communicate the

transformational changes to all area of the organization.

Engaged the entire organization—the employee engagement teams and innovation challenges provide employees

with the opportunity to become part of the solution.

Develop and leverage an integrated organizational change framework, which used a standardized, six-step

change readiness and management process as a road map to assess and adjust for potential people and business

environment conditions and roadblocks.

Balance structure and flexibility—project teams are required to conduct formal reviews, throughout the six-

step change framework process and are encouraged to use rapid prototypes and defined tools to test ideas.

Encouraged collaboration and broke down silos—the quality initiatives provided renewed focus on the infra-

structure and development to ensure the collaboration among business units, and the innovation demonstrated

change transparency on innovation across the business.

CONCLUSION


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Underwriters Laboratories Inc. (UL) is a global safety science company with over 10,000 employees in 39 countries and approximately $1 billion in annual revenue. Within the testing, inspection, and certification market, UL provides safety solutions involving electricity, sustainability, renewable energy, and nanotechnology. UL provides the knowledge and expertise for clients to navigate growing complexities across the supply chain involving everything from compliance and regulatory issues to trade challenges and market access.

UL’s business started as a nonprofit with a single business unit and has evolved to seven separate for-profit business units reporting to the nonprofit parent, Underwriters Laboratories Inc.

UL ‘s Business Structure

UL’s mission statement reflects the changes it has undergone in the past decade.

To promote safe living and working environments for people by the application of safety science and hazard-

based safety engineering

To support the production and use of products which are physically and environmentally safe and apply our

efforts to prevent or reduce loss of life and property

To advance safety science through research and investigation

To concentrate our efforts and resources on public safety in those areas where we can make valuable

contributions

To work with integrity and a focus on quality to enhance the trust conveyed by our certification marks and

services

To charge fair prices that allow us to meet our obligations, sustain our growth, and invest in safety science and

education

To invest in our people and encourage our people to invest in themselves

CASE STUDY: UNDERWRITERS LABORATORIES INC.


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When its current CEO arrived in 2005, UL faced several challenges. In addi-tion to traditional concerns regarding globalization, privatization, and out-sourcing, competition for UL had in-creased after the consolidation of its testing client base. And customer needs regarding safety were expand-ing to areas such as air/water quality and sustainability.

In response, UL sought to expand out-side the U.S. market and move beyond its traditional service delivery ap-proaches by embracing emerging sci-entific developments. These efforts would be bolstered by a new mission and a renewed focus on client inter-ests that served its financial stability.

UL has progressed through a multiple-phased transition that began in 2005 and is still in progress in 2014. Figure 1 outlines the timing and phase goals for “21st Century UL”.

“21st Century” UL Transformation Plan


UL’s New Mission

UL’s new mission and focus on the customer required a ten year trans-

formational change called “21st Century UL”. UL’s executive team out-

lined the future state of “21st Century UL” in the following high-level

goals:

mission led,

client-centric,

open to new science rather than traditional methods,

open to grow globally, and

financially sound.

Figure 1


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1. Fix the Core—focused on preparing the organization for change, ensuring financial stability, and creating a

culture that aligned with its new goals. In other words, the goal was to inverse the culture – moving from a

risk adverse, command-and-control culture to one ready for change. According to UL this corresponded to

John Kotter’s steps of “Create a Sense of Urgency, Form a Guiding Coalition, and Paint the Vision.”

2. Multi-Platform Service Provider—focused on growing the customer base, establishing new business

units to match evolving customer needs, and integrating newly acquired organizations. In phase two UL ad-

justed the structure of the company with business units aligned to customers and their needs, with new ca-

pabilities. These changes enabled UL’s core team to execute on the next parts of Kotter’s model –

“Communicate the Vision, Empower for Action and Create Short Term Wins.”

3. Indispensable Partner—focuses the back office, providing and standardizing the infrastructure (i.e., tools

and resources) to secure widespread customer loyalty. The key point here is that the tools and technology

did not lead the change, but actually served to “cement” the change. In Kotter’s model, this was

“Consolidating Gains and Anchor the Change.”

OUTLINE THE CURRENT STATE

In order to align the organization with this future state, UL first needed to outline its current state. UL’s core team, responsible for the transformation, bench-marked customer satisfaction, market share by re-gion, and employee satisfaction. One of the most tell-ing benchmark results was its Net Promoter Score (NPS) used to measure customer satisfaction. NPS measures the difference between promoters (i.e., loy-al enthusiasts likely to recommend a business, prod-uct, or service to a peer) and detractors (i.e., unhappy customers likely to spread negative word-of-mouth about the organization). UL was in trouble with its customers, as indicated by its NPS score of -27 in 2007 (Figure 2).

In addition to its poor NPS, UL employee satisfaction was lagging and its market presence was small compared to the global, diversified market that testing, in-spection, and certification had become.

Although UL’s primary competitive advantage was its employees, the culture and business model at the time did not support optimizing that asset. To implement change, UL would need to overcome its risk-averse cul-ture, top-down, control-and-command management style, focus on past accomplishments, and siloed busi-ness units.

Preparing the organization for change involved four steps.

1. Adjust the culture—UL needed to change the decision-rights of the organization and embed new cul-

tural norms and behaviors (e.g., problem analysis, collaboration, and customer-focus) that would align to

its new goals.

2. Increase communication—UL needed transparent and consistent communication from its leaders

across multiple channels.

2007 Net Promoter Score Benchmark

Figure 2


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3. Focus on Lean Thinking—UL needed to empower its employees, find better ways to get work done, and

focus on value-added methods that meet customer needs.

4. Make data-driven decisions—UL needed to conduct root-cause analysis and make decisions based on

data.

OVERCOMING CULTURAL ROADBLOCKS

As noted, two of UL’s barriers to change, risk aversion and business silos, were culture-related, and it needed to embed new behavioral norms to ensure lasting change. Overcoming risk aversion was a multisided problem because employees were not comfortable going outside of their role (which would be needed for the new or-ganizational alignment), the management structure punished failure, and its engineers were trained to analyze things for faults. The speed with which change occurred was important, so UL took multiple approaches to em-brace risk.

Establish a safe environment to take risk—UL felt that when employees feel secure they are more like-

ly to be comfortable taking risks. Hence UL created a secure environment through process improvement

and standardization efforts and by establishing a common language throughout the organization.

Reward those that take risks—UL acknowledged people that take risks (to make decisions and try new

ideas) and provided opportunities to try new things. For example, when UL created seven new businesses, it

looked for people enthusiastic to try something new in addition to their leadership and business acumen.

Promote a culture of continuous learning—UL made it acceptable to fail. It promoted the idea that

people will learn from their failures and get better; part of this includes not publically chastising people for

their failures.

Addressing business silos required a combination of collaboration focused programs, standardization of measures, and training. First, UL started by establishing a set of performance measures that cut across busi-ness units and aligned with the corporate performance goals. Second, it established methods to provide trans-parency on what projects and tasks need to get done (across business groups and regions). Transparency was improved through a set of governance processes that evaluated business and technology projects against a set of strategic criteria for the company’s success. The selected projects were then reviewed by UL’s executive team regularly to ensure performance and strategic alignment. Finally, project status—success and failure--was communicated broadly throughout the organization using scorecards and intranet articles. Additionally, UL used leadership training programs to have leaders in the different businesses work collaboratively on projects.

UL had amassed a large savings account, but it was losing its profitability and its financial performance was un-predictable. UL used this savings to invest in the Lean initiatives and training programs for phase one.

LEAN AND TRAINING PROGRAMS

In 2007, the core team in charge of managing the transformation introduced a program of “Thinking Lean”, based on the Lean StartUp by Eric Ries, to set the groundwork for transformational change. The Thinking Lean program was a process improvement effort that assessed UL’s current processes for inefficiencies and custom-er value. Concentrating n Lean techniques and process improvement allowed UL to focus on providing value for its customers and engaging employees concerning the need for change. Lean also provided a common vocabu-lary across the disparate businesses.


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However, UL felt relying only on Lean techniques alone would prioritize the development of tools rather than cultural transformation and focus attention on small, local improvements, without considering the impact for enterprise and transformational change at a global perspective. So UL coupled its process improvement efforts with the development of the UL University, a program providing technical and leadership training. UL University receives 2 percent of UL’s revenue and spends 75 percent of its budget on technical training and 25 percent on leadership training. UL University created three leadership training programs (Figure 3) de-signed to change its management style by empowering employees with decision rights and embeds the new culture and preferred behaviors within its leadership.

Program Management Essentials Global Leadership Program Executive Leadership Program

Description Series of on-demand, virtu-

al courses

Interactive, four-week

course in four regions:

China, the United States,

Italy, and Japan

A series of three, two-week sessions conducted in part-nership with Yale University

Goal

The course introduces the

ideas and concepts about

coaching and mentoring, as

well as introduces the par-

ticipants to UL’s leadership

The team-based class al-lows participants to solve real-life work issues and challenges and to build cross-functional and cul-tural awareness and skills.

Executives improve busi-ness acumen and critical behaviors regarding integri-ty, a competitive spirit, and collaboration.

Participants New manager or new to a

supervisory role

High-potential manage-

ment Future executive leaders

Program Graduates 800 managers 350 leaders 75 leaders

Leadership Training Programs

Figure 3


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UL has a variety of programs to achieve its new high-level goals. One example is its Buy & Pay pro-gram. This program initially started as Quote to Cash, but leadership said that the initiative name was not customer-centric (an insight developed during its Thinking Lean program). The program examined UL customers' purchasing behavior in order to further understand its customers, simplify the purchasing process, establish better controls, and offer flexibility within the process. The project also created a common financial and transaction processing platform for the enterprise, which had grown significantly through acquisitions.

UL did not deploy the transformational programs across the enterprise all at once. Instead, it rolled out the second phase in steps, by launching the phase two programs (e.g., Buy & Pay) in one or two locations at a time. UL chose the initial regions for deployments with two requirements: first, they had to be visible and provide early feedback; sec-ond, they had to allow the core team to test its deployment methodology and tactics in a low-risk environment. Overall

UL used a multistage rollout of the ten year trans-formation, “21st Century UL”, for the following rea-sons:

Investing the cost savings or increases in revenue

from one stage to the next would create a sus-

tainable change and provide financial stability.

Rolling out the phases in two– to three-year cy-

cles provided flexibility and the ability to stay

ahead of changes in the business environment.

Providing mechanisms for feedback allowed the

team to adjust the programs and plan to match

the needs of the business.

Ensuring new behaviors and expectations are

adopted before asking people to take on more

ensures they are internalized.

Creating short two– to three-year cycles creates

a sense of urgency, not only for the programs

but also for the organization as a whole/

Leveraging a phased approach creates a series of

short-term wins that helps maintain momentum

and enthusiasm for the change.

PEOPLE, PROCESS, AND TOOLS

People

In order to make sure UL achieved “21st Century UL” future state, it used a core team of 10 to 15 individuals

with process management, change management, training, and program management skills to man-age the enterprise-wide transformation. The core team is part of the ePMO, and is comprised of:

ePMO vice president,

three transformational directors—one for each

major program (Buy & Pay, Information Manage-

ment, and Fulfillment),

change management & communications leader,

deployment leader,

technology director, and

governance portfolio manager.

The core team was supplemented by external ex-perts and internal resources from various business units including implementation teams from each business unit (who were responsible for managing the change within their business units). This en-sured UL created a sense of ownership among its employees, tapped the right skills when they were needed, gleaned additional customer insight from the business units, and



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got a broader perspective on its approach. For example the “Buy &Pay” program at its peak included more

than 300 individuals.

As UL deployed the Buy & Pay program, one of its successes was the development and execution of roles

and responsibilities for all of the groups involved in the deployment. The deployment was complex not only

because it was the first enterprise-wide collaborative program UL had launched for the “21st Century UL”

transformation, but also because each business unit within UL had its own culture that needed to be ad-

dressed as they worked toward common goals and enterprise-wide implementation. Therefore, UL estab-

lished specific responsibilities for each of the groups that would be a part of the project.

Executive management drove the message, built enthusiasm, allocated resources, and provided guiding

principles.

Enterprise PMO (ePMO) drove the transition and supported the other group’s execution of their respon-

sibilities. They created the road map, established a replicable framework, and enabled the implementation

teams.

Business leaders drove the change within their business units and ensured the implementation team was

not over-committed.

Implementation teams within each business unit mirrored the core team’s skillset. The implementation

team was responsible for the execution of the program and served as change agents within their business.

A key lesson UL learned during the transformation, was that having the right people with the right skills and capabilities is critical and sometimes the organization needs to supplement its internal re-sources. UL was able to leverage and develop its own staff to assist with leadership, strategy, plan-ning, and change management but it needed to develop a strategy to fill the gaps with additional hires and external partners and vendors (Figure 4).

Processes

UL’s core team used a hybrid approach to manage its transformation using con-cepts from Kotter, Lean, organizational

change management, and APQC’s Process Classifi-cation Framework. Additionally, UL created an enterprise project management office (ePMO) to prepare for the Buy & Pay program. The ePMO drives transformational initiatives, unlike typical PMOs that manage pro-ject portfolios.

Skill Acquisition Strategy

Figure 4


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Tools

UL recognized that the technology for its new processes and its programs should support the transformation, not lead it. Employees were the key to UL's transformation, and technology was

not addressed until all other issues were corrected regarding its new cultural norms and behaviors and the organizational realignment to customer needs.

UL learned that its current business tools would not meet its future needs during the Lean Thinking pro-

gram. Furthermore the tools had to support UL’s high-level goals customer-centric financially sound, and

grow globally. To do this it had to provide a consolidated view of the organization and:

transparently provided information to customers;

Enable collaboration between customers, stakeholders, and employees for project fulfillment; and

Span across the business units to provide a clear picture of project, process, and financial information.

The ePMO chose to use the off-the-shelf versions of Oracle because it provided a standardized structure and set of processes across the organization. Furthermore they met UL’s needs because:

Aria (custom software built on Microsoft technology) serves as the online channel for clients and other

stakeholders (retailers, supply chain managers, etc. ) to access UL’s information online. It also provides the

framework for moving information between many systems and formatting it in a way that is easier for cus-

tomers to understand.

Underpinning Aria’s capabilities are the Self-Service capabilities of Oracle Buy & Pay system. These applica-

tions are accessed through the Aria platform and provide the functionality for clients to get quotes, or-

ders, and invoices online. Aria also has capabilities that allow clients and UL colleagues to collaborate on

orders, projects, products, and other data.

The “Buy” side of the Buy & Pay is used to create quotes and orders for the service. Oracle Order Man-

agement is the principle application in the Buy process and documents the specific services for the client

and then passes that information to its fulfillment systems, where one or more projects are created for

UL’s teams to execute.

During the project fulfillment systems communicate with the financial fulfillment applications to provide

status on the project. This allows UL to recognize revenue on the project and, in some cases; the fulfill-

ment systems will provide specific costing information to enable P&L calculations.

At the end of the project, the fulfillment system provides a notification to Buy & Pay that the order can be

closed and invoiced. The “Pay” set of applications (Oracle Accounts Receivable) creates and tracks invoic-

es sent to clients and accounts for payments received.

Further integration allows information from the fulfillment systems to be used in the Procure to Pay sys-

tem, to order and account for the cost of consumables, reagents, and other equipment and supplies re-

quired to support laboratory operations.


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COMMUNICATION

UL was a change and risk-averse organization with siloed businesses, so it needed to take a structured, multi-

pronged strategy to ensure communications were well-received.

1. Pre-change—UL prepared people for change by communicating the current state, establishing why the

organization had to change, and establishing change agents (find individuals who were centers of influence

that reacted positively to the need for change) throughout the organization. UL had initially believed it

would need to position change agents but found that several of the graduates from the global leadership

program were already eager and well-positioned to act as change agents (promote the change and lead by

example).

2. Executive management—UL leaders provided consistent, focused, and timely communications. This

provides top-down engagement and ensures management leads provides a direction through broad mes-

sages on change.

3. Project teams—Teams within the business units conveyed detailed information and acted as change

agents. This provided bottom-up engagement, because some people are more accepting of information

from peers.

In addition to its multipronged strategy, UL also created a communications plan to ensure communications matched the best method, topic, and person to a target audience. One key lesson that UL learned was the importance of providing two-way communications. In other words, it was just as important to give people ways to provide ongoing feedback and ask questions as it was to carefully craft its messages


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As noted, UL applied Harvard professor John Kotter’s principles to its transformation management efforts. According to Kotter, to ensure change is sustainable it’s necessary to include the step “anchor the change in the corporate culture.” UL ensured the change was embedded by making it part of its organizational structure, reinforcing the culture through the UL Uni-versity, developing employee incentive program that sets goals for growth and collaboration, and its sys-tems and tools to drive consistency as UL continues to align with customer needs.

Over the last six months of 2013, UL formally intro-duced a governance process that includes global pro-cess owners with oversight responsibility for each enterprise process. In addition, UL plans to create a network of process experts to help drive formal changes to the process as needed, or as the technol-ogy supporting the process changes. Finally, UL has tasked an internal audit group to monitor process adoption in the business units. If the internal audit group sees that a business is not adopting the pro-cess or has reverted to the previous way, then the ePMO will contact the executive leadership to rein-force adoption of the new process.

Finally, UL uses its people management programs to monitor and embed its new culture. UL pinpointed eight critical behaviors that align with its new culture and reinforce UL’s high-level goals:

1. Takes initiative and makes decisions

2. Analyzes and solves problems

3. Focuses on customers

4. Achieves goals

5. Demonstrates flexibility

6. Leads and engages peers

7. Works well in teams

8. Communications well with peers

In addition to qualifications and expert technical skills, HR uses these eight critical behaviors for re-cruitment, performance management, and apprais-als, as well as succession. They form the basis for UL’s career management system and subsequent employee development action plans.

MEASUREMENT AND METRICS

The core team combines organization wide measures to assess high-level goal attainment and phase-specific metrics to monitor the implementation of its phases

High-level goal metrics

Over the past six years, UL’s “21st Century UL”

transformation has made progress towards many of

its high-level goals.

Improved its customer-centric perspective, meas-

ured by its NPS. Over the last five years UL’s NPS

has increased by 46 points (from –26 percent to

+20 percent).

Improved its financial stability, measured by reve-

nue. Over the last five years UL’s revenue has in-

creased by 41 percent.

Grown globally, measured by its number of staff

and geographic footptint. UL has increased in the

number of employees by 40 percent and more

than doubled the number of laboratories world-

wide over the last five years.



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Phase-based metrics

During phase one of the transformation, UL prioritized cultural and financial stability. Hence its measured employees against UL’s performance using typical operating metrics: revenue, operating margin, and cash flow. Therefore, regardless of how an individual’s business unit performed, incentives were determined by the overall company performance.

From a culture perspective, UL uses UL University and its three leadership training programs to gauge the cultural shift and adoption of new behaviors by employees. While this is not a formal metric, the programs provide valuable feedback to the core team.

As the transformation moved into phases two and three the ePMO measured the programs progress based on their:

adherence to budget, scope, and time;

alignment to customer needs (effects on NPS and revenue); and

process improvement benefits like integration, flexibility, simplification, and cost savings.

Finally, as UL moves through phase three (back office standardization) it uses to process owners to assess at how efficient and effective are the processes. UL is just starting to look at the order/quote rework rate and examine how often a quote is placed on hold because a missing piece of information is preventing the quote from being processed. UL is also looking at days sales outstanding and A/R metrics as well. These measures are still in their infancy, but UL was able to leverage a lot of metrics that come from their Oracle implementa-tion without having to make any coding adjustments.


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The change in UL’s leadership was an important impetus for change, but the recognition that its leadership had to lead the organization and support the change was equally important. Its success in transforming is a result of care-fully deploying each phase and building on its successes. UL’s three phase approach allowed it to lay the ground-work for sustainable change, by embedding new cultural norms and behaviors and training leadership to spear-head the change. Furthermore its use of Lean to assess and reform its processes to be customer-centric enabled it to meet two of its goals: financially stable and customer-centric. Additionally, UL’s use of the phased deployment methodology hastened the transformation, because it was able to anticipate roadblocks. Finally, UL created sus-tainable change and set the expectations for continuous improvement through its governance structure, educa-tion programs, goal setting, and incentives.

CONCLUSION


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