ORGANIZATIONAL TRANSFORMATIONCIS 654 OVERVIEW AND COURSE REQUIREMENTS
Why include a class in Organizational Transformation (OT) • Change is a key organizational component • When the rate of change inside an organization is slower than the rate of change outside an organization. • The role of information technology (IT) is key in any transformation
A Language of Change • Re-engineering • Re-invention • Re-building • Re-making • Re-organization • Re-designing
Impact on Employees • In the past five years, have you or any member of your family been laid off, downsized, or otherwise lost a job through no fault of your/their own? • Did employers have more loyalty to their employees ten years ago? Twenty years ago?
Definition of Reengineering • The fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in performance.
Four key words in the definition • Dramatic (improvement) • Reduced cost • Increased speed • Greater accuracy • Greater quality • Etc… • Radical • Radical means going to the root of things. • Instead of fixing what you have and what you are currently doing by imagining that your company doesn’t even exit today then create it new? • In other words, start from a clean slate
Four key words in the definition • Process • A business process is a set of interrelated work activities with inputs and value-added tasks that produce outputs. • Horizontal work flows that cut across departments or functions • Evolution leads to Isolated “Islands” of Activity • Sub-optimization might not be good!
Four key words in the definition • Redesign • How the work is done to produce the product or service and deliver it to the customer. • The starting point for organizational success is well-designed processes.
Why Reengineering? Three Cs • Customers: • More sophisticated and demanding on the products they want. • Competition • Has become global vs. local, so now instead of just a few, we now compete with thousands! • Change • Instead of the focus on being on how well we operate, but how well we supply the needs and wants of the customer. Customer Satisfaction!!!
BPR Requires a Questioning of the Status Quo • “the continuity of time sequence” • Procedures have a habit of arranging themselves into structures, institutions, and concepts and becoming virtually immortal. • Simple example: QWERTY
Examples • GTE (local phone service provider) • Maintenance and repair process • Then--Repair clerk, line tester, central office technician, service technician. (Slow) • Now—Customer care advocate handles it all! • Customer focus • 1/2% then—now 70% solved by the person they spoke with originally • 40% resolved while still on line
Examples • Federal Mogul (makes car parts) • To get contracts from car manufacturers they: • Sales rep visits customer to get specs. Hand off specs. to engineer who designed from scratch, Pick a place to manufacture this design and use that toolroom, Design sent by mail, Design sent to toolroom, the part then was sent to customer • This process typically took 20 weeks. Their worst competitors took only 10 weeks and the best 6 weeks • The auto manufacturer gave feedback as soon as they got the parts, so Federal was losing out. • Now—engineer goes to customer, designs based on previous similar parts and a computer program reconfigures the old parts to the new specs. 3 days to 1 minute. Instead of mail it is all done electronically. Use any toolroom that is available. • Twenty-week to 18 days, win rate on new proposals 4 times better, profitability more than double.
BPR Focuses on Specific objectives • Reverse-design process. Figure out what you want, then work backwards until you get it! • Backward chaining • GTE faster repair (customer satisfaction) • Federal Mogul faster design (customer satisfaction)
BPR Focuses on Breakthrough Results • Inherent Slack • Inventory • Production capability • Manpower • Working capital
BPR Focuses on Significant Cultural Change • Social Change • Typically involves eliminating, consolidating, and otherwise altering work activities. • Layoffs and early retirement programs • Not downsizing or restructuring • Or doing less with less • But, doing more with less • What are the negative effects on employees?
The Top Ten Ways to Fail at Reengineering • Don’t reengineer but say that you are. • Don’t focus on processes. • Spend a lot of time analyzing the current situation. • Proceed without strong executive leadership. • Be timid in redesign. • Go directly from conceptual design to implementation. • Reengineer slowly. • Place some aspects of the business off-limits. • Adopt a conventional implementation style. • Ignore the concerns of your people.
Don’t reengineer but say that you are. • Abraham Lincoln’s riddle: If you call a horse’s tail a leg, how many legs does the horse have? • Just because the term “reengineering” is popular and used often, doesn’t mean that is what they are actually doing! This can hurt future implementations when you really decide to do it right. • For example, just because you are putting in a new computer system, doesn’t mean that you reengineered what you do, you may have only automated the process you are currently doing. Not a dramatic improvement!
Don’t focus on processes. • You can’t reengineer an organization only processes in that organization. • You should be able to describe specific inputs and outputs for each one • Each process should cross a number of organizational boundaries. • There should be a focus on goals and ends rather than actions and means. • The processes, their inputs, and their outputs should be easily comprehensible by anyone in the organization. • ALL the processes relate to customers and their needs, either directly or as contributors to other processes.
Spend a lot of time analyzing the current situation. • You should understand the process, but don’t spend too much time on it, because you already know it’s not good and we are looking for dramatic improvement. • Look for the “What and the Why” not the “How” because the how is going to change. • Waste of time • Can inhibit change
Proceed without strong executive leadership • Only a senior executive who deeply believes in the reengineering cause can actually make it happen. • Reengineering is a top-down phenomenon. • Leadership support is a must because change is hard and resistance from within will kill it once implementation begins.
Be timid in redesign. • Reengineering requires bold and imaginative thinking about process design and how work is done. • There may already be great ideas lurking in the minds of your employees just waiting for you to ask. • Create an environment so people can share their radical ideas without fear of ridicule. • On company offered cash for people that came up with a too radical idea, otherwise, they adopted it!
Go directly from conceptual design to implementation • It never goes as one plans, so instead try it out in a safe environment. • Go through a series of intermediate steps and put out the fires as you proceed. • You could try out a new concept by developing a prototype. • You want to catch the major flaws before they actually happen. • It can also help you with refining the actual implementation.
Reengineer slowly • You should see at least some major improvements in 12 months or you are sure to fail. • Executive management will lose faith and funding will dry up. • Resistors will gain power • Employees will exhausted from all the change without anything to show for it. • You can lose focus • Don’t increase the size without very good reason. Continually increasing the scope will cause you many delays and therefore failure.
Place some aspects of the business off-limits. • If you radically redesign your processes but refuse to change the compensation plan, the structure of the organization, or job titles, then you will certainly fail. • Everything must be on the table with no limits for change.
Adopt a conventional implementation style. • The old way of planning an implementing must be thrown away. • Be sure of what you want, figure out how it will be done, then go full steam ahead. • Make the decision to change and then do it! • More like a prototyping.
Ignore the concerns of your people. • Employees’ will ask themselves, “What is in it for ME?” • No matter how great your idea is, if you don’t have the support of your employees you will be in trouble. • Empowerment • Involvement • Compensation
Leadership: Primary Ingredient • Unyielding top management support is a must to see the reengineering through. • Middle management have made a career of the current system and will resist because they have the most to lose. • If the leader isn’t the top dog, make sure the top dog isn’t biting the leader in the leg. • They must have the power and ability to get it done.
Characteristics of the Leader • Passion for the project and company • Be able to inspire trust • Be able to inspire confidence • Exhibit an unusual combination of impatience with the current system and patience when dealing with obstacles and setbacks (perseverance). • Charisma to get it done. • See the need for change early.
Responsibility of the Leader • Make the decision to reengineer. • Make the reengineering succeed. • Appoint process owners and specific tasks and provide them with the resources they need. • Measurement • Making sure everyone follows through by being involved. • Create an environment where it can succeed.
The three Ss of Reengineering Leadership • Signals: Explicit Communications • Communication must be relentless. • Communication must be simple. • Communication must be dramatic. • Symbols: Personal Behavior • If behavior supports the talk, then it is believed, otherwise, it is dismissed. • Systems: Measurements and Rewards • If you don’t change what you measure the rewards for improvement, you will not change behavior.
The Reengineering Team: Second Ingredient • Reengineering is not a one man show, so we must create a team from the best and the brightest individuals that fit the job. • The kinds of people picked must reflect the nature of the endeavor itself. • Let’s look at what they will do in terms of content, context, and style.
Content (the task at hand) • Understanding the old process and customer requirements. • Inventing a new process design that shatters long-held assumptions. • Constructing the new process, including fleshing out full details of its operations. • Selling the new way of working and living to the organization as a whole.
Context (environment) • Uncertainty: the old way is wrong, and we don’t yet have a new way. • Experimentation: iterative experience. It must be tried in reality, not on paper. • Pressure: Usually needed yesterday so they operate under conditions of great urgency and intensity.
Style • Reengineering is a journey into the unknown. • It is about exploration and discovery rather than analysis and knowing. • The reengineer lives in a stream of options, alternatives, possibilities. Ideas must be formulated before all the facts are in, tested before the environment is stable, and evaluated fore the results are conclusive. • Stumbling forward and being comfortable with it.
Process-orientation Holistic perspective Creativity Restlessness Enthusiasm Optimism Persistence Tact Team player Communication skills The Profile of a Reengineer To wrap it up, the perfect member would be a female engineer who has changed jobs frequently and has a background in sales. Why?
Team members share dedication to three things. • These three things should come first for all team members and the management needs to create the environment that it can happen. • The process that is being reengineered. • The needs of the customer of that process. • The team itself.
Team Building • Caring: having an environment that allows open and honest communication. • Daring: encouraging everyone on the team to be innovative and adventurous, and to ask the hard questions. • Sharing: Common objectives, there are no winners on a losing team.
Avoid Commonplace Dysfunctional Behaviors by making them known • Not listening • Idea killing • Personal attacks • Silence • Over sharing
Team management • Career paths: So, they know what will happen to them when the job is done. • Compensation: Bonus for job well done. • Celebration: fun time. • Communications: the more the merrier. • Care and compassion: Take care of them!
Do You Need Help with the Reengineering Process? • What do consultants do? • Heads: Bring knowledge and brain power • Hearts: Deal with the motivation and perseverance of getting the job done. • Hands: Actually do some of the jobs of reengineering.
Pros and Cons of Consultants • Pros • More experience that will help you avoid pitfalls. • Getting access to essential skills • Third-party objectivity • Cons • Become dependent on them. • Cost $ • May take you down the wrong road. Not accountable.
Assumption Busting for Fun and Profit • Rule of Whacko: Any valuable new process design will at first appear to be whacko. That is, if someone approaches you with a proposal for a new process design that strikes you as interesting and plausible, our advice is: Throw it away. • Breaking Assumptions: surfacing and questioning the underpinnings of the old process, the reasons why it was designed to work the way it did.
Assumption Busting: continued • Ford accounts payable example: • Purchase order from purchasing, receiving document from the receiving dock, and an invoice from the vendor: checked to see if they all match and if they did, issue a check. • Now, the person on the receiving dock takes possession of the goods, checks to see if they match against an order, and if so, authorizes payment, if not they don’t accept. • Why wasn’t this done all along? • The old way was never designed, it just happened. • Didn’t have the technology to do it the new way. • Based on assumptions: such as, dock workers can’t or shouldn’t authorize payments! Etc.
Assumption Busting: continued • GTE: • one individual couldn’t do it all, deal with customers, test the lines, and dispatch service technicians. • Federal Mogul: • every design was unique • that engineers couldn’t interact with customers • that a part had to be tooled in the same plant where it was to be made.
Assumption Busting: continued • How do we go about identifying faulty assumptions from ones that are still valid? • Problem: First identify the problem that you are currently having, such as Ford’s accounts payable being too slow. • Rule: Then identify the rule or rules that allow that problem to occur. Ford example, too labor intensive. • Assumption: the ideas we take for granted that caused the rules to happen. Ford example, dock workers can’t authorize payment because they don’t have the information or authority.
Assumption Busting: continued • IBM Credit Corporation example: • One person checked the applicant’s credit rating • Another decided what interest rate to charge • A third person put together the lease agreement • And a fourth prepared the response to the customer. • What is the underlying assumption here?
Assumption Busting: continued • Example, a consumer goods maker distributed its products to retailers through a network of route drivers. • A driver would come to a store, see what was missing from the shelf, go back to the van to pull inventory, bring it into the store, fill out a manifest for the store manager’s signature, and then send the form to headquarters for processing and billing. All of this depended on what was inventoried in the truck, which was hard to manage and very expensive to keep.
Assumption Busting: continued • Problem: the company is carrying lots of inventory on the trucks. • Rule: the drivers decide what is needed after they arrive at the store. • Assumption: The company doesn’t know what is missing from the shelf until the driver checks. • Instead, use prediction models to predict what will be needed, pack it all up and shrink wrap the items for each store, load the trucks in proper order and have preprinted invoice to drop off with retailer. More efficient and reduced inventory.
The Hardest Part of Reengineering • CHANGE! • Getting people to let go of their old ways and embrace new ones. All deal with people in the organization and the ultimate goal of customer satisfaction. • Jobs • Organizational structure • Measurement and rewards • Career path • Management roles • Interpersonal relationships • Value systems
Principles of Change • Resistance to change is natural and inevitable. • Resistance doesn’t always show its face. • Resistance has many motivations. • There’s no one way to deal with resistance: Manage it!