People/Organizational Issues in the Lean Enterprise

People/Organizational Issuesin the Lean Enterprise Professor Debbie Nightingale October 21, 2002

"The soft stuff is the hard stuff” -Chris Cool, VP, Lean Enterprise Northrop Grumman, ISS Sector

Issues in Lean EnterpriseImplementation ➥ How to organize for lean ➥Change management ➥Education ➥Training (re-training) ➥Teams ➥Global/Virtual teams ➥Excess people ➥Metrics

Socioeconomic Drivers ➥Globally rising and converging standard of living ➥Increasing rate of technological change ➥Environmental responsibility ➥Profound increase in understanding of “needs” • 􀃅Customer • 􀃅Employees • 􀃅Stockholders • 􀃅Partners

Changing Roles of the Enterprise,the Individual & the Community ➥Leading edge companies will succeed even if a State or Nation does not ➥The Leading Edge Corporation will be an opportunist that capitalizes on the competitive resources provided by the individual and the community ➥Sustained access to these resources will require a company to be a proactive partner with the community and the individual Source: Next Generation Mfg., 1997

A Premise " It is not the physical facilities but the organizational capability that will differentiate success from failure of the enterprise !" Source : Gerhardt Schulmeyer, President, ABB-North America

From Perform task Reward for doing Skills life equal to career life Training as 1% of payroll Individual treated as cost Limit human potential To Perform task & provide knowledge Reward learning and doing Skills obsolescence at 20% per year Training as 7% of payroll Individual viewed as asset Maximize human potential Human Resource Shifts Source: Next Generation Mfg., 1997

From Physically control core competencies Reward individual contribution Transfer knowledge within team Single decision style: hierarchy Material supply chain To Control the knowledge of core competencies Reward individual contribution and team success Transfer of knowledge between teams Multiple decision styles: hierarchy, team, empowered Knowledge supply chain Shifts Required to Support Teaming& Partnering as a Core Competency Source: Next Generation Mfg., 1997

Knowledge Supply Chain ➥Treat knowledge as a commodity ➥Treat the knowledge process as an integrated supply ➥Utilize the core competencies of industry and academia ➥Apply the principles of supply chain management

Requirements for Competitive Excellence Knowledge Generation Knowledge Transfer New technical & behavioral discoveries that result in new technologies, new principles New knowledge converted into new teachings, new talent University Leading-edge product and process platforms that satisfy customer needs Continuously educated employee using latest knowledge for effective execution of technical & management process Industry

The Knowledge Process Knowledge Generation Build a knowledge base via Research, Adaptation Discovery, Experience Knowledge Need & Use Implement & adjust knowledge to meet Customers’ Needs Knowledge Development Transform raw knowledge into codified Principles & Practices Knowledge Transfer Produce Documentation & People that will facilitate knowledge delivery

Corporate Culture Change Organizational Aspect Traditional Practice Shift in Practice Authority Based on Position Based on Knowledge Decision Making Close to Top Where Action Is Employee Contribution Limit knowledge & Skills Enhance Information Closely Control Share Widely Rewards Individual Preference Teamwork Status Highlight Differences Mute Differences Supervision Watchdog Resource SOURCE: MSB REPORT OF NATIONAL RESEARCH COUNCIL

From Teach Productivity Teach the Need to Change Customer Satisfaction My Standards and Metrics To Teach Innovation & Creativity Teach the Process of Change Society / Stakeholder Satisfaction Our Standards and Metrics Responsive Practices & Culture Source: Next Generation Mfg., 1997

The Fundamental Transition To make change happen means we must change the way we are and perceive we are measured. Stand Alone Equip Integrated Equip/ Systems Single Discipline Employees Multi-discipline Employees

Making Change Happen Is Not Easy "It must be remembered that there is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage - than the creation of a new system. For the initiator has the enmity of all who would profit by the preservation of the old and merely lukewarm defenders in those who would gain by the new." Source: Machiavelli, The Prince, 1513.

Assessing a Corporate Culture Structure Driving Beliefs Managerial Beliefs People Beliefs Strategy Performance Systems Hypothesis: if the beliefs are not aligned, performance suffers. SOURCE : Boston College

Levels of Culture Artifacts The visible, hearable, feelable manifestations of the underlying assumptions, e.g. behavior patterns, rituals, physical environment, dress codes, stories, myths, products, etc. Source : Ed Schein, Sloan School of Management

Levels of Culture Shared Espoused Values The espoused reasons for why things should be as they are, e.g. charters, goal statements, norms, codes of ethics, company value statements Source : Ed Schein, Sloan School of Management

Levels of Culture Shared Basic Assumptions The invisible but surfaceable reasons why group members perceive, think, and feel the way they do about external survival and internal integration issues, e.g. assumptions about mission, means, relationships, reality, time, space, human nature, etc. Source : Ed Schein, Sloan School of Management

Cultural Interfaces ➥Nations/Ethnic Groups ➥Government/Industry ➥Industry/Industry ➥Company/Company ➥Division/Division ➥Functional Groups ➥Hierarchical Echelons ➥Occupational Communities Source : Ed Schein, Sloan School of Management

Cultural Change Issues • Identify the business problem or issue • Develop the strategy & tactics to deal with the issue/solve the problem • Assess the present state of the culture to identify how assumptions will aid or hinder what is to be done • Focus on those cultural elements that will aid you, ignore the ones that will hinder you unless they are absolute constraints • Identify the people in your organization who are “culture carriers” of the elements that will aid you • Empower these culture carriers & build change teams around them • Develop processes for overcoming normal resistance to change Source : Ed Schein, Sloan School of Management

The Change Process Overcoming resistance to change by creating “psychological safety” -- The Change Process In order for new learning to occur, survival anxiety has to be greater than learning anxiety. This is best accomplished by reducing learning anxiety. Source : Ed Schein, Sloan School of Management

The Change Process 1. Creation of a compelling positive vision If I learn this new stuff how will we all be better off? Why should one do this? Where is it all leading? 2. Involvement of the learner in the change/learning process Can I design my own learning process? 3. Formal training What do I need to know to fulfill the new vision, what is involved in the new behavior & attitudes? Source : Ed Schein, Sloan School of Management

The Change Process 4. Informal Training Will I get the “know-how” and skill of handling the new situations? This level of training involves redefining what things mean and changing the standards by which things are judged. 5. A practice field and coaches Can I try my hand in situations where mistakes are OK and I can learn from them? Will there be coaches around to tell me whether I am doing OK and how to do better? 6. Corrective feedback If things are done correctly or incorrectly will there be continuous appropriate feedback? Source : Ed Schein, Sloan School of Management

The Change Process 7. Positive role models & examples: examples & cases of what not to do Will we observe our own managers all the way up the line “walking the talk” and setting positive examples? Are there stories, myths, parables that exemplify correct and incorrect behavior and attitudes? 8. Support groups in which learning problems can be aired Are there formal opportunities in which learning problems can be aired and discussed in a supportive environment? Source : Ed Schein, Sloan School of Management

The Change Process 9. A reward and discipline system consistent with the new learning If I or others do it right will we get consistent rewards, and if I or others are failing in some way, will we get appropriate feedback; if others are violating the new rules will I observe them getting appropriately disciplined? 10. New structures and routines to support the new behavior If I learn the new things and do them will my behavior be “normal” in the organization? Source : Ed Schein, Sloan School of Management

The Bottom Line Questions 1. Does culture have to change or do you have to change business processes within the present culture? 2. If culture has to change, can you build on enhancing cultural strengths rather than eliminating elements of culture? 3. If cultural elements have to be eliminated, are you prepared to deal with the anxieties involved? 4. Are you willing to allocate the time and resources necessary to actually change the culture? Source : Ed Schein, Sloan School of Management

Migrating From Taylorism...

...To Druckerism (The Notion ofthe Knowledgeworker) "The factory will be an information network.”

...Has Led to an "IdealKnowledgeworker Profile" Breadth of Knowledge Depth of Knowledge Source : Profile 21, SME,Dearborn, MI

The Teamwork Continuum 1. Team 2. Manager 3. Shared Formation Centered Leadership One on One Supervision Directs each Member’s Work Group Leader Focus on Goals Manage Group Team Coordinator Members are Goal Focused Shared Leadership Manager’s Role Team Member’s Role Initiate Actions Track Data Lead Projects Do What They Are Told Work Together As a Group

The Teamwork Continuum (cont.) 4. Self - Directed 5. Self – Managed Boundary Manager Coaches Team Manages Interface Resource “Staff” Provide Help on Request Run Day - to - Day Operation Team is Accountable for own work

Rewarding Teamwork Individual Group Organization Financial Non-Financial To successfully reward teamwork, research has found that all six of the matrix elements must be clearly defined. SOURCE : Dr. Ann Majchrzak, USC.

Organizing for ProductDevelopment and Transfer toManufacturing Source : Tom Allen, Sloan School of Management

The Process of Innovation Technology Market Source : Tom Allen, Sloan School of Management

Departmental Organization Technology Market Source : Tom Allen, Sloan School of Management

Time and Coordination ➥Time can always be substituted for coordination. • 􀃅And the converse: ➥Improved coordination can reduce development time. Source : Tom Allen, Sloan School of Management

Project Team Organization Technology Market Source : Tom Allen, Sloan School of Management

Matrix Organization Technology Market Source : Tom Allen, Sloan School of Management

Matrix Connections to Marketand Technology Technology Dept Head Dept Head Dept Head Dept Head Dept Head Dept Head Proj Mgr Proj Mgr Proj Mgr Proj Mgr Proj Mgr Market Proj Mgr Source : Tom Allen, Sloan School of Management

Departmental Organization Departmental structure is more closely mapped to the structure of the supporting technologies It thereby provides a better connection to those technologies and better ongoing technical support to the project effort. This is, however, accomplished at the cost of much greater difficulty in coordination of the project tasks and less responsiveness to market change. Project Team Organization Project Team structure groups people from different disciplines together in a single team all reporting to a common manager. It thereby provides better coordination of the project tasks and increased sensitivity to market dynamics. This is, however, accomplished at the cost of a separation from the disciplinary knowledge underlying the project effort. When this is carried to an extreme, it will gradually erode the technology base of the organization. The Basic Tradeoff and Dilemma in ProductDevelopment Organization Source : Tom Allen, Sloan School of Management

Contact with Technology ➥If Departmental Organization provides better connection to technology, are all technologies equal in the degree to which this necessary? • The answer, of course is no. ➥What then is it about different technologies, that determines the degree to which close contact is necessary? • The answer is, the rate at which new knowledge is being generated. Source : Tom Allen, Sloan School of Management

Rate of Change of Knowledge Rapidly changing technologies Mature, stable technologies dK dt Source : Tom Allen, Sloan School of Management

Coordination ➥Turning to Project Team Organization, if this form of organization provides better coordination, the question follows, are all projects equal in the amount of coordination needed? • The answer is no. ➥What then is it about different projects that determines the amount of coordination that is needed? • The answer is the degree of interdependence that exists in either the product architecture or among the tasks that must be performed in product development. Source : Tom Allen, Sloan School of Management

Interdependence of the Architecture orof the Tasks to be Performed dK dt Source : Tom Allen, Sloan School of Management

Organizational Structure Space dK dt rate of change of knowledge = I = interdependence dK dt Source : Tom Allen, Sloan School of Management

Three Possible Situations: ss Project Team Departments dK dt Source : Tom Allen, Sloan School of Management

Duration of Project Assignment Ti Project Team ss T1 T2 T1 >T2 Department dK dt Source : Tom Allen, Sloan School of Management

People/Organizational Issues in the Lean Enterprise