BUSINESS EXCELLENCE
TRANSFORMATIONAL CHANGE
Making it Last
BEST PRACTICE REPORT
TABLE OF CONTENTS
PROJECT TEAM
ACKNOWLEDGEMENTS AND STUDY PARTICIPANTS
PROLOGUE FROM THE SUBJECT MATTER EXPERT
3
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
5
6
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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PROJECT PERSONNEL
Project Team
Contributing Authors
Jonathan Kraft, project manager, APQC
Cindy Hubert,
Holly Lyke-Ho-Gland, project team member, APQC
Jonathan Kraft
Cindy Hubert, senior advisor, APQC
Holly Lyke-Ho-Gland
Subject Matter Expertise
Dr. David Shaner, CEO, Connect Consulting
Jeff Varney
Editor
Jeff Varney, senior advisor, Business Excellence,
APQC
Paige Leavitt
Research Champion
Grant Thornton LLP
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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, faxing, 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 certain 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, policies, 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 representatives 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 transfer 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

NEC

Newfield Exploration

PepsiCo Mexico

Rockwell Collins

US Navy (Carrier Team 1)
Best Practice Organizations

Booz Allen Hamilton

Optum Technology

Baker Hughes

Underwriters Laboratories (UL)
Data Only Partners

Organization A
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©2014 APQC ALL RIGHTS RESERVED
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
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.
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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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FOREWARD BY RESEARCH CHAMPION
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.
“The world as we have created it is a process of our
thinking. It cannot be changed without changing our
thinking.” ― Albert Einstein
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.

Understand the impact on the individual. Using business role definitions and a logical approach, an organization should capture and define the specific impacts of a change on the day-to-day business lives of the individual.

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 management plan appropriately to the areas that are most important to the individual and to the overall change initiative.

Focus training on the individual’s new tasks. An organization can then focus training on the tactical changes 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 addressing 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 acceptance of the transformation.
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.
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INTRODUCTION
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 bestpractice 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.
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.
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.
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.
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:

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 communicate the strategic message of change and a
change culture.
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.
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
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Our workers are influenced by many factors:

How things are currently done

Available technology

What their managers are watching for

Collaboration with their peers

Ease of compliance

And more...
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.
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EXECUTIVE SUMMARY : THE BEST PRACTICES
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.
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THE BEST PRACTICE ORGANIZATIONS
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 journey can be found in the case studies created as part of this project.
Baker Hughes
Optum Technology Group of UnitedHealth Group
Baker Hughes Inc. is an oilfield service company that
delivers solutions for the identification, development, 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 developed 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 culture of innovation and collaboration. All of the components of the matrix have three things in common:
communication, collaboration, and innovation.
Optum Technology Group is a division within UnitedHealth Group that offers infrastructure services,
application services, and global solutions. Optum
Technology employed a multifaceted approach to
drive its transformation involving:

Lean management to increase operational efficiency 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.
Booz Allen Hamilton
Booz Allen Hamilton Inc. provides professional services primarily to U.S. government agencies, as well
as corporations, institutions, and nonprofit organizations. 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 holistic framework of methodologies, processes, and documents 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:

People

Process

Technology

Physical infrastructure
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UL
Underwriters Laboratories Inc. (UL) is a global safety
science company with 10,000 employees in 39 countries. UL created a ten-year transformational change
called “21st Century UL” to become a more customer-focused organization. UL transformed its organization using a three-phased approach that allowed it
to lay the groundwork for sustainable change by embedding new cultural norms and behaviors and training leadership to spearhead the change. Additionally,
the use of Lean management techniques to assess
and reform its processes to be customer-centric enabled it to meet two of its goals: financial stability and
a customer-centric focus.
©2014 APQC ALL RIGHTS RESERVED
CHAPTER 1: SETTING THE STAGE 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.
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
Who is Ultimately Accountable for Change?
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 organization. More often than
not, executives at bestpractice 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
Source: APQC Detailed Questionnaire
other functions. So it has Figure 1.1
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 ensure leadership supports and drives the change to ensure consistent communications. One way to ensure leadership 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 direction, and leading by example.
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Senior Management’s Level of Involvement
Figure 1.2
Source: APQC Detailed Questionnaire
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 management 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 behaviors within its leadership that would enable them to communicate the right messages and lead by example.
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UL Leadership Training Programs
Program
Description
Goal
Participants
Management Essentials
A series of on-demand, virtual
courses
Global Leadership Program
Interactive, four-week course in A series of three, two-week sesfour regions: China, the United sions conducted in partnership
States, Italy, and Japan
The course introduces the ideas The team-based class allows
and concepts about coaching participants to solve real-life
and mentoring, as well as intro- work issues and challenges and
duces the participants to UL’s to build cross-functional and
cultural awareness and skills.
leadership culture.
New manager or new to a super- High-potential management
Program Graduates 800 managers
Executive Leadership Program
350 leaders
Figure 1.3
with Yale University
Executives improve business
acumen and critical behaviors
regarding integrity, a competitive spirit, and collaboration.
Future executive leaders
75 leaders
Source: UL Case Study
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 don (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 employees 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 behaviors (or culture that is expressed through behaviors) to match the new vision or business model, and a single
change method would not accomplish that.
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Best-practice organizations combine
change management
methods to guide the people components with process improvement methods
to support their transformational change plans.
Change Methodologies Used
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 organizing transformational change
at each component and
Figure 1.4
Source: APQC Detailed Questionnaire
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.
Transformation Life Cycle Overview
Figure 1.5
Source: Booz Allen Case Study
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.
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Effective transformation requires addressing all four
components and tailoring the TLC to each unique situation. If an organization focuses on 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 technical 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 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.”
As indicated in Figure 1.6, when examining the process component, the majority of the study participants 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 1416 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 transformation. It focuses on stakeholder engagement by
developing an enterprise-wide vision of the future
and a transformation strategy to achieve it.
Process Groups
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.
Booz Allen’s TLC also includes three process areas,
each with 14-16 sublevel processes, that when performed collectively achieve the transformation.
1. Capability development—defines, builds, and
deploys future-state capabilities to achieve the
organization’s vision.
3. Design—During this stage, the organization expands the requirements to include resource allocations and an implementation plan.
2. Ownership building—secures management and
stakeholder sponsorship, involvement, and commitment to drive change.
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 capabiliPractices Integrated with Change Methodologies
ties.
3. Program stewardship—provides guidance and
program management that drives, integrates and
coordinates the transformation.
5. Deploy—During this
final stage, the organization
initiates the implementation plan, monitors the
implementation and organizational performance, and
adjusts the implementation
plan where needed.
Figure 1.6
Source: APQC Detailed Questionnaire
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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 something 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 transformation.
scale initiatives.

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
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 sponsoring or managing a change initiative) must be certified on the change framework. This method allows
leaders to achieve results that are tied to its process
release framework. The six steps for this organizational change readiness and management process
are:

includes an intranet landing page and leader guide.
1. Form a change management team.
Build phased rollouts into the transformational change plan.
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 management, business knowledge, change management,
and consultation.
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.
UL leveraged a multistage rollout focusing on its mission and customer-centric view that required a tenyear transformational change called “21st Century
UL.” UL has progressed through its two- to threeyear phases since 2005. Figure 1.7 outlines the timing and phase goals for “21st Century UL”.
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.
“21st Century UL” Transformation Plan
5. Implement the change.
6. Evaluate and monitor progress.
The change road map outlines the change while incorporating relevant people and business environment conditions and roadblocks. Change leaders use
the change road map to validate each step of the
organizational change process (which includes stagegate reviews) to monitor, track, and measure large-
Figure 1.7
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Source: UL Case Study
©2014 APQC ALL RIGHTS RESERVED
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 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 required 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.

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.
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 transformational 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 people to take on more.

Create short-cycles of changes to engender a sense of urgency, not only for the programs but also for the organization as a whole.

Leverage a phased approach, and celebrate a series of short-term wins to help maintain
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CHAPTER 2: MANAGE THE TRANSFORMATION
Chapter Findings:
1. Combine centralized governance with decentralized implementation.
2. Engage employees throughout the change journey.
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.
Who is Responsible for Implementation?
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
Source: APQC Detailed Questionnaire
Figure 2.1
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.
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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.
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.
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.
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.
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.
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-today 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.
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.
In summary, best-practice organizations combine
centralized management with decentralized
implementation for a number of reasons.
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).
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
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Impact of Barriers to Change
Figure 2.2
Source: APQC Detailed Questionnaire
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,
Baker Hughes Matrix
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 Figure 2.3
Source: Baker Hughes Case Study
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a year in the development of the solution.
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.
7. Strategy workshops—These multiday workshops
create and define the product or businesses
strategy.
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.
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.
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.
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 frontline 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.
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.
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.
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.
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.)
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.
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.
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
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Communication Method’s Effectiveness
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.
Figure 2.4
Source: APQC Detailed Questionnaire
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.
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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 leadership 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 relevant to everyone within the organization, and over-communication can result in people ignoring important 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 information 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 employees for the transformation.
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CHAPTER 3: EVALUATING THE IMPACT AND CONTINUOUS IMPROVEMENT
Chapter Findings:
1. Build reviews and accumulative measures into the process.
2. Reinforce change through ongoing training, modified performance expectations, and continuous
improvement programs.
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 implementation.
Transformational Change Measurement Approach
Figure 3.1
Source: APQC Detailed Questionnaire
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 viability of the project.
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Transformational Change Measurement Approach
Source: Baker Hughes Case Study
Figure 3.2
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 technology 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.

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 to 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 committee 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?

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?
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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 project then is refined until it is ready
to launch (RTL).
market or organization. For complex process projects, an organizational change management representative joins the project team to manage the ADKAR portion of the plan.
The stage-gate process is one way of taking a structured 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 metricbased approach uses deviation or variance and data
tagging to support a continuous improvement model
and react swiftly to any roadblocks or issues.
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 deliver, such as profitability,
cost-savings, reduced cycle time, or reliability.
Booz Allen combines a simple four-stage continuous
5. Lifecycle management—Product line manageimprovement process with five assessments (e.g.,
ment or the process owner is responsible for monquality, program management, and customer satisfacitoring the product during its life cycle (the growth,
maturity, and decline of
Transformational Change Measurement Approach
the revenue life cycle).
At this point, the project
or product is monitored to
determine 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 components 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.
Figure 3.3
Source: Booz Allen Case Study
tion) to measure the implementation and success of
its Vision 2020 components throughout the transformation (Figure 3.3). The four stages follow.
2. A statement of requirement—outlines the necessary resources (time, people, and budget).
1. Monitor and assess—Measure the implementation against key goals and measures. Assess different aspects (e.g., compliance, and risk management)
of the change by five different groups.
3. A project development plan—includes the
project schedule and risk management plan.
4. A launch plan—details the project rollout to the
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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
adjustment in the process, and update the process
accordingly.
This approach ensures the organization shares best
practices, manages risk, identifies problems, and provides 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 projects. These assessments have the additional benefit of building voice of the customer,
through the client satisfaction assessment, into the
transformation monitoring process.

Improved its customer-centric perspective, measured 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 revenue. Over the last five years UL’s revenue has increased 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.
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.
Start with the end-state in mind, and
then identify the measures that will indicate success at different stages.
As the transformation moved into phases two and
three the ePMO measured the programs progress
based on their:
As the beginning of this report notes, transformational 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 requires 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 implementation and resolve any issues through root-cause analysis.

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
UL combines enterprise-wide measures to assess high
-level goal attainment and phase-specific metrics to
monitor the implementation of its phases. For example, over six years, UL’s “21st Century UL” transformation has made progress toward many of its highlevel goals.
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©2014 APQC ALL RIGHTS RESERVED
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 creates 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 context. Without context, an organization risks reacting too quickly to a shift in data and instituting unnecessary corrective 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 original 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 problematic even though product revenue was increasing. So the next phase of improvement is to reduce the cycletime of the process and conduct a root-cause analysis to determine why project teams miss their launch dates.
REINFORCE CHANGE THROUGH ONGOING TRAINING, MODIFIED PERFORMANCE EXPECTATIONS, AND CONTINUOUS IMPROVEMENT PROGRAMS.
Best-practice organizations sustain change using people-focused tactics (Figure 3.4). Many of these tactics are integrated 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 improvement, ongoing training, and modified performance expectations.
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Provide ongoing training to reinforce the new culture, behaviors, and necessary skills.
Again, 80 percent of the best-practice organizations 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 structure allows the organizations to instill prioritized behaviors in new employees and immerse them in the organization’s culture. Furthermore universities provide ongoing training
in skills that support an organization’s new
model such as leadership, Lean, change management, technical skills, and business acumen
(e.g., finance or consultation).
Long-Term Adoption Tactics
UL felt that relying on Lean techniques alone
would prioritize the development of tools rather than focus the organization on cultural
Figure 3.4
Source: APQC Detailed Questionnaire
transformation. So it developed the UL University, 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 employees 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 reward system to reinforce the adoption of new behaviors 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.
Rewards for Behavioral Changes
Figure 3.5
For example, 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.
In addition to qualifications and expert technical
skills, HR uses these eight critical behaviors for recruitment, performance management, and apSource: APQC Detailed Questionnaire praisals, as well as succession. They form the basis
for UL’s career management system and subse31
©2014 APQC ALL RIGHTS RESERVED
quent employee development action plans.
Use continuous improvement programs to monitor and refine transformation for sustainable change.
For all of the best-practice organizations, transformational change has become synonymous with a continuous improvement mindset. Each organization embedded continuous improvement in its culture and uses this focus to drive
how they interact with external customers and enBaker Hughes PDM Steering Committee
gage and reward employees.
Baker Hughes’ enterprise engineering group uses
cross-functional steering committees (Figure 3.6) to
ensure each project formalizes its continuous improvement. The steering committees meet once a
month to assess projects and discuss:
1. Is the new project working well? The committee 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.
Figure 3.6
2. How is the project performing? The committee looks at the project’s data to evaluate and address any deviations.
Source: Booz Allen Case Study
In 2013 UL introduced a governance process giving global process owners 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 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 conKey Lessons
tact the executive leadership to reinforce
Key lessons follow from best-practice organizations on the benefits of including incremenadoption of the new
tal reviews and measures and reinforcing change through long-term adoption tactics.
process.
 Track macro measures to assess the change, and use bottom-up measurements (of individuals 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 success as the organization matures.
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CONCLUSION
Transformational change is not formulaic; it is not just a methodology and checklist you can follow. Transformational 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:

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.
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 characteristics 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.
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CASE STUDY: BAKER HUGHES
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.
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SETTING THE STAGE FOR EFFECTIVE CHANGE
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 contributing to some fragmentation and lack of collaboration.
To that end, the executive leadership decided to create a centralized department, enterprise engineering, to create and govern a standardized product
development and management process. The enterprise 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 management (PDM) team, and a project management
team. Members of the PDM team follow.
In addition to the challenges created by a growth
through acquisition strategy (e.g., lack of holistic customer 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 launches, one of Baker Hughes key innovation performance 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 company with five business segments—reservoir development services, drilling and evaluation, completion
and production, pressure pumping, and industrial
services—all aligned with the oilfield lifecycle.

A dedicated product development and
management (PDM) director—provides direction, socializes proposed changes, and promotes the possibilities.

Dedicated PDM process managers—are responsible for process governance and metrics and
collaboratively work with stakeholders on potential process changes.

Dedicated PDM managers—manage the PDM
process for each product line as integrated business partners, lead PDM steering teams that identify and implement continuous improvement opportunities, 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).
ORGANIZATIONAL RESTRUCTURE
The overarching goal of the One Baker Hughes initiative is to ensure solidarity, standardization, and efficiency throughout the organization. This required
centralization of Baker Hughes’ innovation, back
office, supply chain, and sales departments. However, due to Baker Hughes' focus on product and service development, it prioritized the establishment of
a single product development and management process for all businesses segments.
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opment of a multigenerational product (a product
that will go through phased changes to keep its appeal 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 balanced scorecard, for entrance into the next step
and to secure resource allocation.
Each business segment has its own product development teams, which are aligned by product lines that
manage and execute the day-to-day innovation processes. 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
the organization to provide standardization and governance over its product development and management process while still maintaining accountability
and technical expertise within the business segments
and their product lines.
2. Leverage the PDM process–The team manages
the change through a stage-gate review and development process.
3. Develop a launch plan—The team assists in the
creation of a launch plan for the products, processes, and programs. For products this includes product marketing, messaging, value proposition, collateral, tradeshows, and training and development
needed for sales and field engineers. For process
projects the launch plan includes the communication plan, training plans, and post-launch reviews. It
also includes an organizational change management
plan using the ADKAR Model.
Due to its success in developing a single PDM process,
measured by its ability to quantify the product portfolio and maximize return on investment, the engineering enterprise team has evolved over the last five
years from an organization focused on product development and management to include business process
improvement, project management, and knowledge
management responsibilities as well.
According to Ron Sonnier, director of product management, one of the key factors that made the development 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 process and ensure its success. Representation on the
executive team, through the vice president of enterprise engineering, also helped generate buy-in on the
team's processes and services in the business segments and support functions.
As Baker Hughes continued to centralize and standardize 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 investments. Hence, the executive leadership decided to
extend the PDM planning, execution, and benefit realization 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 investment, are called transformational and/or strategic
programs.
Regardless of whether the project is product development 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 sponsorship and resources. This begins with the devel36
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MANAGE THE TRANSFORMATION
cils is
Sonnier states that, the effectiveness of a transformational change project can be understood by the equation: effectiveness = quality of the solution x acceptance of the solution.
The Matrix
to pro-
The quality of a solution can be gauged by an organization's ability to develop the right solution matched
to the problem and culture. The acceptance of a solution is more difficult because it ties to the people
component. Getting the people part right means generating widespread buy-in through education, awareness, 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 communication.
Figure 1
mote collaboration and improve performance, by
pulling common disciplines together across divisions that might not speak together but are responsible for the same things.
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 processes) and their networks were dismantled and recreated. 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 organization. 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.
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.
All of the components of the matrix have three things
in common: communication, collaboration, and innovation.
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.
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 coun-
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.
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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 Sonnier, the leadership councils are instrumental in addressing the challenge of buy-in through topdown 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 competitors, 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 include 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 analyses), 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 competitor. The groups then go through each scenario and anticipate how their competitor organization would likely react.
2. Scenario analysis—The goal of day two is to brainstorm potential strategies and solutions for the selected 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 benefit of creating buy-in on the proposed project with senior and middle management, because they worked through
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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.
Stage-Gate Process
Figure 2
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 technology 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 committee 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?
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
Competitive advantage—What unique benefits
will the project create?

Probability of success—How likely is the project going to be successful? This is an inverse of
the project's risk or complexity.

jects, an organizational change management representative joins the project team to manage the ADKAR portion of the plan.
The stage-gate process is one way of taking a structured 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 metricbased approach uses deviation or variance and data
tagging to support a continuous improvement model
and react swiftly to any roadblocks or issues.
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 project then is refined until it is ready to launch (RTL).
TOOL
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 deliver, such as profitability, cost-savings, reduced cycle
time, or reliability.
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 record. The tool it opted for is Clarity operational management software, but there are other available tools that
work as well. The important part is to choose a comprehensive 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.
5. Lifecycle management—Product line management or the process owner is responsible for monitoring 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 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 components 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 necessary 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 pro40
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EVALUATE THE IMPACT AND CONTINUOUS IMPROVEMENT
As noted, measuring the success of transformation projects is part of the stage-gate process. The enterprise engineering team requires project teams to include an outline of the benefits and measures of success for each project 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 percentage 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 organizaPercent of Revenue from New Products
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 transformation 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 organization’s definition of success and associated measure become
more sophisticated.
For example, now that the PDM process has met its initial
Figure 3
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 improvements 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 cycletime reduction. Data tagging and root-cause analysis will help Baker Hughes identify opportunities for improvement. 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).
Percent of Products to Launch Gate on
Figure 4
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CONTINUOUS IMPROVEMENT
In addition to the lifecycle management stage of the stage-gate, the enterprise engineering team uses crossfunctional steering committees (Figure 5) to ensure each project includes continuous improvement.
PDM Steering Committee
Figure 5
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 transformation. 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.
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CONCLUSION
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 management initiative.
Baker Hughes' success is tied to a few key points. First, it established clear process ownership and stability by creating 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 matrix, which engaged employees in the process and embedded new norms and behaviors. Finally, Baker Hughes understands 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 improvement.
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CASE STUDY: BOOZ ALLEN HAMILTON
ORGANIZATIONAL BACKGROUND
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.
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SETTING THE STAGE FOR EFFECTIVE CHANGE
In early 2012 Booz Allen came to the realization that, although it had experienced doubledigit growth for more than a decade, the market and its business environment were changing. Furthermore other challenges concerning
customer needs started to emerge. So the organization opened up a dialogue among the
top 2,000 people within the organization to
determine what service offerings it should provide to clients, what were options for change,
and where the organization should be. This
discussion was the impetus for the developFigure 1
ment of its 2020 Vision project.
A Vision 2020 core team, with representatives from
senior management and corporate quality management, assessed the market and organization to understand the organization’s current state and identified 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,

VISION 2020 COMPONENTS
BUILD THE FOUNDATION FOR SUSTAINABLE CHANGE
To ensure Booz Allen created change that would last,
it prioritized three key activities: addressing cost issues, developing a new operating model, and aligning its businesses with the changing market. These
initial priorities would ultimately support sustainable
change by freeing up resources to fund the transformation and streamline the people and process aspects of Booz Allen’s businesses.
Traditionally Booz Allen had been a matrix organization organized by:
Benchmarking programs—Conduct a broad
comparison of people programs within and outside 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 market was shifting, the needs of its stakeholders
(clients, staff, and investors) were changing to include an offering in the technical engineering space,
and its business model was outdated. The team,
along with other senior management, used this information to develop a plan to transform the organization over the next ten years. The components of
the plan are outlined in Figure 1.

market ( responsible for revenue),

capabilities (responsible for cost management),
and

geography (clustering people, resources, and clients by location)
Booz Allen found that these three axes were not
equally balanced, which splintered its decision making, capabilities, and resource allocations. And in several ways, it created unintentional organizational
tension that could interfere with client and firm objectives. When an organization is experiencing rapid
growth the matrix organization works fine, there is
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little conflict between the axes because cost isn’t relevant 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 advantage—its people – across markets and across
functional solutions for clients.
aging its internal resources into cohesive work
and teams, the people in Booz Allen that were already creating innovative work.
The new structure created a fluid approach to managing Booz Allen’s competitive advantage by:
To address these issues Booz Allen simplified its organization 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).

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 centralized, 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 responsibilities within the business.
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 creation of a Strategy Innovation Group (SIG). The single
P&L removes obstacles associated with competing
agendas and facilitates adoption because the organization is focused on shared goals. The SIG was created to improve the firm’s ability to find innovative
new ways to grow and was tied to fulfilling the organizations future vision. The new group was staffed by
lever-
Once the framework for the change (particularly the
organizational and business model restructure) was
complete, Booz Allen moved onto the next interlocked components of its transformation: a new people model and establishment of functional communities.
New Organizational Structure
Figure 2
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MANAGE THE TRANSFORMATION
2. Clear performance expectations—Defines the
career path and its expectations, and provide ongoing, collaborative communication on progress.
Booz Allen’s new people model was focused on aligning its people with the new structural organization. As
stated, Booz Allen’s people are at the core of its business and their skills and expertise are its primary competitive advantage. Hence the new people model had
to enable the growth and development of its diverse
talent and use multiple programs to enable their success. 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 feedback—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 development 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.
3. Differentiated, functional communities of
practice—Align people by their capabilities, maintain/improve intellectual capital, and support professional development.
Booz Allen’s previous people model, based on functional 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 functional communities a vital component of the transformation because they have also helped the organization map the current capabilities of its staff, pinpoint
gaps for investment, and support collaboration.
PROCESS AND TOOLS: THE TRANSFORMATION 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 framework of methodologies, processes, and documents for
organizing transformational change at each component and stage. Booz Allen provides a textbook worth
of detailed procedural and related information concerning the cycle. According to Ron Lear, Corporate
Quality Director, the TLC frames one’s thinking about
the change and it’s transformation aspects and enables Booz Allen to tailor a solution with the right balance of people, processes, tools and infrastructure.
Figure 3 outlines the TLC, its four dimensions of
change, process areas or groups, and transformation
stages.
To accomplish these goals, Booz Allen developed
three core elements of its new people model.
1. A flexible career model—Define how staff navigate their career in three areas: career tracks, functional roles, and titles.
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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 technical 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 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 performed collectively 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.
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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 implementation 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 buyin 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 practitioner (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 management 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.
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COMMUNICATIONS
According to Booz Allen, communications are a vital part of any transformation. They help establish expectations, create 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 communications. 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 provides 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 occurred, Booz Allen was transparent on the issue and informed employees about actions to address 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 organization, 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 engagement 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 transformation.
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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.
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EVALUATE THE IMPACT AND CONTINUOUS IMPROVEMENT
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 conducts 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 facilitates feedback by planting change agents within the audience with seed questions on the transformation to initiate the conversation and get feedback in the areas the implementation team needs feedback on. Other communications methods like e-mails, social media, and notices or bulletins on the latest updates for the Vision 2020 include 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 transformation. 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 examples follow of goals from Vision 2020 and the measures Booz Allen used to track its progress during the subsequent 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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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.
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
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The four stages follow.
1. Monitor and assess—Measure the implementation against key goals and measures. Assess different aspects (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 adjustment in the process, and update the process accordingly.
This approach ensures the organization shares best practices, manages risk, identifies problems, and provides 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 projects. 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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CONCLUSION
Booz Allen spent 2012 creating awareness and implementing training for the new people model, and it is now implementing 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 longterm change, and embed new behaviors and roles within the organization.
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CASE STUDY: OPTUM TECHNOLOGY
ORGANIZATIONAL BACKGROUND
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.
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SETTING THE STAGE FOR EFFECTIVE CHANGE
rything we do.
In the late 1990s and early 2000s the company acquired multiple businesses. As is common with this
strategy, the organization faced challenges as it integrated 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 marketplace, technology advancements, and serving customers in new ways for example, through mobile
devices, were a few foundational transformational
business drivers for Optum Technology.
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 commercialization, innovation, health care regulatory and
compliance, and enterprise data
2. Advancing the business—stability, software and
product engineering, enterprise architecture, and
information security
Like many organizations, UnitedHealth Group’s business environment was affected by consumers’ access
to information in the digital age, the Affordable Care
Act, and shifting consumer expectations. In particular, consumers expect all interactions, from the distribution of benefits explanations to customer services, 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 development of technology to deliver a differentiated
experience that was defect-free, reduced cycle time,
cost less, and delivered in the context of a valuesbased culture that drives business outcomes for the
organization.
3. People and culture—employee engagement,
work force performance, and organizational effectiveness
Optum Technology employed a multifaceted approach to drive transformation including:

implementing a quality operating system to improve quality in process and software delivery,

using Lean management techniques to increase
operational efficiency and maintain a customercentric focus,

Providing supervisor training to prepare management for change and a leadership academy to promote systems thinking with cross-functional team
work, and

organizing employee engagement teams to create
feedback loops and communicate to the organization’s change actions and improvement initiatives.
The UnitedHealth Group values-based culture emphasizes five core values.
1. Integrity—Honor commitments and never compromise ethics.
2. Compassion—Walk in the shoes of the people it
serves and works with.
3. Relationships—Build trust through collaboration.
4. Innovation—Invent the future, and learn from
the past.
5. Performance—Demonstrate excellence in eve-
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MANAGE THE TRANSFORMATION
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.
Optum Technology realized that its waterfall project
approach alone, characterized by a linear series of
steps, would not support experimenting with different 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.
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.
Transformational Change Components
5. Implement the change.
6. Evaluate and monitor progress.
The change road map outlines the change while incorporating 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 stagegate reviews) to monitor, track, and measure largescale initiatives.
This approach:

provides simple, streamlined, and actionable tools;
Figure 1

integrates with processes, projects, and programs;
PROCESS: ORGANIZATIONAL INTEGRATED CHANGE FRAMEWORK

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.
In 2011, Optum Technology created the organizational integrated change framework (OICF). The OICF
methodology allows leaders to achieve business results 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.
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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 management, business
knowledge, change management, and consultation.
To support organizational change, Optum Technology leverages workforce capabilities, learning tools, and training solutions for leaders and employees in addition to the OICF tools. Preparing change agents, training supervisors, 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 solution for leaders and employees to share instructional knowledge on implementing technology changes. The supervisor 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, improvement. Quality assurance and quality controls are key aspects to this addressing shifting customer and environmental 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 employees 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 effectiveness 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.
Q*A=E
where Q = quality, A= acceptance, and E = effectiveness.
The immediate opportunity and challenge for Optum Technology was acceptance of change across the organization. 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, invest 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 organization. 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 Partners, 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.
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Employee Engagement Team
drive innovation across the enterprise. Two examples
follow.
To ensure a sustainable transformation, Optum Technology needed to engage the workforce in the change
and tap into their expertise to help pinpoint opportunities 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 selected by leadership from different businesses, who
commit 8-10 hours per month in addition to their fulltime 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.
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 experiences 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 media application where employees can submit ideas or
solutions and vote on the submissions. The originator of the problem or opportunity then identifies
three to four submissions for review by executive
management for further development. These challenge 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.
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
Brian Landwehr, director of innovation and R&D,
shared that adapting to changes, developing relationships, 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 leadership teams.
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.
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.
COMMUNICATIONS
Optum Technology’s communication for its transformational change is customized based on the individuals’ role in the organization. The customized approach
uses multiple communication channels to ensure the
messages are embedded in, and shared across, the organization. For example, leaders are provided toolkits,
scripted dialogue talking points, and attend nationwide
quality road shows to stay informed. Employees receive communication using more traditional channels,
including e-mail, staff meetings, newsletters, and the
intranet.
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
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EVALUATE THE IMPACT AND CONTINUOUS IMPROVEMENT
As Optum Technology continues to manage transformational 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 operational and transformative solutions that affect the bottom
line. To be successful, the organization must balance
the need to drive change and measure operational excellence.
surance plan are willing to purchase certain health care
services and book their appointment online. This provides the patient with a seamless experience and provides 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 engender 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 rebooking services on the site.
To continue to drive innovation and transformational
change, UnitedHealth Group has recognized that quality 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 example, 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 employees, 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 example of how Optum Technology is preparing the organization 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-
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CONCLUSION
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 sixstep 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 infrastructure and development to ensure the collaboration among business units, and the innovation demonstrated
change transparency on innovation across the business.
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CASE STUDY: UNDERWRITERS LABORATORIES INC.
ORGANIZATIONAL BACKGROUND
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 hazardbased 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
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SETTING THE STAGE FOR EFFECTIVE CHANGE
When its current CEO arrived in 2005,
UL faced several challenges. In addition to traditional concerns regarding
globalization, privatization, and outsourcing, competition for UL had increased after the consolidation of its
testing client base. And customer
needs regarding safety were expanding to areas such as air/water quality
and sustainability.
In response, UL sought to expand outside the U.S. market and move beyond
its traditional service delivery approaches by embracing emerging scientific developments. These efforts
would be bolstered by a new mission
and a renewed focus on client interests that served its financial stability.
UL’s New Mission
UL’s new mission and focus on the customer required a ten year transformational change called “21st Century UL”. UL’s executive team outlined 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.
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
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 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.”
2007 Net Promoter Score Benchmark
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, benchmarked customer satisfaction, market share by region, and employee satisfaction. One of the most telling benchmark results was its Net Promoter Score
(NPS) used to measure customer satisfaction. NPS
measures 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). UL was in trouble with its
customers, as indicated by its NPS score of -27 in 2007
(Figure 2).
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, inspection, 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 culture, top-down, control-and-command management style, focus on past accomplishments, and siloed business 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 cultural 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.
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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 organizational 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 embrace risk.

Establish a safe environment to take risk—UL felt that when employees feel secure they are more likely 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 business units and aligned with the corporate performance goals. Second, it established methods to provide transparency 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 unpredictable. 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 customer 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 vocabulary 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) designed to change its management style by empowering employees with decision rights and embeds the new
culture and preferred behaviors within its leadership.
Leadership Training Programs
Program
Management Essentials
Global Leadership Program
Executive Leadership Program
Description
Interactive, four-week
Series of on-demand, virtu- course in four regions:
al courses
China, the United States,
Italy, and Japan
A series of three, two-week
sessions conducted in partnership with Yale University
Goal
The course introduces the
ideas and concepts about
coaching and mentoring, as
well as introduces the participants to UL’s leadership
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 competitive spirit, and
collaboration.
Participants
New manager or new to a
supervisory role
High-potential management
Future executive leaders
Program Graduates
800 managers
350 leaders
75 leaders
Figure 3
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MANAGE THE TRANSFORMATION
UL has a variety of programs to achieve its new
high-level goals. One example is its Buy & Pay program. 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.
Rolling out the phases in two– to three-year cycles 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.
Leveraging a phased approach creates a series of
short-term wins that helps maintain momentum
and enthusiasm for the change.
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 manage the enterprise-wide transformation. The core
team is part of the ePMO, and is comprised of:
Investing the cost savings or increases in revenue
from one stage to the next would create a sustainable change and provide financial stability.


People
UL used a multistage rollout of the ten year transformation, “21st Century UL”, for the following reasons:

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/
PEOPLE, PROCESS, AND TOOLS
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; second, they had to allow the core team to test its
deployment methodology and tactics in a low-risk
environment. Overall



ePMO vice president,

three transformational directors—one for each
major program (Buy & Pay, Information Management, and Fulfillment),

change management & communications leader,

deployment leader,

technology director, and

governance portfolio manager.
The core team was supplemented by external experts 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 ensured 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 addressed as they worked toward common goals and enterprise-wide implementation. Therefore, UL established 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 responsibilities. 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 resources. UL was able to leverage and develop its
own staff to assist with leadership, strategy, planning, and change management but it needed to
develop a strategy to fill the gaps with additional
hires and external partners and vendors (Figure 4).
Skill Acquisition Strategy
Processes
UL’s core team used a hybrid approach to
manage its transformation using concepts from Kotter, Lean, organizational
Figure 4
change management, and APQC’s Process Classification 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 project portfolios.
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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 program. 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 customers to understand.

Underpinning Aria’s capabilities are the Self-Service capabilities of Oracle Buy & Pay system. These applications are accessed through the Aria platform and provide the functionality for clients to get quotes, orders, 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 Management 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 fulfillment 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 invoices sent to clients and accounts for payments received.

Further integration allows information from the fulfillment systems to be used in the Procure to Pay system, to order and account for the cost of consumables, reagents, and other equipment and supplies required 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, multipronged 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 messages 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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EVALUATE THE IMPACT AND CONTINUOUS IMPROVEMENT
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 University, developing employee incentive program that
sets goals for growth and collaboration, and its systems and tools to drive consistency as UL continues
to align with customer needs.
Over the last six months of 2013, UL formally introduced a governance process that includes global process 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 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 the
ePMO will contact the executive leadership to reinforce 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:
In addition to qualifications and expert technical
skills, HR uses these eight critical behaviors for recruitment, performance management, and appraisals, 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 phasespecific 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, measured 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 revenue. Over the last five years UL’s revenue has increased 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 worldwide over the last five years.
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
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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 implementation without having to make any coding adjustments.
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CONCLUSION
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 carefully deploying each phase and building on its successes. UL’s three phase approach allowed it to lay the groundwork for sustainable change, by embedding new cultural norms and behaviors and training leadership to spearhead 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 sustainable change and set the expectations for continuous improvement through its governance structure, education programs, goal setting, and incentives.
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