Sustaining Quality and
Operations Excellence
Laws of Physics for Successful Quality and
Operations Transformation
Date: May 2012
ABSTRACT
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As industry leaders, we still see more than half of our quality and
operations excellence initiatives "fail" (or, more precisely, because we
rarely acknowledge failures -- quietly and politely fade into irrelevance and
obscurity),
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.....but years of successful experience and empirical data from industry
leaders have also established, beyond reasonable doubt, the key factors
and their interrelationships, as reliable and predictable as the "laws of
physics", for sustained success and performance improvement in quality
and operational excellence. What can we learn from the successes of
industry leaders?
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“Laws of Physics” for Sustained Quality and Operations Excellence (OE)
1. Be clear and aligned on “the destination” (i.e., with meticulous alignment to enterprise
vision, mission, strategic objectives, targeted performance and practices)
3. Approach Quality and OE “systemically” (i.e., based on thorough accounting for
interdependencies in related processes and systems)
4. Go to “the work” to make the change (i.e., the only change that matters -- “go deep”,
to the line level)
6. “Have a pre-flight checklist and flight plan….and follow it.” (i.e., Design and
implement programmatically -- with attention to key enablers and key success factors)
7. Leaders must “LEAD” (i.e., with active, visible support and role modeling)
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5. Adults “learn by doing” (i.e., Employ adult learning principles and concepts in training
and capability-building.)
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2. It‟s a “Transformation” -- Design and implement “holistically” (i.e., with balanced
and complete attention to the technical processes and systems, management systems,
Text
and organizational
capabilities and behaviors)
1
Be clear and aligned on “the destination”
Operational Excellence (OE) focuses on simultaneously driving continuous
performance improvement in Quality, Efficiency, and Time
Efficiency
▪ Etc…
Operational
Excellence
Time
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▪ Etc…
Quality
Quality of Outcomes
▪ HSE performance, …
▪ Asset reliability and integrity…
▪ Conformance to Product
specifications, …
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Efficiency in Delivery
▪ Process Efficiency, e.g.
reduction of waste,
cycle times, WIP, etc.
▪ Economic
Efficiency/Profitability
▪ Labor Productivity
▪ Equipment Utilization
▪ Total Cost of
Ownership
▪ Energy Efficiency
▪ Overheads
Timeliness of delivery
▪ Process cycle times, e.g.
asset turnarounds,
establishing new contracts,
implementing a new
practice across assets, ….
▪ Event response times, e.g.
asset trips, well
interventions
▪ Etc…
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Be clear and aligned on “the destination”
Implementing management systems to deliver “sustained competitive advantage”
requires more aggressive approaches to standard-setting and programmatic
implementation
Excellence
Targeted
Impact?
Value
Creation
Efficiency
Business
Competitive
Requirements
Legal &
Regulatory
Compliance
Risk
Mitigation
Loss
Reduction
Minimum
Standards?
Programmatic Implementation
allows achievement of:
• Higher level of
standardisation (e.g.,
practices, procedures,
tools, methods, application
of best practices, etc.)
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Value
Preservation
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Sustained
Competitive
Advantage
Impact
1
• Higher consistency and
completeness in
implementation (e.g.,
enablement, performance
management, change
management, etc.)
Programmatic Implementation
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2
It‟s a “Transformation” -- Design and implement “holistically”
“Business Transformations” are fundamental changes that penetrate deep within
an enterprise and lead to substantial and sustained performance improvement
Requires integrated program
and dedicated leadership: not
business as usual
Financial and
operating
performance
Organizational and
individual skills and
competencies
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Transformation is a conscious transition to a
sustainable way of working at a higher level
of business performance, based on fundamental
shifts in
▪ Ambition
▪ Mindset and behaviors
▪ Capabilities, systems, and processes
Not just
incremental
improvements –
a quantum leap
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Crosses a threshold;
new levels of
performance
maintained over time
2
It‟s a “Transformation” -- Design and implement “holistically”
Large-scale performance transformations are very challenging and most do not meet
their objectives due to incomplete/non-holistic approach
How successful was the transformation overall in reaching the targets your company set?
Percent of respondents from executive survey (N = 2,994)
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Extremely successful
6
Successful
Very successful
28
52
Unsuccessful
Not successful at all
Don‟t know
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Somewhat successful
34%
Only
of company
executives
considered their
transformations
successful
10
SOURCE: July 2008 McKinsey Quarterly Performance Transformation Survey
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2
It‟s a “Transformation” -- Design and implement “holistically”
Unsuccessful performance transformations often result
in minimal impact, at the cost of valuable time and resources
Successful
transformations
Unsuccessful
transformations
▪ Unsuccessful transformations
Cumulative improvement
% of COGS
25
20
15
15%
10
0
0
12
24
36
48
60
Duration
Months
time and resources that could
have been used elsewhere2
– Average of 5 months from
discussion to implementation
– 80% affected large portion of
company
– 80% strongly involved CEO or
business unit leader
– 30% of executive staff directly
involved
1 Impact from successful transformations from direct company experience and research of operationally excellent companies. Impact from unsuccessful
transformation illustrative only and not drawn from source work
2 Select results from McKinsey Quarterly survey
SOURCE: McKinsey Operations Practice; July 2008 McKinsey Quarterly Performance Transformation Survey
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5
▪ …and require large amounts of
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result in lost impact…
– E.g., by as much 15% of COGS
over several years1
– Benefit in first 15-18 months
requires focused initial wave
– Longer-term benefits from
continuous improvement
2
It‟s a “Transformation” -- Design and implement “holistically”
Common failure modes in large-scale improvement programs
Business
results
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Failure to sustain
▪ No change in day-to-day behaviors
▪ Change agents – not the line –
leading the change
▪ No capability upgrade at the site level
▪ Improvements not baked into budgets
Failure to scale
▪ Multiple bottom-up efforts with
competing methodologies and
no overarching blueprint
▪ Limited leadership capacity
▪ Waning focus from senior team
Time
Sites involved
People involved
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Failure to launch
▪ Stuck in diagnostics –
leaders unable to align on
what to do, where to start
▪ Managers not held accountable for performance
▪ Employees resistant
1-3 years
<10
100s
<50
1,000s
Network
10,000s
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2
It‟s a “Transformation” -- Design and implement “holistically”
Reliable and sustained delivery of the
targeted business objectives and benefits
requires
Related Technical components
Technical
Components
Management
Infrastructure
Components
• Processes and Practices,
• Procedures
Organizational
Components
• Facilities and equipment
• ….
Technical
Components
Technical
Components
Management
Infrastructure
Components
Organizational
Components
Related Management Infrastructure
Components
• Resources and budgets
• Performance measures,
monitoring, and reporting
• Reliability Continuous
Improvement
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Management
Infrastructure
Components
• Methods, tools, and technology
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Alignment with
overall vision, strategy and
objectives (KPIs)
•…
Organizational
Components
Technical
Components
Management
Infrastructure
Components
Organizational
Components
Leadership Commitment and Support
(Active, Visible, Engaged)
• Reliability Management Principles
and Practices Competency and
Capability Building
• Maintenance QA Training and
Competency
• Contractor Management
•…
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2
It‟s a “Transformation” -- Design and implement “holistically”
Formalized Performance Management processes and objectives must be
part of every holistic, sustainable Business Transformation
Set direction and
context
▪
▪
Execute and
manage
performance
and health
4. Hold
robust
performance
dialogues
Business – Review
business performance
and risks
Individual – Review
talent and individual
performance
▪
▪
▪
2. Create
realistic
budgets and
plans
▪
▪
3. Track
performance
effectively
▪
Business – Choose
metrics and set
targets
Individual – Agree to
performance contract
Business – Create
budgets and plans
Individual – Build
capability
Business – Track unit business
performance and health
Individual – Track individual
performance
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▪
5. Ensure
rewards,
consequences
and actions
Business – Take
corrective actions
Individual– Ensure
appropriate rewards
and consequences
Measure
stakeholder
value/delivery of
outcomes
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▪
1. Establish
clear metrics,
targets, and
accountability
Business
Individual
3
Approach Quality and OE “systemically”
Integrated Quality and Operations Management Systems (OMSs) are a natural
evolution of Quality Management Systems, developed to drive long-term sustainable
excellence in Operational Integrity (i.e., Safety. Reliability, Environmental
Compliance), Quality, and Efficiency
▪
▪
Targeted levels of operational performance
▪
▪
Internal and external best practices
▪
Create a common language and culture of
operatingl discipline and excellence
Common standards, guidelines, processes and
practices, organizational capabilities, methods
and tools in all company areas
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SOURCE: McKinsey
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Operations
Management Systems
(OMSs) are the
response of industry
leaders to stakeholder,
competitive, and
regulatory demands for
dramatic, reliable, and
sustained
improvements in
operational
performance
Operations Management Systems (OMSs) are
deliberately designed to provide or promote
A holistic, systemic framework for sustaining
and continuously improving performance
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3
Approach Quality and OE “systemically”
Operations Management Systems can be viewed as a layered “elements”,
deliberately designed, integrated, and implemented to align, drive and sustain
targeted performance, processes, and practices at all levels
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Operations
Objectives
Operations
Performance
Priorities
OMS Design &
Implementation
Core
Support
Enablers
Processes Processes
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Expectations & Standards
Detailed Operating Processes,
Procedures & Practices
Day to Day
Line Operations
Expectations & Standards
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3
Approach Quality and OE “systemically”
Integrated Operations Management Systems can be viewed as a hierarchical structure
of interdependent elements or subsystems
Different levels of elements
Level 2
Basic elements, e.g.
- Performance Priorities – e.g., HSE, Efficiency, Optim
- Key enablers – e.g., People, Plant, Processes, Tech
- Operating Principles – e.g., Lean, Continuous Impro
Level 3
Functional and technical elements, e.g.
• Core Business
• Supporting Elements
Elements (e.g.,
(e.g., Training, Perf.
HSSE, Mgt, Asset
Mgt., Procurement,
Integrity Mgt, Asset
Supply Chain Mgt.,
Reliability Mgt,
IT & Document Mgt,
Energy Mgt, Control
Performance Mgt.)
of Work, Production
Optimization, Capital
Project development)
Level 4
Specification of Technical Standards
associated with Level 3 Elements
Level 5
Formal and informal Procedures and
Practices on Level 3 and 4 Elements
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Source: McKinsey
Aspirations/ objectives (linked to vision), e.g.,
• Continuous
• Recognition for
Improvement
Excellence
Culture
• Premier company
• Efficiency
• Risk Mgt Discipline
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Element – A subsystem or a
combination of Management,
Organizational, and Technical
Infrastructure components and
capabilities (i.e., processes, practices,
competencies, mindsets, behaviors,
systems, etc.) which deliver business
results in a particular area of the
system
Level 1
3
Approach Quality and OE “systemically”
There are a few important principles to understand with regard to Quality and Operations
Management System design and implementation
Management
System
Design
By nature, management systems need to cover all company
processes (“elements”), in one holistic system; they are therefore
complex, with many interdependencies
▪
Management systems in the oil & gas arena look different on the
highest level but in reality they are very similar in terms of scope
and many common elements
3B
3C
▪ Having a management system that drives sustainable,
competitive advantage, beyond compliance to e.g. safety
standards requires that “you go deep” to address the required
elements
▪ Implementation on an element-level needs to be holistic, i.e. to
3D
cover 1) the technical system, 2) the management structure around
it as well as 3) the mindsets & capabilities to be sustainable
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Management
System
Implementation
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▪
3A
▪ Such implementation therefore require a well-architected
3E
programmatic approach over a longer period of time (3 years to
build internal capability)
Source: McKinsey
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3
Approach Quality and OE “systemically”
The Benefits of Formalized, Structured Quality and Operations
Management Systems
100%
91%
90%
79%
80%
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Firms with Structured OE
Control Firms
69%
70%
60%
50%
43%
40%
30%
37%
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32%
23%
20%
7%
10%
9%
8%
0%
6%
0%
Operating
Income
Sales
Total Assets Employees
Return On
Sales
Return on
Asset
Ref: Kevin B. Hendricks, Vinod R. Singhal, 2000
15
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Approach Quality and OE “systemically”
Quality Management System Framework Illustration - EFQM
Balancing Enablers and Performance Results (i.e., keys to reliability
and sustainability) and Performance
People
Results
People
Partnerships
& Resources
Processes
Customer
Results
Key
Performance
Results
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Leadership
Policy &
Strategy
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Results
Enablers
Society
Results
Innovation & Learning
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3
Approach Quality and OE “systemically”
Quality Management System Illustration - EFQM
Objective: Create a continuously reinforcing system of performance
drivers and enablers leading to sustained high levels of operational
excellence
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Results
Orientation
Corporate
Social
Responsibility
Customer
Focus
Continuous
Learning &
Improvement
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Leadership &
Constancy of
Purpose
Partnership
Development
Fact-based
Management
People
Development &
Engagement
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3
Approach Quality and OE “systemically”
The importance of Systems Analysis and Systems Thinking --addressing complex
interdependencies
SIMPLIFIED
Improve
System
& Equipment
Criticality
Analysis
Improve
Operations
Performance
Raise
Condition
Monitoring
Stds
Raise
Operating
Standards
Improve
Tech Services
Performance
Increase
OM&T
Failure
Intervention
Increase
Tech Services
Capability
Improve
Cross
Functional
Design
Review
Improve
Operations
Training
Improve
Construct
& Commission
QA
Improve
Design
Operability
Increase
Asset
Reliability
Raise
Maintenance
& Repair
Standards
Accelerate
Reliability
Continuously
Improvement
Improve
Engineering
Performance
Source: McKinsey
Improve
Project
Development
Standards
Improve
ERS & EDMS
Enablement
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Improve
Engineering
Design
Standards
Improve
Lifecycle
Cost
Analysis
Improve
Maintenance
Performance
Improve
Failure
Analysis
Increase
Inherent
Design
Reliability
Raise
Materials
& Parts
Standards
Increase
Tech Services
Capacity
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Improve
Condition
Monitoring
Improve
Condition
Monitoring
Technology
Increase
Cross
Functional
Reliability
Teamwork
Improve
Reliability
Knowledge
Management
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3
OMS Framework – Oil and Gas Industry Illustration
„Exxon Mobil‟s OIMS framework establishes common worldwide expectations for controlling operations
integrity risks inherent in its business‟
Driver
“Assurance of
operations integrity
requires
management
leadership and
commitment visible
to the organisation
and accountability
at all levels”
Source: ExxonMobil
•
•
•
•
•
•
•
•
•
Risk assessment and management
Facilities design and construction
Information/documentation
Personnel and training
Operations and maintenance
Management of change
Third-party services
Incident investigation and analysis
Community awareness and emergency
preparedness
Supported by 64 “expectations”, 256
detailed guidelines on best practice
implementation and 27 common
systems
Evaluation
Operations integrity
assessment and
improvement
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Management
leadership,
commitment and
accountability
Operations
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„Each operating unit must have in place properly designed and documented management systems that
address all the expectations set out in the OIMS framework‟
Annual internal assessments and 3–5
yearly external assessment of
management system „status‟ (design and
deployment) and „effectiveness‟
(conformance, execution, impact)
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3
Operations Management Systems often look different at the highest
levels i.e. the “superstructure”
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3
However, overall system scope and content is
very similar…..
ILLUSTRATIVE, NOT EXHAUSTIVE
XOM
CVX
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
• Ops Integrity
Mgt
X
X
X
X
• Asset Integrity
& Reliability
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
• Leadership
Behaviors
• Competency
Mgt
• Continuous
Improvement
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Any variances linked to
business performance
imperatives, priorities, and
context at the time of
system design and
implementation
Basic
Elements
BP
RDS
• ….
Core Business
Elements
• HSSE
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• ….
Support
Elements
• IT and
Document Mgt
• Supply Chain
• Technical
Services
• ….
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3
… and at the lowest levels, they are even
more similar
Core Business
Elements
• Control of
Work
• Reliability
Improvement
Support
Elements
• IT and
Document Mgt
• Contractor
Management
BP
RDS
CVX
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
• Procurement
Basic
Elements
• Any •variances
linked
to business
Similarities
reflect
performance
imperatives,
priorities, and
industry‟s
inherent asset
context
at
the
time
of
system
design and
intensivity, technical
implementation
complexity and risk profile
• MOC
Leadership
Review
• Required
Safety
Training
• Employee
Feedback
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XOM
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• Process
Hazard
Analysis
ILLUSTRATIVE, NOT EXHAUSTIVE
4
Go to “the work” to make the change
Addressing OMS implementation at the lowest level is necessary to impact the actual
work practices and behaviors …….
• Cascade company vision
and targeted
performance
expectations (e.g., KPIs)
to lowest levels
"The Defined System“
that is put on paper as a
central, formalized and
maintained system
"The actual dayto-day Work"
• Drive standardization on
internal and external best
practices across
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• Break down
organizational silos and
facilitate cross-functional
collaboration
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Implementing an
OMS requires
“going deep”, e.g.
4
Go to “the work” to make the change
….which has some implications related to implementation strategy and approach
You want to…
Implementing an OMS
- Engage at the line level
- Thorough and
rigorous Change
Management approach
- Define and drive
standard practices
- Objective, application
of best practices
- Deeply collaborate
across functions
- breaking through
organizational silos
- Link efforts to top-level
company performance
- closed loop
continuous
performance
improvement
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- Leadership alignment
and commitment on
objectives and
aspirations
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- Cascade objectives
and expectations
"The
Defined
System
"
"The actual
day-to-day
Work"
Which requires…
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4
Go to “the work” to make the change
For each element “successful implementation” (i.e., sustained performance at the target
level) requires a holistic, integrated approach
Reliable and sustained delivery of the
targeted business objectives and
benefits requires
Technical
Components
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Alignment with
overall vision, strategy and
objectives (KPIs)
Management
Infrastructure
Components
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Organizational
Components
Leadership Commitment and Support
(Active, Visible, Engaged)
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4
Go to “the work” to make the change
A holistic approach to an individual element illustrates the depth of integration and
alignment required across elements to achieve sustained results
E.g., “Asset Reliability
Management”
Related Technical components
Technical
Components
Management
Infrastructure
Components
• Asset Condition Monitoring
• Inspection Management
Alignment with
overall vision, strategy
and
objectives (KPIs)
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• Maintenance Management
Organizational
Components
• Asset Reliabilty Improvement
• ….
Technical
Components
Management
Infrastructure
Components
Organizational
Components
Related Management Infrastructure
Components
• Inspection and Maintenance
Budgeting and Planning
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• Reliability Performance Monitoring
and Reporting
• Reliability Continuous Improvement
•…
Leadership Commitment and
Support (Active, Visible,
Engaged)
Technical
Components
Management
Infrastructure
Components
Organizational
Components
• Reliability Management Principles
and Practices Competency and
Capability Building
• Maintenance QA Training and
Competency
• Contractor Management
•…
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5
Adults “learn by doing”
Adult learning methods employ experiential, physical learning environments (model
workplace)
I see and I remember,
I do and I understand"
Confucius
▪
Realistic learning
environment in which
managers and change
leaders are trained to lead
operational transformations
▪
New tools and skills are
presented and immediately
applied in real-life settings
of a work place
▪
Learning center designed for
lean service operations
and manufacturing,
covering private and public
sector institutions
Hearing
Seeing
Doing
85%
Recall
after
3 weeks
72%
70%
Recall
after
3 months
32%
65%
10%
SOURCE: McKinsey
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Typical learning center
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Learning
by …
"I hear and I forget,
Adults “learn by doing”
5
ILLUSTRATIVE
Capability-building must employ adult learning approaches (e.g., “field and forum“)
▪
Prepare for
diagnostic
phase
▪
Understand key
issues and possible
impact
1
Find solutions for
key issues and
prioritize
2
Diagnose
▪
Prepare for roll-out
phase (incl.
organizational
changes)
3
Design
▪
4
5
Plan
Plan for
implement Forum 4
ation of Impleimprove- menting
ments
Coaching
Coaching
Coaching
Coaching
2 weeks
2 weeks
2 week
14 weeks
Review
Implement
Forum 5
and
optimize Refine/
improve- Sustain
ments
Continued
cycles of
improvement
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Idea
generation
and
Forum 3
problem Planning
solving
workshops
Keep continuous
improvement loop
alive (do not revert
to old situation)
6
Implement
Forum 2
Applying
Analysis
lean
and
diagnostic
problem
tools
solving
4 days
▪
Implement changes
and engrain new
way of working
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Prepare
Forum 1
Lean
Basics
and tools
▪
Continuous
Example of forum
Lead business
Lead self
Lead others
Lead change
▪
▪
▪
▪
▪
▪
▪
HSE processes and
standards
Work permitting planning
Maintenance policies
Operating standards
Time management
▪
▪
SOURCE: McKinsey
Problem-solving
– 7-step problem solving
– Root-cause problem solving
– Value driver mapping
Interviewing
– Listening and asserting
Workshop facilitation
Creating and
communicating story
for change
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5
Adults “learn by doing”
McKinsey Learning Center Darmstadt Example: Learning by experience in a real
production environment with real products
Objective
A real production environment ...
▪ Learning of lean principles in a real-life production
environment
Working Draft - Last Modified 22/05/2012 17:13:43
▪ Experience of significant change through application of
lean tool in a realistic production environment
Set-up
▪ End-to-end production of a pneumatic cylinder with a
machining center and an assembly line with 8 work
stations from raw material to quality tested product
▪ Up to 10 line technicians in operation (trained staffed of
the Technical University)
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Process
▪ Clients observe a non-optimized workflow at the
beginning of the session
▪ Step-by-step teaching and immediate application of
With real products …
performance improvements measures in the work flow
▪ Final target state fully optimized with nearly 100%
productivity increase and a reduction of 50% in
inventory and required space
SOURCE: CiP, McKinsey
Pneumatic cylinders
From industry partner
Bosch Rexroth
McKinsey & Company
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6
“Have a pre-flight checklist and flight plan….and follow it.”
The need to “go deep” in each element and, at the same time, cover the full system a
programmatic approach
Management system concept
Program concept
Wave 3
Wave 1
Pilot
IC
Purchasing
▪ One element on
▪ Few
elements to
scale up the
program and
build the
competences
to replicate
▪ Complete the management system working on all the elements
of QG
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Best practices to build a
management system is to work
at business processes/element
level
which test the
optimization/
improvement
methodology
PPE
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Wave 2
Program Management Office
Overall concept
Development and implementation of QGMS means optimize/ improve
every single element of Qatargas business process universe
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6
“Have a pre-flight checklist and flight plan….and follow it.”
Change champion
Programmatic Capability Building ensures sustainability by creating
your Change Champions to lead the improvement initiatives and carry forward the
design and implementation principles
McKinsey & Company
Printed 3/15/2012 9:53:42 AM
SOURCE: McKinsey
Working Draft - Last Modified 22/05/2012 17:13:43
Pilot
▪ Coaches lead the
improvement efforts,
client‟s Change
Champions participate in
initial pilot with peers and
supervisors
Wave 3
▪ Change Champions
Wave 1 and 2
support multiple
▪ Change Champions
improvement areas,
move into leading role for supervising team leaders
increasingly significant
and front-line staff
improvement areas
▪ Coaches provide
▪ Coaches support and
feedback
provide feedback
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“Have a pre-flight checklist and flight plan….and follow it.”
6
Formalized Program Management methods and tools are required
… existing and resolved
issues …
Explicit tracking of program
quality & risks …
Issue matrix
Risk Factor
Low: Keep in mind
4a RISK MATRIX
Progress Reports
Risk Factor
Low: Keep in mind
5b ISSUE MATRIX
Medium: Action required
Medium: Action required
High: Urgent measures
required
D
B
C
E
Proposed measures
Date
Responsible
Overall project
leader
High(4)
Workstream
leaders
Sales and
Distribution
Technical
Wokrstream
Project Office
Red
Status
Issue
A Software
delivery
Deadline
Deadline (new)
Responsible
Description Proposed measures
Date
• Delivery of • Continue test on alpha
10/20/06 10/21/06 11/04/06/ J. Westin
release 1.0
delayed by
two weeks
release
Low(1)
• Set up contingency plan
• Allocate additional
High(4)
Impact
resources to testing
(Importance = Impact x Probability)
Source: Team
23
B Promotor
allocation
•BVA-262309-758-20061107-GE1-client
Allocation • Launch internal
of qualified
promotors
difficult
10/14/06 10/25/06 -
T. Cochran
10/01/06 11/25/06 -
L. Hersh
campagin for promotor
recruiting
• Reach out for outsource
partners
C Product
booking
performance
Source: McKinsey
Source: McKinsey
21
22
BVA-262309-758-20061107-GE1-client
• Average
time to
book a
product
is to high
(>10 min)
• Assess process speedup potential within IT and
process description
• Transfer tasks to Back
Office
BVA-262309-758-20061107-GE1-client
▪ Compiled and tracked optimally
▪ Compiled and tracked by the
by the PMO
Ongoing numbering to ensure
consistency and ability to
reference
PMO
Covers only main issues
"Traffic light" logic to trigger
necessary action
▪
SOURCE: McKinsey
▪
▪
Resource Reports
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D
Description
Regu• Product Roadmap
• Set up meetings with regulatory 10/30/06
latory
interferes with new
board
Environgovernmental
ment
regulation plans Low(1)
Project
• Insufficient project
• Review project plans/milestones 10/31/06
Importance
manage- management and
(Importance = Impact x Probability)
ment
progress control
PoSSource: Team
• Legal danger to
• Revise contracts and set up a
11/15/06
BVA-262309-758-20061107-GE1-client
21
contracts product sales by
task force for negotiations with
loopholes in distributor distribution channels
contract for Points of
Sale
Construc- • Cities obstruct cable • Initiate talks with political leaders 12/15/06
tion Perconstruction works by • Check project plans for speed-up
missions
delaying permissions
potential
First
• Integration of
• Launch marketing campaigns
ongoing
mover
employees
advan• Competitors are
tage
pushing quickly to
market
B
5a Issue report
Working Draft - Last Modified 11/22/2006 11:52:45 AMPrinted 11.10.2006 17:11:35
A
Working Draft - Last Modified 11/22/2006 12:21:47 PMPrinted 11.10.2006 17:11:35
Issue
Low (1)
E proposed measures
4a Risk report – project risks and
C
Issue report
Yellow
B
Green
Urgency
C
A
Working Draft - Last Modified 11/22/2006 11:52:45 AMPrinted 11.10.2006 17:11:35
Quality and Risk reports
Working Draft - Last Modified 11/22/2006 11:52:45 AMPrinted 11.10.2006 17:11:35
High(4)
High: Urgent measures
required
A
Working Draft - Last Modified 22/05/2012 17:13:43
Risk matrices
… and project-wide resources
▪ Regular tracking of project
▪
progress via estimate
completion time
Consistent, transparent tracking
of budget allocation
to work streams is key
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7
Leaders must “LEAD”
John Kotter‟s Critical Success Factors to Sustained Performance
Transformation
5
Empower others to act on the vision
▪ Get rid of obstacles to change
▪ Change structures that seriously undermine the vision
▪ Encourage risk taking and non-traditional ideas,
activities, and action
2
Form a powerful guiding coalition
▪ Assemble a group with enough
power to lead the change effort
▪ Encourage the group to work
together
6
Plan for, and create, short-term wins
▪ Plan for visible performance improvements
▪ Create those improvements
▪ Recognize and reward those involved in
improvements
3
Create a vision
▪ Create a vision to help direct the
change effort
▪ Develop strategies to achieve that
vision
7
4
Communicate the vision
▪ Use every vehicle possible to
communicate the new vision and
strategy
▪ Teach new behaviors by the
example of the guiding coalition
Consolidate improvements and produce still more
change
▪ Use increased credibility to change systems,
structures, and policies that don‟t fit the vision
▪ Hire, promote, and develop employees who can
implement the vision
▪ Reinvigorate the process with new projects, themes,
and change agents
8
Institutionalize new approaches
▪ Articulate the connection between the new
behaviours and corporate success
▪ Develop the means to ensure leadership
development and succession
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Establish a sense of urgency
▪ Examine market and competitive
realties
▪ Identify and discuss crises, potential
crises, or major opportunities
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1
7
Leaders must “LEAD”
Leadership dimensions
Working Draft - Last Modified 22/05/2012 17:13:43
▪ Understand your value needs and system of beliefs and how it influences your behavior
▪ Take accountability and regulate behaviors to create change
▪ Manage energy and attention
▪ Develop strong support network
▪ Leave one‟s comfort zone and commit to opportunities
▪ Use personal vision to motivate self
Lead
self
strategy
Effective
leadership
▪ Examine operational implications
▪ Align the BU strategies with the
▪ Inspire and motivate to action
▪ Turn difficult situations into
overall corporate strategy
▪ Create environment for higher
performance
▪ Communicate inspiring vision
through stories
▪ Define leadership strategies to
shift the broader dynamics
Lead
business
Lead
others
learning moments
▪ Build relationships and networks
▪ Foster collaborative leadership
and decision making
▪ Engage organizational support
▪ Create energy to sustain change
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▪ Develop the business vision and
7
Leaders must “LEAD”
Required Leadership behaviors
Fostering understanding
and conviction
“I know what is expected of
me – I agree with it, and it is
meaningful”
▪ Align management processes (including
Mindsets and
behaviors
Reinforcing with formal
mechanisms
“The structures, processes,
and systems reinforce the
change in behavior I am
being asked to make”
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Developing talent and
skills
“I have the skills and
competencies to behave in
the new way”
strategic, operational, and people planning
and review, 360° feedback, performance
dialogues, and personal development
plans) and systems with the desired
leadership behavior
▪ Set up individual and organizationwide
performance goals necessary to reach or
exceed aspirations
▪ Motivate individual and group
performance and align employee interest
with the organization‟s objectives, through
financial and nonfinancial incentives and
consequence management
▪ Other specific interventions tailored to the
client‟s context
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Role modeling
“I see superiors, peers, and
subordinates behaving in
the new way”
7
Leaders must “LEAD”
Companies with top quartile leadership characteristics have measurably better
performance
59
▪ The likelihood that a company with top1.8x
33
Top
quartile
1 Leadership measured as an element in the Organizational Health Index database
Source: Organizational Health Index database mining effort (N = 60,000)
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Bottom
quartile
▪
quartile leadership has above-median
EBITDA margin is 59%, suggesting it is
a key contributor to financial
performance
Companies with top-quartile leadership
are 1.8 times more likely to outperform
on EBITDA margin, compared with
companies with bottom-quartile
leadership
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Likelihood that top quartile leadership1 has
above-median EBITDA margin performance
%
7
Leaders must “LEAD”
Organizations that invest in developing leaders through business
transformations are ~2.5 times more likely to succeed
Degree of transformation success
Extremely successful
Very successful
Somewhat successful
Unsuccessful
A great deal
1
Somewhat
36
3
7
Not at all
15
53
65
59
39
5
26
23
11
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A little
52
Working Draft - Last Modified 22/05/2012 17:13:43
To what extent, if at all, did your company invest in developing leaders through
the transformation?
%, N = 2,0471
3
3
x 2.4
1 Unweighted data
Note: Because of rounding off, totals might not add exactly to 100%; data weighted by proportion of world GDP, following McKinsey Quarterly
weighting standards
Source: McKinsey Quarterly transformational change survey, January 2010
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| 37
7
Leaders must “LEAD”
Successful approaches to Cultural Change (i.e., values, mindsets, and
behaviors) are fact-based and link aspirations to Program Architecture
Organizational Health
Assessment
Cultural Change
Engineering
J
Area of focus
Architect Programmatic
Cultural Change
Use the influence model to design interventions that address
FROM TO shifts along the four levers
Understanding &
Conviction
“... I understand
what is being
asked of me and it
makes sense.”
Working Draft - Last Modified 3/10/2011 7:46:57 PM
“…I see my leaders,
colleagues, and staff
behaving differently.”
“I will change
my mindset and
behavior if . . .”
Skills required
for change
“…I see that our
structures, processes, and
systems support the
changes I am being asked
to make.”
Reinforcement
mechanisms
▪
Diagnose organizational
health outcomes and
practices
▪
Analyze relative
emphasis of practices
▪
Focus efforts on most
critical practices for a
given archetype
Identify current
activities to address
critical practices and
highlight activity gaps
McKinsey & Company | 13
▪
Use influence model to
design interventions
▪
Construct portfolio of
initiatives to “move the
needle” on practices
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| 38
Printed 3/15/2012 9:53:42 AM
SOURCE: Scott Keller and Colin Price, ‘Performance and Health: An evidence-based approach to transforming
your organization’, 2010.
▪
Printed 3/4/2011 4:36:04 PM
“…I have the skills
and opportunities
to behave in the
new way.”
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Role
modeling
“Laws of Physics” for Sustained Quality and Operations Excellence (OE)
1. Be clear and aligned on “the destination” (i.e., with meticulous alignment to enterprise
vision, mission, strategic objectives, targeted performance and practices)
3. Approach Quality and OE “systemically” (i.e., based on thorough accounting for
interdependencies in related processes and systems)
4. Go to “the work” to make the change (i.e., the only change that matters -- “go deep”,
to the line level)
6. “Have a pre-flight checklist and flight plan….and follow it.” (i.e., Design and
implement programmatically -- with attention to key enablers and key success factors)
7. Leaders must “LEAD” (i.e., with active, visible support and role modeling)
McKinsey & Company
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5. Adults “learn by doing” (i.e., Employ adult learning principles and concepts in training
and capability-building.)
Working Draft - Last Modified 22/05/2012 17:13:43
2. It‟s a “Transformation” -- Design and implement “holistically” (i.e., with balanced
and complete attention to the technical processes and systems, management systems,
Text
and organizational
capabilities and behaviors)
Working Draft - Last Modified 22/05/2012 17:13:43
Thank You.
Printed 3/15/2012 9:53:42 AM
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