I M P R O V I N G T H E P R A C T I C E O F M A N A G E M E NT
By Joseph A. De Feo
Reprint # 9B04TF02
IVEY MANAGEMENT SERVICES • November/December 2004
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Managers obsessed with breakthrough improvements are often overly obsessed with statistics and technology. But data and software won't achieve real, sustaining breakthroughs. As this author explains, it's up to managers to identify opportunities for improvement and mobilize the resources and skills to capitalize on those opportunities. Only then will breakthroughs become a continuing process.
By Joseph A. De Feo
Joseph A. De Feo is the president and CEO of the
Juran Institute. He is the co-author (with William
W. Barnard) of Juran Institute's Six Sigma:
Breakthrough and Beyond, (McGraw-Hill, 2003).
This article is based on the book.
Leaders today face a predicament that is wider in scope and more difficult to overcome than ever before. The way leaders respond to this predicament will determine whether their organizations become market leaders, followers or failures. The predicament I refer to is not a new one. It is the same one that seems to challenge any competitive organization every five years or so: how to achieve sustainable business results while contending with accelerating, unprecedented change.
Why is it that some leaders manage to get their organizations on a path of sustainable performance while others cannot? The answer may lie in the choice of the improvement strategy they employ.
Selecting a strategy based on quality, customer focus and waste reduction seems to be a common theme for successful organizations. This strategy provides a longer-term approach to change, and it results in sustainable change.
Quick fixes (6-12 months) and piecemeal approaches to making organizational changes to improve performance tend to result in isolated and temporary improvements. What is really needed is a means to sustain performance breakthroughs organization-wide, year after year, thus enabling a quick adaptation to changing events.
The Juran definition of breakthrough is "to create deliberate change with a decisive movement to a new and unprecedented level of performance in customer satisfaction and financial performance."
Although breakthroughs can vary by organization, a true breakthrough enables an organization to compete at an unprecedented level compared to its competitors and its performance the previous year.
Breakthroughs of this magnitude can be made and sustained only when the means to achieve them is embedded in the fabric and culture of the organization. Breakthrough improvement is not a one-time event. It is a continuous process that can rescue an organization from its predicaments and help it deal successfully with accelerating change that is not only fraught with danger, but also abounds with opportunities.
It should be noted that business change and improvement initiatives are all too often doomed from the start because they were not supported by the organization's leaders, or the organization wanted a quick ROI. Other times, a successful initiative is abandoned because the results did not meet
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expectations quickly enough.
We have monitored lessons learned for three decades and have found six reasons why organizations fail to sustain performance improvements:
1.
Winning : Becoming the market and/or profit leader or lowest-cost producer can distract an organization from the need to improve continuously.
2.
Change in leadership : An executive who is leading the transformation leaves, and the successor discards initiatives that are ongoing, whether they are working or not.
3.
Impatience : The organization tires of its initiative to improve and moves on before it can yield sustainable results.
4.
Reduction in improvement methods :
The infrastructure that enabled the improvement was not maintained.
5.
M&A activity : A merger or acquisition forces an initiative's postponement or derailment.
6.
Global macroeconomic events : The organization is blindsided by change it did not foresee or grossly underestimated
History demonstrates that some organizations wait too long before initiating a process to deal with an urgent need to bring about change. When a decision is eventually made, the organization doesn't know what it should do differently. As a result, it may embark on an initiative that yields less than expected, and often considerably less. The development of a
Six Sigma effort or similar organization-wide change, for example, might provide disappointing results because it lacks some essential elements. These elements may not enable the organization to achieve performance breakthroughs. To be sure, a successful journey includes various phases an organization must pass through. We have plotted these phases on a road map of performance breakthroughs that need to occur to avoid these situations. We will discuss that road map further down in this article.
First, we discuss the five key breakthroughs that must occur.
The five key breakthroughs
Five distinctly different breakthroughs must occur before an organization can sustain its results.
1. Breakthroughs in leadership
Leadership breakthroughs occur when managers know the answers to questions like: "How do I set performance goals for my organization and activate the people to reach them?" "How do I best utilize the power of our people and other resources in my organization?" "How should I best manage them?"
"How can I 'walk the talk' and lead by example?"
Leadership breakthroughs do the following:
• Clearly espouse performance goals to drive customer satisfaction
• Clearly articulate and inculcate the mission, values and norms expected in the behaviour of employees
• Mobilize an organization to pursue these goals and live by its values
2. Breakthroughs in organization
• Design and establish an organization's infrastructure and operational system to deal with multi-functional issues
• Design and put into practice a formal structure that relates each function with all the others, with appropriate authority levels and reporting lines
• Align and coordinate interdependent functions into a smoothly integrated whole
3. Breakthroughs in current performance
• Establish a process to understand the root causes of current chronic problems and eliminate them
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• Place the processes in a state of self-control to prevent the return of the causes
Process problems almost always boil down to just a few specific species of things that go wrong, including excesses in number of defects, delays, cycle times, and costs of reworks, scrap, late deliveries, failure to deal with dissatisfied customers, replacement of goods, and loss of customers and goodwill.
4. Breakthroughs in culture
• Create a set of behaviour standards and a social climate that best supports an organization's goals
• Inculcate in all functions and levels the values and beliefs that guide behaviour and decision-making
•
Determine cultural patterns such as style, extent of internal-versus-external collaboration, high-versus-low energy/ morale, etc.
Breakthrough in culture is a response to the basic question: "How do I create a social climate that encourages employees to march together eagerly toward the organization's goals?"
Leaders who want to make breakthroughs in culture must deal with issues like:
• The organization's publicly stated vision and mission
•
Orientation of new employees and training practices
• Reward and recognition policy and practices
• Human resource policies and administration
• Quality policy that focuses on its customers
•
Commitment to customers and their satisfaction
• Commitment to continuous improvement
• Conduct codes-including ethics
• No "sacred cows" in people, practices and core business content
• Organizational citizenship and public relations
5. Breakthroughs in adaptability
• Create structures and processes that sense changes or trends (voice of the marketplace) in the environment that are potentially promising or threatening
•
Create structures and processes that evaluate that information and refer it to the appropriate person or function
• Build an organizational structure that facilitates rapid adaptive action to exploit promising trends or avoid disasters
Organizational change: The challenge for leaders and employees
"Breakthroughs in adaptability" is a response to the question: How do I prepare my organization to respond quickly and effectively to unexpected change? Designing and implementing a process to respond to such change begins with an organization's leaders and ultimately involves its employees.
Organization-wide performance breakthroughs begin with three basic processes known as the Juran
Trilogy :
•
Planning processes to create strategies, plans, innovative products, services and processes
• Control processes to prevent and/or correct unwanted change in day-to-day processes
• Breakthrough Improvement processes to create purposeful and unprecedented beneficial change
The guiding force behind the Juran Trilogy is Dr.
Joseph M. Juran, who founded Juran Institute in 1979 and popularized many of the tools and techniques on which Six Sigma's methodology is based. Dr.
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Juran made organizations aware that they must prepare for the growth of severe international competition, and showed them how to combat that competition successfully.
It is essential, Dr. Juran said, to choose the right strategy. Most failures are due to a poor choice of strategy. Many upper leaders lack the knowledge of how to manage for quality and, when pressed, make what they believe are reasonable decisions. In fact, these decisions are the wrong ones.
Dr. Juran also noted that managing-forperformance breakthroughs begins with understanding the processes of The Juran Trilogy.
The planning process includes these elements:
•
Identify customers (often hidden customers)
• Determine customer needs
• Develop product or service features to meet customer needs
• Establish product and service performance goals
• Develop a process to meet those goals
• Prove that the process can meet the goals in operating conditions
"When the planning process is complete," Dr. Juran said, "turn the responsibility over to the operating forces to maintain control, for detection of any deficiencies traceable to the quality planning process, and quality improvement-the main road to quality leadership. Their job is to maintain the level that management established, not to replan. The challenge then is to reduce deficiencies, rejects or errors to the level that has been planned and is acceptable."
As we carry out our day-to-day processes, we must periodically focus on improving them. The breakthrough improvement process must be established to carry out improvements project by project. This universal breakthrough strategy involves these steps :
• Identifying specific projects for improvement
•
Organizing project teams with the responsibility to make the improvements
• Discovering the causes of any variation that prevents the current performance from satisfying the customers
•
Developing remedies
• Proving that the remedies are effective under operating conditions
• Dealing with the cultural resistance, and
• Establishing controls to hold the gains
An effective breakthrough improvement initiative must include the tools and techniques to solve problems, such as the DMAIC process (Define,
Measure, Analyze, Improve and Control). Using these tools and techniques appropriately will prepare an organization to continuously improve at rates faster than competitors. Performance improvement never ends.
A road map for change
We have found that organizations that are successful follow a comprehensive road map to achieve and sustain beneficial change. Sudden
"explosive bursts" of change in specific projects can occur, but it may take months or years before the cumulative effect of many coordinated and interrelated efforts provide maximum results. While the effort usually begins as a response to a crisis, it should be a planned initiative. The road map helps an organization remain competitive in the global marketplace by identifying long-term business goals, marshalling the resources needed, and meeting the goals.
The road map represents a systematic - not prescriptive - way of achieving organizational change. It brings about a positive systemic change, not a technological change in the way business is done. One project will not change a culture. Many
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projects that are managed effectively will be needed to meet long-term gains.
To implement the road map successfully, it is important to examine what the organization is changing from, and what it hopes to become. A typical organization that wants to change may be facing challenges like the following:
•
Higher operating costs and lower-thandesired profits
• A system where productivity comes first over customers and quality, often sacrificing customer satisfaction to meet schedules
•
Slow response to complaints or needed corrective action
• Lack of creativity and initiative in new processes or product or service designs
• Lack of employee-management trust
•
Little collaboration or employee participation
• A pervasive attitude that quality is someone else's job
Such an organization should consider these goals:
• Greater profitability through leaner processes and greater productivity
• Customer-focused staff that responds quickly to complaints
• Continuous improvements of all processes
• Employees empowered in a state of selfcontrol to maintain performance levels
• A flexible organizational structure
•
An organization-wide belief that quality is everyone's job
• Vision-driven leadership
• Values that include high moral standards, ethics, teamwork, involvement and risktaking
An organization that is not meeting customer expectations must change if it is to survive. The level of change needed will be determined by the resources, energy and degree of commitment to bring about the change. It is difficult to quantify change, but looking at Figure 1.1 (All Figures in
Appendix), one can get an idea that transformational change or radical change is different from incremental change.
Indeed, any organizational change must be integrated slowly to give employees the time needed to adapt. Change processes must invade a culture through a pilot effort that can then expand to other parts of the organization with greater success and less resistance than before. Organizational change is very similar to an antibiotic attacking a virus.
When a patient takes a drug daily, the patient slowly builds up an antibody to attack the virus. The virus invites the drug into its system, and the drug begins to kill the virus. Health returns to the patient, much as it would in an organizational culture.
The five phases
The five phases of the road map (Figure 1.2) are
Decide, Prepare, Launch, Expand and Sustain .
Each phase is independent of the others, and each part of an organization will respond differently to the changes taking place. This means one unit can remain in one phase longer than another.
1. Decide
The decide phase (Figure 1.3) begins when the executive team concludes change is needed if the organization is to meet constituent expectations. It ends when a decision is made to prepare a clear plan for change.
To understand the level of improvement needed, an organization must have new or better information about itself. A world-class quality system review will provide the needed data about customers, culture, strengths, performance problems, attitudes toward change, key business processes, cost analysis of poor-performing products and services, and the determination of the business case for change.
A typical review recommended for organizations
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embarking on a Six Sigma transformation initiative is shown in Figure 1.4.
From these assessments, the executive team should have the qualitative and quantitative information needed to define an implementation plan. The plan must include an infrastructure to steer the changes, methodology and tools to be used, goals and objectives, and a detailed plan for achieving results.
2. Prepare
The executive team should develop a pilot effort to test changes in a few business units before implementing the changes in the total organization.
This phase begins by deploying the plan created in the Decide phase and ends after the successful launch of pilot projects (Figure 1.5).
3. Launch
In the Launch phase (Figure 1.6), the organization identifies potential improvement projects that must be carried out to meet the desired goals; launches pilot projects; reviews progress; and enables success.
As projects are completed, the executive team evaluates what did and did not work, and either abandons elements or makes changes and expands the plan throughout the organization.
4. Expand
The Expand phase (Figure 1.7) can take months to deploy if the organization's employees are in the hundreds, or three to five years for an international company with thousands of employees. Positive financial results will occur long before cultural changes take place. Staying in the Expand phase is not necessarily bad. An organization must continue to implement change unit by unit until the entire enterprise has had time to implement all of the desired changes.
5. Sustain
The sustain phase (Figure 1.8) occurs when an organization has a fully integrated operation, and all improvements and goals are aligned with the established strategy and deployment plans. Key business processes are defined and process owners are assigned to manage each unit.
Employee performance reviews and compensation should be aligned with the changes that were made and the responsibilities now in place. Those who comply should be rewarded, or desired behaviour changes will not take place and the organization will risk the loss of loyalty and compromise its credibility for making change.
Top management and unit managers must conduct regular reviews and audits of the change processes and consider whether changes or new strategies are needed.
The Sustain phase will help the organization learn more about its capabilities as well as about its customers and other constituents. This process may lead to changes in strategies. This phase endures as long as the organization meets its financial goals.
Macroeconomic events can cause deviations that require a review to determine what must be changed.
The need for critical mass and cultural change
Many organizations make changes, but do not complete enough projects to impact the bottom line or produce noticeable change in the organization's culture.
The Juran Road Map addresses culture as well as processes only after a series of projects that demonstrate the benefits of change. As each process improves, employees are affected in a way that demonstrates what is and what is not important to the organization. Meeting cultural resistance is part of the overall process of improvement. Employees must support the change.
Each step of the road map and the time it takes can vary in different companies. Typically, an organization takes up to 18 months to decide to
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change, another 12 months to plan, an additional
12 to 24 months to start, and multiple years to expand. Large organizations may take three to eight years to achieve lasting cultural change.
The essential elements for success include:
• Sufficient numbers and the productive employment of internal experts such as Six
Sigma Black Belts, who become drivers and propel their organization to best-in-class
•
Extensive training in tools and techniques for all employees that enables learning to take place and institutionalizes the productive use of the tools
• Systematic application and deployment through proven methodologies like Six
Sigma to create a common language
• A focus on reducing costs and making breakthrough bottom-line results possible by eliminating deficiencies that impact its customers
• Improved processes and services that produce a significant increase in customer satisfaction
Even small-scale changes can provide impressive results. On a larger scale, the reduction in costs of poor-performing processes can have a significant impact on the bottom line. On yet another level are the potentially large increases in revenue that result from creating better services and products that customers want and continue to buy. And last, but not least, is the long-term impact of cultural changes that make employees goal-driven and improves their productivity.
Management must be leaders-not cheer leaders!
Unless there is committed leadership and a sense of urgency, breakthrough improvement efforts will provide disappointing results. Exhortation of employees or the vague definition of goals will fail to provide the needed legitimacy. Lack of direct involvement by management can cost two to three years of delay, divisiveness and lost credibility.
Success can be truly achieved only if upper managers:
•
Serve on the executive "steering team"
• Approve the strategic goals
• Allocate the needed resources
• Personally review progress
• Give recognition publicly
•
Serve on project teams
The responsibilities above cannot be simply delegated. Every successful breakthrough improvement effort requires the direct participation of upper management. Success is based on management, not on technology or statistics.
Managers must identify opportunities for improvement, mobilize the resources and skills to capitalize on those opportunities, and make wise choices when selecting the tools and techniques to meet goals. Following this path will lead organizations on the road to making breakthrough improvements a continuous process.
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Figure 1.1
Fix as Fail
Self-Inspection z
Check z
Inspect z
Quality
Control z
Revise
z
"As-is" z
Minor modifications z
5S z
Root Causes are not always identified z z z
Bes t t in
Clas z
Customer Focused
Quality
Improvement
Lean
Manufacturing
Process flow revisions z
Re-Design z
Creative thinking z
Innovation z
Six Sigma z
Benchmarking z
New technology
Figure 1.2
Sustain
Expand
Launch
Prepare
Decide
Phase 1
Yes to
Deployment
Organization/Partner
Phase 3
Phase 2
-Up Front Planning
-Establish
Infrastructure
-Executive
Onboard
- Initial Training
- Pilot Projects
Time
Phase 5
Phase 4
- Expand Training across the organization
- Transition Training from Juran to
Client
- Integrate, Audit,
Measure, Assess,
Review, Inspect,
Focus
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Figure 1.3
Sustain
Expand
Launch
Prepare
Decide
Phase One (Decide) Starts With The Questions—
Do We & How Do We Pursue The Transformation?
1. Learn about the transformation methodology
2. Assess your organization status to identify strategies and the goals
3. Integrate and align “quality” goals into business plan
4. Determine if how the transformation initiative will be integrated with other methodologies and initiatives already in the organization
5. Identify desired scope of change (e.g., spectrum of deployment- business unit, company-wide?)
6. Discuss other initiatives and their impact on resources
7. Determine preliminary scope, goals and business case for deploying the change system and make decision to deploy
8. Select an external partner to help deploy the changes needed and keep you on track
Figure 1.4
• Product Development
• Production
• Supply Chain
• Order Fulfillment
• Support Processes
• Etc.
CUSTOMERS
(Loyal
Customers)
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Figure 1.5
Sustain
Expand
Launch
Prepare
Decide
Sustain
Expand
Launch
Prepare
Decide
1. Establish infrastructure
ƒ Identify the Change Initiative Leader
ƒ Form the Executive Council
ƒ Form other Steering Committee(s)
2. Establish the initiative Goals
ƒ Assure they are aligned to company goals
ƒ Finalize business case
3. Conduct HR planning
4. Address finance issues
5. Develop and begin implementation of the communications plan
ƒ Internal
ƒ External
6. Identify and select pilot projects for training and beyond
7. Begin Developing a Balanced Business Scorecard
8. Establish appropriate metrics and initiative tracking
9. Finalize Deployment Plan
Figure 1.6
Action Item
1.
Train onboard remainder of management team
ƒ Champions
ƒ Other managers
2.
Conduct pilot training and projects
3.
Support and monitor projects
ƒ Juran
ƒ Champions
ƒ Executives
4.
Measure and review progress
5.
Review lessons learned
6.
Make decision – Go/No Go?
How Juran Can Help
1.
Executive and Champion training, mentoring and coaching
2.
Employee training, mentoring and coaching
3.
Project support
4.
Establishment of key metrics
5.
Analysis of progress
6.
Input into decision process
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Sustain
Expand
Launch
Prepare
Decide
Figure 1.7
Action Item
1.
Modify original deployment plan based upon lessons learned and current thinking
2.
Expand (per revised deployment plan)
ƒ Other organizational units
ƒ Other geographics
ƒ More “experts”
ƒ More projects
ƒ Additional training (Design for Six Sigma, Master Black
Belt, etc.)
ƒ Other
3.
Communicate success of pilots and ongoing projects
4.
Maintain robust project and selection process
5.
Establish objectives for
Executives and Employees
6.
Measure, review and inspect
7.
Transition training from Juran to
Client MBB
How Juran Can Help
1.
Executive and Champion training, mentoring and coaching
2.
Employee training, mentoring and coaching
3.
Transition planning and implementation
4.
Train-the-Trainers
5.
Licensed materials
Sustain
Expand
Launch
Prepare
Decide
Figure 1.8
1. Conduct audits and take action as appropriate
2. Continue to assess culture and act on gaps
3. Measure, review and inspect
4. Stay focused on the customer and the bottom line
5. The most critical cross-functional processes are managed best by permanent cross-functional business process management teams led by a formal process owner.
6. Strategic goals for the organization must include measurable, stretch goals related to such areas as customer loyalty, product performance, competitive performance, costs of poor quality, and internal quality culture.
7. Upper managers must personally review and audit progress toward quality goals.
8. All employees must be trained to know what is expected of them, know how they are doing with respect to those expectations, and have the skills, tools, and authority to regulate their work to meet the expectations.
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