From Data to Results Part 1
By: Martin Piplits
Successfully Managing Change
It may come as no surprise that large scale change initiatives don’t always go according to plan. Recent research conducted by the Wall Street Journal and McKinsey shows that the majority of change projects in manufacturing fail or do not achieve the planned targets. A recent McKinsey survey reported that more than 80% of companies are stuck in a project pilot for more than a year. Furthermore, three out of ten projects never get actually started with the implementation at all. All this results in exhorbinant costs, process inefficiencies, and probably more than a few disgruntled employees.
Many of these projects are originally driven by a change or upgrade to technology and/or manufacturing processes. Generally speaking, when these types of large scale change initiatives are planned and implemeneted, the focus is primarily (if not exclusively) on the technology itself – the software or system being implemented. Rarely is adequate consideration given to the people component – the resulting shift in individual expectations,roles and responsibilities, business processes, and so on. In most cases, what seems at the beginning to be an IT driven project, is really a full-scale organizational change project, and technology is simply playing the role of the enabler. Ultiamtely, it’s the organization’s ability to reflect on the human component resulting from technological change that ultimately determines the success or failure of a change management initiative.
A successful organizational transformation requires three essential elements: the right people, the right processes, and the right tools. What is “right” is determined by the organizational culture, leadership, and ultimately by organizational goals. A change to just one of those key elements – for example by implementing a new ERP system – is not enough. In order to be successful, an organization needs the right people and the right processes to be enabled to make use of the new tool, in order to be able to convert data and information into outcomes and results. Bottom line, changes in technology need to go hand-in-hand with organizational change.
To add another layer of complication to the mix, we need to take into account today’s business reality. We are faced with volatility, uncertainty, and complexity on a daily basis. We operate in an environment which can fluctuate tremendously from one month to the next. For many companies, operational metrics are not available in real time, which results in missed opportunities or failure to react quickly enough to mitigate risk. The solution is organizational agility in combination with real-time, high-integrity data to enable rapid decision making in today’s complex business environment.
The High Performing Organization
We are faced with a paradigm shift; successful companies must create an agile, fast-paced, high-performing organization which makes use of additional insights, analyzes deviations, and takes internal and external developments into account more quickly than ever before. However, an expensive, best-in-class tool which creates real-time data and operational transparency is not enough to maximize ROI and enable long-term success on its own.
How do we create a high performing organization which allows us to transform data and information into outcomes and results? We need to break from the way things have always been done and fundamentally shift management style to align with a data-driven culture. This means eliminating the micromanagement, centralized decision making, and “shut-up and color” attitudes which prevail in an alarmingly high percentage of organizations. We need to change our management paradigm in order to truly embrace and benefit from advanced shop floor management principles and tools. For example, while our tools in the past allowed for manual, decentralized data collection, we now need to use real-time, reliable, automated, and transparent performance data to make informed decisions as fast as we can in order to stay ahead.
In addition, and most importantly, we need to align our organizational goals and KPIs, look carefully at our management processes in order to move from top-down micromanagement and centralized decision making, to empowerment and decentralized decision making.
The Need for a Plan and a Pilot
Without a plan and clear targets for what needs to be accomplished, everything we do is almost guaranteed to be a waste of time and resources. The initial step of any large project, which has the potential to touch every aspect of an organization, is the selection of a pilot or “proof of concept” phase. I will provide supplemental pilot selection guidelines later on in this series. For now, it is important to acknowledge that the selection of the right pilot is crucial, as it will allow us to test our assumptions, confirm and/or modify them, and ultimately determine the success drivers for our organization. Without having a clear understanding of the people, process, tools triangle, we are unlikely to achieve our desired results – our investment in operational improvement becomes a gamble.
When designing the pilot and later on the implementation phase, the first step is to create alignment and transparency. Organizational roles, responsibilities, reporting hierarchies, compensation, score cards, etc. need to be consistent and congruent throughout the organization, allowing us to identify root causes, hold people accountable, ultimately achieve our organizational results.
Vertical alignment ensures that, if every organizational unit, cell, team, and functional business unit achieves its individual targets, the organization as a whole will achieve its overall goals. I have worked with countless organizations where everyone achieved her/his individual targets but the organization as a whole failed to reach its goals. This is an indicator that not all success factors have been identified relative to the overall organizational goal and are not reflected in the target hierarchy throughout the organization.
Horizontal alignment ensures that roles and responsibilities are unique as related to specific business processes – in order to avoid accountability overlaps and finger pointing – and targets and reporting are consistent with those roles. For example: if the KPI score card for your unit includes performance indicators which are not fully under your control, you probably will not completely accept responsibility and will object to being held accountable for the results. Typical symptoms for a lack of horizontal alignment are “finger pointing”, lack of accountability, and insufficient corrective action – as no one really knows who is responsible.
In the next installment in the Data to Results series, I will address the role of an effective pilot in driving organizational change. Future topics will also include focus, consistency, transparency, decentralization, and empowerment. Please contact me at firstname.lastname@example.org any questions or comments.