Leading Change: On Target, On Time, On Budget

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Leading Change On Target, On Time, On Budget

• HIMSS
• Dutch Holland, PhD
• February 2005

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Management Trends/Movements
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The Latest and Greatest

• Whats hot in your business?

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Whats Hot

• Whats hot in general?

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Whats Hot

• Global Best Practices (GBP)

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Whats Required

• Leading Change Effectively

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Todays Business Reality

• Companies have two things to do
• Run the Business to get products and services out
  the door and get paid for them this month
• Change the Business to ensure the organization
  will be competitive in the future
• To say it another way
• Companies must Run the Business to eat at the end
  of the month
• Companies must Change the Business to eat this
  time next year

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The Dual PerspectiveNeeded for Leading Change
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The Problem in a Nutshell!

• Companies run their businesses well
• Fedex delivers 99.97 of its packages
  successfully
• Companies change businesses poorly
• The typical big company successfully changes
  itself on 30 of its change trials

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Run the Business/Changethe Business
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Reasons for the Lack of Change Success

• Organizations are hard to changebut we need to
  change them anyway!
• Most leaders are managers and know how to keep a
  business going but not how to change it
• Not trained in changing the business
• Not experienced in changing the business
• Not suited for change the business leadership
• Not willing to put in the energy and stomach
  lining that is needed
• Change tools are not widely available and stress
  mysterious means

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Consequences

• Organizational change without effective change
  leadership might workeventually
• People will muddle through it
• Muddled-through change has real costs

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Consequences

• Economic Costs
• Delay or total loss of business case value of the
  change
• Costs of work-arounds and do overs
• Potential of missed / messed up sales
• Potential of customer dissatisfaction because of
  messed and/or slow sales
• Competitive gains they gain while you delay
• Your worst nightmare at Halloween Hershey misses
  an entire Halloween candy season!!

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Consequences

• Organizational / People Costs
• People overloaded and playing catch up
• Organizational stress increases
• Loss of confidence in management
• Morale plummets
• Feelings of failure and frustration
• Turnover (actual or virtual)
• Cynicism develops and spreads
• Your worst nightmare you work your buns off and
  have nothing to show for it or you are blamed
  for failure careers ruined

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Steps to a Change-the-Business System

• We have identified, tried and tested seven steps
  for putting a Change-the-Business System in place
• While the steps look and sound simple
• leadership attention
• time
• discipline
• will be required to move to a true, balanced
  RTB/CTB business approach
• Leaders must lead, not delegate, a CTB System
  into existence

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Step One Adopt Dual Perspective

• 1. Envision running the business (or doing
  business) as separate from changing the way we
  run the business.
• 2. See run the business in terms of customer
  business (i.e., getting products and services
  out the door to fill customer orders).
• 3. See changing the way we run the business in
  terms of changing attributes of the business.

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Step TwoAlign Power Sources

• 1. Both running the business and changing the way
  we do business require energy/power.
• 2. Focus top managements attention on change
  focus other management on running the business.
• 3. Ensure top management has time and
  concentration to focus on change.
• 4. Top managements first step should be to
  clarify the way the business will be run.

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Step TwoAlign Power Sources

• Examples Predict what happened!
• The COO of large financial services firm hands
  off RTB responsibilities for one year, and moves
  his office to one next door to his CTB team
• The CEO selected his successor, named him
  publicly and encourage him to be the leader of
  the companys strategy development and
  implementation team
• The CEO of a large energy company named a
  recently removed Regional manager to head the
  corporations Change Team (so I wont have to
  fool with it, says the CEO

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Step Three Clarifythe Vision for the Future

• 1. Determine a vision that is
• Valid
• Complete
• Feasible
• Resourceable
• Compelling
• 2. Arrange to communicate the vision.

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Step Three Clarify theVision for the Future -
Example

• By 2005, our company will be the market share
  leader in both commercial and US military
  aircraft
• We will win leading market share by having
• The best aircraft reliability ratings in the
  industry
• Lowest operating cost per hour
• The highest customer satisfaction scores in the
  vertical lift market
• We will prepare to win in the future by flying
  and certifying a commercial tilt rotor aircraft
  that bridges the vertical lift and short hop
  markets

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Step Four Set Agendas

• 1. Set agendas for running the business and
  changing the business.
• 2. The annual business plan is the run the
  business agenda for most companies.
• 3. Set a change agenda that targets company
  attributes that must change to reach the vision.

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Contents of the Business Agenda - Example

• 2004 Operating Plan / Targets
• ROI - 21
• Free cash generated - 52 million
• Market share for commercial helicopter sales -
  34
• Secure funding for Production Phase of V-22
  3.5 billion
• Average aircraft reliability index 98.5
• Win the Canadian Air Force procurement for medium
  helicopters

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Contents of the Change Agenda - Example

• 2004 Change Agenda
• Complete instrumentation of Test Fleet
  (supporting the best aircraft reliability
  ratings in the industry)
• Form and charter the Customer Reliability
  Panel (the best aircraft reliability ratings in
  the industry)
• Complete the insurance reliability study to
  qualify for lower premiums for helicopter
  operators ( the lowest operating cost per hour)
• Complete and open for business the New Customer
  Reception Center ( the highest customer
  satisfaction scores in the vertical lift market)
• NOTE these four wont achieve the Vision, but
  they do advance the ball toward the Vision

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Two OrganizationsNeeded for Change
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The Organization Chartfor Change
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Step FiveEstablish Scorecards

• 1. Agendas have no weight without accompanying
  scorecards.
• 2. Scorecard results must have real consequences
  for the organization members i.e., tied to
  incentives!

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Contents of Scorecards

• 1. Identify the specifics that will be graded.
• Run-the-Business scorecard
• Business results for period
• Financial targets
• Change-the-Business scorecard
• Completed actions on change targets
• Financial targets
• 2. Specify how well the specifics must be done to
  achieve a maximum score.
• 3. Cross-check scorecards with vision.
• a. Directional correctness
• b. Level of stretch

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Scorecards and Compensation - Example

• Major Plastics Manufacturer
• Philosophy the CEO said, My managers earn
  their salary by hitting our annual targets. They
  are not eligible for incentive compensation
  unless we hit RTB targets as a company and they
  individually hit their CTB targets
• This philosophy pushed company to
  industry-leading quality and customer
  satisfaction levelsand cost two members of exec
  team their jobs for not achieving CTB targets

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Mind-boggling Fact

• Companies have trouble getting change
  donebecause managers / employees are only
  evaluated, promoted, and incentivized on
  Run-the-Business performance (I.E., their
  regular job)
• In other words, we pay people not to change!!

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Step Six Establish Forums

• 1. Forums are opportunities for leaders to work
  with agendas and scorecards (meetings or calendar
  periods).
• 2. Two forums are needed to emphasize the dual
  perspectives
• Similar priority
• Similar structure
• Similar operating rules

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Step Six Forums Examples

• Helicopter Company
• RTB and aircraft deliver Status Meeting every
  Tuesday afternoon, attended by COO and Executive
  Team
• CTB Status Meeting first Monday of every month,
  hosted by CEO and COO each CTB agenda item
  reviewed
• Grocery Company
• RTB statusevery Monday AMwith senior team hot
  problems and workarounds
• CTB statusevery Monday PM.with same senior team
  in same exec conference room status of each CTB
  project

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A Final Check on RBCB

• Have each leader construct and
• explain two wall charts

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A Final Check on RBCB

• Run the Businesslooking around the room at the
  wall charts should show folks who are responsible
  for achieving company RTB agenda for the year
• Change the Businesslooking around the room at
  the wall charts should show the folks who are
  responsible for achieving the company CTB agenda
  for the year
• How do you think your managers would do?

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Leading With Business Opportunities

• Use Run-the-Business Opportunities to shape the
  contents of Change Agenda
• Pick Change agenda items to match executive
  interest in business opportunities
• Flex Change agenda items (I.e., cancel or
  postpone items) around opportunities

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Leading With Business Opportunities - Example

• Helicopter Company
• Had just started cycle time reduction pilot
  project when big deal order came in from
  Canadian Air Force
• COO decided to personally lead the the Canadian
  project and use it as the cycle time reduction
  pilot
• Oilfield Service
• Set Vision to go global with their services
• Project underway to open Singapore office in 1998
• Big order came in from Saudi Singapore office
  put on hold while new office opened in Riyadh

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Leading With Business Opportunities

• 1. SCAN business opportunities/transactions and
  evaluate each as a potential carrier of change.
• 2. SELECT and projectize opportunities.
• 3. LEAD the project(s) to business and change
  success.
• 4. LEVERAGE results of project for business and
  change.

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Manage the Portfolio ofChange Projects - Example

• Engineering / Construction Company
• Nine CTB projects workingall focused on ROI
  improvement through developing infrastructure
• Employees felt there is noting in all this hard
  work for us cooperation was low
• Upstream Energy Company
• Company has lost momentum on change projects
• Inventory showed 72 projects underway, all
  sponsored by the Senior Executive Team
• CEO put 65 on hold until progress was made on
  seven

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Bottom Line onChange Leadership

• Change Leaders must flex around
  run-the-business issues/opportunities
• Change Leadership is not delegatable but personal
• Change Leadership in not reactive but pro-active
• You do it personally even if you have helpers
  attached to the hip

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Fast Takes for IT
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Business Red Zone

• Changes are not all the same
• Some changes are sweeping and far reaching they
  are Make it Big or Break it Bad Changes
• We label those changes as Red Zones.

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The Red Zone

• The Red Zone is a critical time and place in the
  life of an organization that is characterized by
  the simultaneous presence of
• The opportunity for Great Gain
• and
• The real likelihood of Great Loss
• In the Red Zone, failure to achieve the Gain will
  result in the Loss

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The Red Zone

• R e d Z o n e

GAIN
Company Performance
LOSS
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Red Zone Maneuvers

• The most important Red Maneuvers are as follows
• Change of Competitive Vision/Strategy
• Merger/Acquisition
• Macro Reengineering (Enterprise or Process)
• Big System Implementation (ERP or e-business)
• Enterprise restructuring and/or downsizing
• Culture Change
• Combinations of the above
• The purpose of each maneuver is to grow the
  company.

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The Organization Chartfor Big IT
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Negative Trend

• At the very time IT should be running toward the
  information
• IT is running toward the technology!

TREND
Information Technology
NEED
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Intimidation

• IT frequently costs itself a seat at the table
  because of
• Java, Java

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and In Conclusion

• Change is the Rule
• So we better get pretty darn good at doing it!