BetaCodexC1 - Case Study "Paradigma" on Transformation

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Case study of a Beyond Budgeting transformation project

Text of BetaCodexC1 - Case Study "Paradigma" on Transformation

  • 1.Beyond Budgeting at Paradigma. What it means to us and how we make it real! BBRT Europe 41 meeting, 1 April 2008 1

2. The Paradigma group 2 3. The Paradigma group The man behindSolar energy Wood pelletsGas-firedthe business ideasystems systems condensingsystemsWhat have Paradigma solar collectors achieved in terms ofenvironmental protection, up to now?Carbon dioxide savings: 200,000 tonsFuel oil savings: 80 million liters 3 4. October 2006 the inspiration for the beyond budgeting journey at our firm (or: The slide that really got me thinking)Evolutionary pathways within an organization's life Low degree of decentralization/Classic evolution path: empowerment and Differentiation stagnation within the fixed performance phase tayloristic model contracts: in conflict with today's critical success factors! Transformation - Revolution through radical devolution andClassic evolution path:decentralization (alternative path!)professionalization,bureaucratization andThis is our path now!functional differentiation High degree of decentralization/ empowerment with relative Maintenance of empowered, Sustaining and performance Pioneeringtrust-based culture, in spite ofIntegrationdeepening of the contracts: aligned phasegrowth (alternative path!). phase decentralized model, with today's critical through generations success factors!FoundationTime scale: organization's ageSeveral decades old Source: Niels Pflging, Leading with flexible Targets. Beyond Budgeting in Practice, 2006 4 5. Beyond Budgeting at Paradigma - how it started Some steps that initiated our journey. October 2006 COGNOS Performance 2006 everything started here December 2006 Niels Pflaeging meets Paradigma for a first conversation. February 2007 1 1/2-day in-house introductory workshop onBeyond Budgeting with some managers.Workshop led by Niels and Gebhard Borck. 5 6. Beyond Budgeting at Paradigma - how it started March 2007: Decision among the 5 general managers: Result: We will do it.. Planning of next steps. Sunday, 15.04.2007: Getting the owner on board 1-day workshop with Alfred Ritter. Result: Do it, I am at your side! Monday/Tuesday, 16./17.04.2007: 2-day Workshop with the team of 26 German managers of Paradigma Group, plus 2 employee representatives. Result: We will do it together. May 2007: Formal project start first small implementation steps6 7. Beyond Budgeting at Paradigma how we started: Speed of change area of indirect influencepersonal areaarea of noof (direct)influence influenceReading:possible speed of change per actionSource: Influence Speedo - Gebhard Borck 7 8. Beyond Budgeting at Paradigma how we started Communication activities to reach all Paradigma employees, during the earliest stage of the initiative Beyond Budgeting book and Our Iceberg is Melting book for all employees Information about Beyond Budgeting on the intranet Departmental talks Since June 2007: Tandem Meetings. These are frequent, open discussion forums with 12 participants max., at the various locations of Paradigma group (moderated by a tandem of members of the Guiding Coalition), 8 9. Beyond Budgeting at Paradigma how we started 9 10. Beyond Budgeting at Paradigma how we startedMixed feelings among our employees Where the hell is the project plan with fixeddeadlines for all those involved? Who is responsible for these changes? This sounds great but what are thespecific actions required? Top management and middle managementshould give it a start and prove thiswith their good example first.I don't trust them. This seems to mean that managers will bepassing on responsibilities to commonemployees so they will work (even) less andwe will have to do all the stuff!10 11. An initiative for full model transformation, since mid-2007:At Paradigma, beyond budgeting becomes FIRE! Flexible(responding adaptively to market demands) Integration(of all organization members into the transformation process) Respectful(in dealing with people and the environment) Effective(as an organization and as people within the team) 11FIRE 12. Our change manifesto: Writing up the case for changeThe change manifesto is aimed togive all people in the Paradigmaflexible boundaries for action. Manifesto Task Force with 12 people on board including full general management team and employee representatives Started work in May 2007 and concluded version 1.00 in September 2007 First rounds of Tandem Meetings on the Change manifesto, version 1.00.Summer 2007: Paradigma becomes a member of the BBRT.12FIRE 13. Our change manifesto Among the contents: Our business model (redefined with help of the consultants) 12 new core values and the 12 principles of the beyond budgeting model constitute the foundations ofour collaboration.Everyone within the Paradigmagroup can refer to it!13FIRE 14. Our change manifesto:Establishing a sense of urgency among all people in the firm Our urgency described: Insufficient market orientation too much technology-oriented Bad financial performance Differences within the top management team Collaboration within departments is ok, while trans-departmental collaboration is lousy Egoisms at the different locations 14 FIRE 15. Our change manifesto - the crucial point:How do we, within the organization, perceive human nature? 15FIRE 16. Our change manifesto - the underlying issue:Our assumptions about human natureWe don't believe in We believe in Attitude Attitude - People need to work and want to People dislike work, find it boring, and willtake an interest in it. Under the right avoid it if they can.conditions, they can enjoy it.Direction Direction People must be forced or bribed to make thePeople will direct themselves towards a right effort.target that they accept.Responsibility Responsibility People would rather be directed than acceptPeople will seek, and accept responsibility, responsibility, which they avoid.under the right conditions.Motivation Motivation - Under the right conditions, People are motivated mainly by money and people are motivated by the desire to realize fears about their job security.their own potential.Creativity Most people have little creativityCreativity - except when it comes to getting roundCreativity and ingenuity are widely distributed management rules.and grossly underused.Based on Douglas McGregor, The Human Side of Enterprise, 196016 FIRE 17. Our change manifesto - 12 core values that fit with FIRECore values for the organization, articulated in the change manifesto Partnership culture Humanist behavior Social contribution Transparency Dialogue-based leadership Consultation Decentralization Trust Learning culture Attractive place to work Targets Success17 FIRE 18. Our change manifesto: To us, beyond budgeting means a set of 12 principles. No less. Principles Do this!Not that! 1. CustomersFocus everyone on their customers Hierarchical relationships 2. NetworkOrganize as a lean network of accountable teams Centralized functionsLeadership 3. Autonomy Give teams the freedom and capability to actMicro-manage them 4. Responsibility Enable everyone to think and act like a leaderMerely follow the plan 5. Values Govern through a few clear values, goals and boundaries Detailed rules and budgets 6. Transparency Promote open information for self managementRestrict it hierarchically 7. GoalsSet relative goals for continuous improvement Negotiated contracts 8. RewardsReward shared success based on relative performance Fixed targetsProcesses 9. Planning Make planning a continuous and inclusive processTop-down, annual event 10. ControlsBase controls on relative indicators and trends Variances against plan 11. Resources Make resources available as neededBudget allocations 12. CoordinationCoordinate cross company interactions dynamically Annual planning cyclesSource: BBRT 18 FIRE 19. Our change manifesto:If you leave one principle out, you will not succeed. 19 20. Management model transformation:Is it like traditional project work? All of us are FIRE - not just a few! All of us have do our bit and contribute our share - not just the others! Change will not come if we wait for some other personor if we wait for some other time. We are the ones we have been waiting for!(Barack Obama) 20 FIRE 21. In a management model transformation, two intertwined change processes must come together 3. BeginningOrganizational Individualchange processchange process(John Kotter) (William Bridges) 2. Neutral Zone 1.2.3.4. 5.6.7.8. Create aPull Develop Communi- Empower Produce Don'tCreate a sense of together a changecate for all others short-term let up!new culture urgencyguidingvision and understan- to act wins coalitionstrategy ding andbuy-in1. EndingThe Double Helix Transformation Framework is a completely new kind of change initiative framework: One in whichthe two different dimensions of profound change organizational and personal are intertwined and inseparable. Theframework allows for a richer and more realistic leadership of profound change. Source: Double Helix Transformation Framework - Niels Pflging/Gebhard Borck/BBTN 21FIRE 22. Our management model transformation:The role of the Guiding CoalitionTransformation must be led by a strong Guiding Coalition (GC).The Guiding coalition (GC) is a group of people from different levels and functions of theParadigma group, who got together on the basis of conviction and determination, to actfor change. Tasks of the GC:Not tasks of the GC: Get rid of obstacles to FIRE Take or carry through corporate Support task forcesdecisions.Do the change all alone Support people during the change Support change in conformity with FIRE Other important facts: Keep track of FIRE (e.g. check changeThe GC is no elitist circle temperature The GC is not a new form of Handle resistancehierarchyBeing a member in the GC Push ahead with changeis no promotion Cater for consequence22 FIRE 23. Our management model transformation:The role of the FIRE Task Forces The actual changes through