BetaCodexC2 - Case Study "Logoplaste" on Transformation

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Beyond Budgeting Change Case "Logoplaste" in Brasil

Text of BetaCodexC2 - Case Study "Logoplaste" on Transformation

Logoplaste Case

A Nossa EmpresaOs nossos Parceiros

Our Products Logoplaste throughout the World

Logoplaste in numbers

GERAL

Info@logoplaste.com

logoplaste.comwww.logoplaste.com

Transforming an organization's management model from command and control to Beyond Budgeting: The Logoplaste case

This white paper is based upon a public case presentation held on 21.02.2008at the InterNews seminar Beyond Budgeting in So Paulo.

Founded in 1976. 49 plants in Austria, Brazil, Canada, Czech Republic, France, Holland,

Portugal, Spain, England, USA and Asia.

3rd largest container transformer in Europe. 2nd largest container transformer in Brazil employing 450 people.

1st in integrated operations in Brazil and Europe. Approx. 150,000 tons of raw material processed in 2007. 5.5 billions in plastic packaging sold in 2007 throughout the world.

The company: Logoplaste Group

2007: 8 plants

Our organization in South America

A selection of Logoplaste plastic packaging products in Brazil

There is a need to grow, so that we do not disappear (...) The sheer size of this sector is a driving competitive factor.(Alexandre Relvas, FIEP Conference, February 2002)

Our goal: .. 15% annual growth rate in each country A new contract every year, in each country(Annual Report 2006)

Logoplaste in the FutureTransforming the model to achieve the board's goals:Competitiveness Growth One Logoplaste

The board's vision for the company's future

Why should we change?

Conclusion: Given the historic results recorded by Logoplaste over the last five years, it is not possible to meet the goals set by the Board (15% per year), if we do not make significant changes.

Our profitability has decreased over time (greater customer demands are not reflected in the price).

We are overly reactive to customer demands

We have lost market space and have not developed the market. Is our price too high? Is our structure too expensive? Are we efficient? How long can we stand this?

We lack agility in responding to the market, resulting in missed opportunities. Paternalism from Headquarters in Europe has created a comfort zone,

excessive job stability and bureaucracy in the decision making process.

We are not regarded as a leading company within our sector in Brazil, today.

Oct/07: How the story began...

Seminar Leading people and teams new concepts for the 21st centuryParticipation: ManagersSpeaker: Niels Pflaeging Director of the Beyond Budgeting Round Table

10/17/2006

Information Age

1980 1990 2000 2010 2020 2030

Highly competitive, unpredictable

Abrupt/unpredictable change

Demanding employees

Short life cycles

Price pressure

Disloyal customers

Transparency

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Our urgency: The world has changed!

Recently installed capacity at one of our units is already smaller than what the client needs

Continuous production re-scheduling Constant changes in new project assumptions

Product life spans: from eight years to three years (with impact on investment)

Demand from customers for greater innovation on the part of Logoplaste

Strike at one of our units (Nov/07) Demand for positions&salaries policy

and more recognition

More complicated contract renewals More competitive electronic bids R$ 1.5 MM in Technology and Change

Investments in 1 year

One project was passed on to our competitors by partner-customer

Lost 18MM PET containers from our customer Electronic bids

ERP Restructuring project Internal and external audits

Information Age

1980 1990 2000 2010 2020 2030

Critical Success FactorsHighly competitive, unpredictable

Fast response

Best place to work

Innovation

Operational excellence

Customer relationship

Ethical behavior

Abrupt/unpredictable change

Demanding employees

Short life cycles

Price pressure

Disloyal customers

Transparency

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Today's Critical Success Factors (CSF) require freedom

All are important today!

Extension of the decentralized model throughout operations

Alternative path:Transformation, based on radical decentralization, leadership and process change.

Foundation Several decades oldTime Scale increasing age of the organization

Low degree of decentralization/ empowerment. Out of sync with today's critical success factors!

DifferentiationPhase

IntegrationPhase

But we have gone down a different path: Classic and alternative paths for an organization's evolution

Classic path: Bureaucratization and functional differentiation, owed to growth and application of tayloristic principles

Pioneering Phase

High degree of decentralization/ empowerment. Aligned with today's critical success factors!

Classic path: Stagnation within the tayloristic model

Alternative path: Maintenance of an empowerment and confidence culture

This is our path now!

Importance of management model: Most organizations use the management model that has been designed for efficiency....while the problem today is complexity*.

* Multiple critical factors for competitive success that include efficiency

Creating adaptive organizations:The secret of success is not being able to predict the future and create an organization that prospers in the unforeseen future.

Michael Hammer

Critical Success Factors (CSF)

Management control cycle

StrategyStrategy

Strategic Learning cycle

ControlControl

Traditional management processes from the command and control model are straightjackets.

Fixedperformance

contract

Fixedperformance

contract They conflict with our

Critical Success Factors!

Our entire management model actually restricts performance

Examples of non-alignment

Delays caused by excessive planning processes

Innovation is asphyxiated by central bureaucracy

Budget mentality: spend it or lose it

Incentives created short-termism

Motivation is extrinsic rather than intrinsic

Individualism causes dysfunctional and even unethical behavior

Success factors

Fast response

Innovation

Operations excellence

Close customer relations

The best people

Ethical behavior

Financial performance Inferior financial performance

When pressure increases, the problems get worse!

The Beyond Budgeting model: Rooted in science and in practice.

Sciences: Thought leaders(selected)

Practice: Industry leaders

(selected)

Complexity theories

Social sciences & HR

Leadership & Change

Strategy & performance

management

Manufacturing

Distribution

Services

Government & Not-for profit

Charles Horngren Henry Mintzberg Gary Hamel Jeremy Hope Michael Hammer Thomas Johnson

Stafford Beer Margareth Wheatley Niklas Luhmann Kevin Kelly Ross Ashby Joseph Bragdon Douglas McGregor

Chris Argyris Jeffrey Pfeffer Stephen Covey Viktor Frankl Howard Gardner Reinhard Sprenger

Peter Drucker Tom Peters Charles Handy John Kotter Peter Senge Thomas Davenport Peter Block

Source: Niels Pflaeging/BBTN

Fonte: www.bbrt.org

ABB ABC Technologies ACCO Europe ACNeilsen Accenture Alcan Packaging Alstom American Express Anheuser Busch Archstone Consulting Armstrong-Laing Andersen Ascom Barclays Bank BT Group Burmah Castrol BG Transco Boots The Chemists Cadbury Schweppes Charles Schwab CIBC CIMA CITB Clariant International Cognos Coors Brewers CorVu CSIRO Livestock

De Beers DFW Airport Diageo Deutsche Bank Deloitte & Touche ERS DHL EADS eNiklas Ernst & Young EBRD Exelon Halifax Hammond Suddards HON Comp. Housing Associations HP Bulmer Hyperion IBM-BCServices Ingersoll Rand Interbrew UK International Finance Johnsonville Sausage Kaiser Permanente Kingfisher KPMG Consulting Mars Confectionery Port of Tyne Authority MasterCard

Maxager Mencap Millipore Corp. National Power Navigant Consulting Novartis Omgeo LLC openBC (agora: XING) Park Nicollet Health

Services Parker Hannifin Pentland Group proDacapo Puget Sound Energy Priority Health Resorts World Royal Mail Rugby Group Sainsbury's

Supermarkets SAS Performance

Management Schneider Electric Schwan Food Scottish Enterprise Siemens Sight Savers Intl. SKF

Softlab Solver Inc. Southco Standard Life Statoil Stratature T-Online TelecomNewZealand Texas Instruments Thames Water The World Bank ThinkFast Consulting Time Warner Telecom TPG UBS AG United Engineering

Forgings Unilever US Analytics Vaisala Oy Valmet Corporation Verisign Wachovia Corp Welsh Devel. Agency West Bromwich

Building Society Wright Williams&Kelly ...

Command and control and budgetary management: widely recognized as a problem: BBRT membership between 1998 and 2007

Learning more about Beyond Budgeting: pioneering organizations we met, visited, researched or interviewed

- Each one of these companies has developed its o