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© 2007 Harrington Institute

LOS CINCO PILARES DE LA

EXCELENCIA ORGANIZACIONAL

JAMES HARRINGTON




The Five PillarsThe Five Pillars

Organizational ExcellenceOrganizational Excellence

Dr. H. James HarringtonCEO, Harrington Institute

San Jose , Cal. USA

07, Harringtontute, Inc.



© 2007 Harrington Institute © 2007, HarringtonInstitute, Inc.




Organizational Excellence (OE)is the process of building an

organization thatEXCELS!

© 2007, HarringtonInstitute, Inc.




The Pi llarsThe Pillars

of of

Organizational ExcellenceOrganizational Excellence

, Harrington Institute,14th Oct 2003 - Dubai

Structured, Innovative Management

Performance Excellence

Value to all Stake Holders






© 2007 Harrington Institute, Harringtone, Inc.







Element IElement I

Process ManagementProcess Management

, Harringtonte, Inc.




Two Approaches of Two Approaches of


• Micro-level Approach

• Macro-level Approach

, Harringtonte Inc.




MicroMicro-- level Approachlevel Approach

• Continuous Improvement• Ten to fifteen percent per year

• Area Activity Analysis





MacroMacro-- level Approachlevel Approach

• The Fine Methodology – Phase I. Define the process.

– Phase II. Confine the process.

– Phase III. Refine the process.






TypicalTools/Approaches

• Process Qualification

• Process Controls

• Problem Solving

• Six Sigma

• Continuous Flow

• Business ProcessImp.

• Inspection and Test

• ISO 9000/14000

• Information Systems• Active Based Costing








Element II

Project ManagementProject Management





Project ManagementProject Management

“Processes define how we operate.Projects are the way we improve

processes.”





Typical ProjectsTypical Projects

• TQM

• Process Redesign

• New Information Technology

• Market Analysis

• Alliance Partnership

• Customer Future Needs Analysis• Six Sigma


Wh d 35 t 65% f th TQMWh d 35 t 65% f th TQM




Why do 35 to 65% of the TQMWhy do 35 to 65% of the TQM

projects fail?projects fail?

• Costs more than planned

• Missed schedule

• Poor quality

• Risks were not managed

• Rejected by the target users





Only 26% of Projects were successful(on-time/on-budget)

40% of all IT projects fail or are cancelled

$75 billion spent by US firms on cancelled projects

26% of projects will cost 190% of their originalestimate

Over 60% of the projects do not produce theprojected R.O.I.

Standish Group International,Chaos report 1999

Project & Program

Issues/Solutions




Benchmarks“World class organizations complete nearly

90% of their projects within 10% of budget andtime estimates.”

“I.S. organizations that establish enterprisestandards for project management, including aproject office, cut their major project costoverruns, delays, and cancellations by 50%.”

Gartner Group,August 2000 © 2007, Harrington

Institute, Inc.

T P t fTen Parts of




Ten Parts of Ten Parts of

Project ManagementProject Management1. Integration Management

2. Scope Management

3. Time Management4. Cost Management

5. Quality Management

6. Human Resource Management7. Communications Management

8. Risk Management

9. Procurement Management

10. Organizational Change Management








Element IIIElement III


Change

Management




More ProjectsMore Projects

fail due tofail due tolack of changelack of change

managementmanagementthan anythingthan anything

else.else.





“ “Some 50% to 70% of Some 50% to 70% of reengineeringreengineering

attempts fail to deliver theattempts fail to deliver theintendedintended

dramatic resultsdramatic results” ”

• Hammer & Champy1993 page 217





Change ManagementChange Management

“Research confirms that as much as 60% of change initiatives and other projects fail as a

direct result of a fundamental inability tomanage their social implications.”

Gartner Group





The Magnitude of IT Driven ChangeThe Magnitude of IT Driven Change

First-OrderMagnitude

Tasks Affected

Second-OrderMagnitude

People Affected

Third-OrderMagnitude

Structure/CultureAffected+ +

Culture Technology

Structure

People

Technology

Tasks


Source: O’Hara, Watson & Kavan




The Change Management SystemThe Change Management System

• Defining what will change.

• Defining how to change.

• Making the change happen.


Get a Clear View ofGet a Clear View of




Get a Clear View of Get a Clear View of

Where You Need To GoWhere You Need To Go





Defining How to ChangeDefining How to Change





Change is a ProcessChange is a Process

CurrentState

TransitionState

FutureState

3. Implementation Architecture

1. Motivation 2. Vision

Three Prerequisites for Change





Clarifying the Vision: PurposeClarifying the Vision: Purpose

Why is thischange

necessary?

What's in it for me?

Why is itimportant to my

organization?





Element IV




Know ledge ManagementKnow ledge Management





Knowledge ManagementKnow ledge Management

“When a person dies,a library is lost.”


Knowledge Workers




Knowledge Workers New hires require 2.5 months to be fully effective

Knowledge management system will reduce it by 30%

At a loaded cost of $200,000/yr that is $12,500

The cost to keep them current is going up 20% per year

Fortune 500 Knowledge Deficito1999 - $12 billiono2007 - $52 billiono1999 - cost to provide knowledge workers was $5000

each ( now it is $8,000 )Knowledge

ManagementMay-Oct


l d kK l d T k T F




Know ledge Takes Two FormsKnow ledge Takes Two Forms

Tacit knowledge –

undocumented intangiblefactors embedded in individual

experiences Explicit knowledge –

documented and quantified





Know ledge Management SystemKnow ledge Management System

InformationWarehouse KnowledgeWarehouse

DataWarehouse

Analysis/Selection

Analysis

USE

RS

Inputs Inputs Outputs/Users


K. M. Road MapK. M. Road Map




pACBF's Knowledge Management Road Map

Phase 0 Phase I Phase II Phase III Phase IV

Requirement Infrastructure KM System Analysis Deployment Evaluate and

Definitions Evaluation Design & Development Improve

Activities Activities Activities Activities Activities

1. Prepare 3 Year 4. Analyze Existing 6. Benchmark Best of 12. Deploy Using a 14. Evaluate

KM Vision Infrastructure Class Results-Driven Incremental Performance,

Statement Methodology Measure ROI and

5. Align KM and 7. Design KM Continuously Improve

2. Develop KMS Business Strategy Infrastructure 13. Manage Change Culture

Specification and Reward Structure

8. Audit Existing

3. Prepare Project KM Assets and Systems

Plan9. Design KM Team

10. Create the KM

Blueprint

11. Develop the KM System

ProcessProcess – –based Know ledge Mappingbased Know ledge Mapping




g pp gg pp g

ProcessProcess

• Phase I – Create the knowledge map.

• Phase II – Analyze the map.• Phase III – Apply the map.





Element VElement V




Element VElement V

Resource ManagementResource Management(Assets Management)(Assets Management)


Resource ManagementResource Management




Resource ManagementResource Management

• People

• Materials

• Money• Time

• Space


Some of the things that need to beSome of the things that need to be




Some of the things that need to beg

considered in resource managementconsidered in resource management

are:are:

• Good Governance

• Staff Resources

• Product and Service Mix• Suppliers and Alliance Partners

• Financial Status• R&D





Boards need to be watchdogs,Boards need to be watchdogs,not lapdogs.not lapdogs.


RESOURCE MANAGEMENTRESOURCE MANAGEMENT




RESOURCE MANAGEMENTRESOURCE MANAGEMENT

• Outsourcing

• Empowerment

• Training• Activity Based Costing

• Just-in-time• Acquisitions

• Skills Inventory

• Product Planning• Strategic Planning


Impact of Pushing/ Pull ingImpact of Pushing/ Pull ing




Impact of Pushing/ Pull ingImpact of Pushing/ Pull ing


Organization ChartsOrganization Charts




(Old and New Look)


TopMgmt

Middle

Management

First LevelManagement

Employees

Employees

First LevelManagement

Middle

Management

TopMgmt

Hierarchical Organization Chart(Old Look)

Upside-Down Organization Chat(New Look)

Preferred Organizational ModelPreferred Organizational Model




Preferred Organizational ModelPreferred Organizational Model


RESOURCES

EXTERNAL CUSTOMERS

EMP

LOYEES

FIRST

LEVEL

MGT

MIDD

LE

MGT

TOP

MGT

The Three Purposes




The Three Purposes

of Business Planning

Directions

ActionsExpectations


Business Planning Elements and Timing




Business Planning Elements and Timing

PURPOSE

Direction

Expectations

(measurements

Actions

11 OUTPUTS

Visions

MissionValues

Strategic focus

Critical success factors

Business Objectives

Performance Goals

Strategies

Tactics

Budgets

Performance Plans

TIME FRAME

10 - 20 years

Open-endedOpen-ended

5 years

3 years

5-10 years

1-5 years

1-5 years

1-3 years

1-3 years

3-12 months

ORGANIZATIONAL ALIGNMENT




ORGANIZATIONAL ALIGNMENTORGANIZATIONAL ALIGNMENT

Strategy

RewordsSystems

Structure

PeoplePractices

Processes &Capabilities





“ “ I f we are not customerIf we are not customer--driven,driven,our car wonour car won’ ’ t be either.t be either.” ”

Donald E. Petersen

Ford’s past chairman





“ “Being good is good.Being good is good.Being the best is great!Being the best is great!” ”





Excellence




Excellencecan be attained if you .

Care morethan others think is wise.

Risk morethan others think is safe.

Dream morethan others think is practical.

Expect morethan others think is possible.


Organization Excellence can be explained by




g p y

focusing on any one of the five parts, butwhen all five become interrelated – watchout! Great things happen. Profits, market

share, morale, customer satisfaction, andstock prices soar.


Have a quality




day with a high

degree ofreliability.

Principles of Good GovernancePrinciples of Good Governance




Principles of Good GovernancePrinciples of Good Governance(continued)(continued)

Board Activities

• Meet without management being present.

• Evaluate their own performance.

• Audit Committee should meet at least 4 timesper year.

• Be frugal on executive pay.

• Be decisive when plan CEO succession.• Be quick to react to troubles.


Best Versus WorstBest Versus Worst

Governance CompaniesGovernance Companies




Governance CompaniesGovernance Companies

• Stock outperformed 2 to 1

• Retained value

Best 51.7 %

Worst -12.9 %





“ “ In the postIn the post --Enron days,Enron days,

governance has becomegovernance has becomecritical.critical.” ”

Sanjay Kumar, CEO

Computer Associates


Best BoardsBest Boards




Best BoardsBest Boards


• 3M

• Apria Healthcare

• Colgate Palmolive

• General Electric

• Home Depot• Intel

• Johnson &Johnson

• Medtronic

• Pfizer• Texas Instruments

•

Boards That Need HelpBoards That Need Help




Boards That Need Helpp


•Apple

•Conseco

•Dillard’s

•Gap

•Kmart

•Qwest

•Tyson Foods

•Xerox

•AT&T

•Ford

•HP




6




QuestionsQuestions

IssuesIssues

ConcernsConcerns

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5 pilares-jharr