ORGANIZATIONAL TRANSFORMATION

CIS 654

•OVERVIEW AND COURSE REQUIREMENTS

Why include a class in Organizational Transformation (OT)

Change is a key organizational component

When the rate of change inside an organization is slower than the rate of change outside an organization.

The role of information technology (IT) is key in any transformation

A Language of Change

Re-engineering

Re-invention

Re-building

Re-making

Re-organization

Re-designing

Impact on Employees

In the past five years, have you or any member of your family been laid off, downsized, or otherwise lost a job through no fault of your/their own?

Did employers have more loyalty to their employees ten years ago? Twenty years ago?

Definition of Reengineering

The fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in performance.

Four key words in the definition1. Dramatic (improvement)

A. Reduced costB. Increased speedC. Greater accuracyD. Greater qualityE. Etc…

2. RadicalA. Radical means going to the root of things.B. Instead of fixing what you have and what you are currently

doing by imagining that your company doesn’t even exit today then create it new?

C. In other words, start from a clean slate

Four key words in the definition

3. Process

A. A business process is a set of interrelated work activities with inputs and value-added tasks that produce outputs.

B. Horizontal work flows that cut across departments or functions

C. Evolution leads to Isolated “Islands” of Activity

D. Sub-optimization might not be good!

Four key words in the definition

4. RedesignA. How the work is done to produce the product

or service and deliver it to the customer.

B. The starting point for organizational success is well-designed processes.

Why Reengineering? Three CsCustomers:

More sophisticated and demanding on the products they want.

CompetitionHas become global vs. local, so now instead of just a few, we now compete with thousands!

ChangeInstead of the focus on being on how well we operate, but how well we supply the needs and wants of the customer. Customer Satisfaction!!!

BPR Requires a Questioning of the Status Quo

“the continuity of time sequence” Procedures have a habit of arranging themselves into structures, institutions, and concepts and becoming virtually immortal.

Simple example: QWERTY

Examples

GTE (local phone service provider)Maintenance and repair process

• Then--Repair clerk, line tester, central office technician, service technician. (Slow)

• Now—Customer care advocate handles it all! Customer focus 1/2% then—now 70% solved by the person they spoke

with originally 40% resolved while still on line

ExamplesFederal Mogul (makes car parts)

To get contracts from car manufacturers they:• Sales rep visits customer to get specs. Hand off specs. to engineer

who designed from scratch, Pick a place to manufacture this design and use that toolroom, Design sent by mail, Design sent to toolroom, the part then was sent to customer

• This process typically took 20 weeks. Their worst competitors took only 10 weeks and the best 6 weeks

• The auto manufacturer gave feedback as soon as they got the parts, so Federal was losing out.

• Now—engineer goes to customer, designs based on previous similar parts and a computer program reconfigures the old parts to the new specs. 3 days to 1 minute. Instead of mail it is all done electronically. Use any toolroom that is available.

Twenty-week to 18 days, win rate on new proposals 4 times better, profitability more than double.

BPR Focuses on Specific objectives

Reverse-design process. Figure out what you want, then work backwards until you get it!

Backward chaining

GTE faster repair (customer satisfaction)

Federal Mogul faster design (customer satisfaction)

BPR Focuses on Breakthrough Results

Inherent SlackInventory

Production capability

Manpower

Working capital

BPR Focuses on Significant Cultural Change

Social ChangeTypically involves eliminating, consolidating, and otherwise altering work activities.

Layoffs and early retirement programs

Not downsizing or restructuringOr doing less with less

But, doing more with less

What are the negative effects on employees?

The Top Ten Ways to Fail at Reengineering

1. Don’t reengineer but say that you are.2. Don’t focus on processes.3. Spend a lot of time analyzing the current situation.4. Proceed without strong executive leadership.5. Be timid in redesign.6. Go directly from conceptual design to implementation.7. Reengineer slowly.8. Place some aspects of the business off-limits.9. Adopt a conventional implementation style.10. Ignore the concerns of your people.

1. Don’t reengineer but say that you are.

Abraham Lincoln’s riddle: If you call a horse’s tail a leg, how many legs does the horse have?Just because the term “reengineering” is popular and used often, doesn’t mean that is what they are actually doing! This can hurt future implementations when you really decide to do it right.

For example, just because you are putting in a new computer system, doesn’t mean that you reengineered what you do, you may have only automated the process you are currently doing. Not a dramatic improvement!

2. Don’t focus on processes.You can’t reengineer an organization only processes in that organization.

You should be able to describe specific inputs and outputs for each oneEach process should cross a number of organizational boundaries.There should be a focus on goals and ends rather than actions and means.The processes, their inputs, and their outputs should be easily comprehensible by anyone in the organization.ALL the processes relate to customers and their needs, either directly or as contributors to other processes.

3. Spend a lot of time analyzing the current situation.

You should understand the process, but don’t spend too much time on it, because you already know it’s not good and we are looking for dramatic improvement.Look for the “What and the Why” not the “How” because the how is going to change.

Waste of timeCan inhibit change

4. Proceed without strong executive leadership

Only a senior executive who deeply believes in the reengineering cause can actually make it happen.

Reengineering is a top-down phenomenon.

Leadership support is a must because change is hard and resistance from within will kill it once implementation begins.

5. Be timid in redesign.Reengineering requires bold and imaginative thinking about process design and how work is done.There may already be great ideas lurking in the minds of your employees just waiting for you to ask.Create an environment so people can share their radical ideas without fear of ridicule.On company offered cash for people that came up with a too radical idea, otherwise, they adopted it!

6. Go directly from conceptual design to implementation

It never goes as one plans, so instead try it out in a safe environment. Go through a series of intermediate steps and put out the fires as you proceed.You could try out a new concept by developing a prototype.You want to catch the major flaws before they actually happen.It can also help you with refining the actual implementation.

7. Reengineer slowlyYou should see at least some major improvements in 12 months or you are sure to fail.

Executive management will lose faith and funding will dry up.Resistors will gain powerEmployees will exhausted from all the change without anything to show for it.You can lose focusDon’t increase the size without very good reason. Continually increasing the scope will cause you many delays and therefore failure.

8. Place some aspects of the business off-limits.

If you radically redesign your processes but refuse to change the compensation plan, the structure of the organization, or job titles, then you will certainly fail.

Everything must be on the table with no limits for change.

9. Adopt a conventional implementation style.

The old way of planning an implementing must be thrown away.

Be sure of what you want, figure out how it will be done, then go full steam ahead.

Make the decision to change and then do it!

More like a prototyping.

10. Ignore the concerns of your people.

Employees’ will ask themselves, “What is in it for ME?” No matter how great your idea is, if you don’t have the support of your employees you will be in trouble.

EmpowermentInvolvementCompensation

Leadership: Primary IngredientUnyielding top management support is a must to see the reengineering through. Middle management have made a career of the current system and will resist because they have the most to lose.If the leader isn’t the top dog, make sure the top dog isn’t biting the leader in the leg.They must have the power and ability to get it done.

Characteristics of the Leader

Passion for the project and company

Be able to inspire trust

Be able to inspire confidence

Exhibit an unusual combination of impatience with the current system and patience when dealing with obstacles and setbacks (perseverance).

Charisma to get it done.

See the need for change early.

Responsibility of the Leader

Make the decision to reengineer.

Make the reengineering succeed.Appoint process owners and specific tasks and provide them with the resources they need.

Measurement

Making sure everyone follows through by being involved.

Create an environment where it can succeed.

The three Ss of Reengineering Leadership

Signals: Explicit CommunicationsCommunication must be relentless.Communication must be simple.Communication must be dramatic.

Symbols: Personal BehaviorIf behavior supports the talk, then it is believed, otherwise, it is dismissed.

Systems: Measurements and RewardsIf you don’t change what you measure the rewards for improvement, you will not change behavior.

The Reengineering Team: Second Ingredient

Reengineering is not a one man show, so we must create a team from the best and the brightest individuals that fit the job.

The kinds of people picked must reflect the nature of the endeavor itself.

Let’s look at what they will do in terms of content, context, and style.

Content (the task at hand)

Understanding the old process and customer requirements.Inventing a new process design that shatters long-held assumptions.Constructing the new process, including fleshing out full details of its operations.Selling the new way of working and living to the organization as a whole.

Context (environment)

Uncertainty: the old way is wrong, and we don’t yet have a new way.

Experimentation: iterative experience. It must be tried in reality, not on paper.

Pressure: Usually needed yesterday so they operate under conditions of great urgency and intensity.

StyleReengineering is a journey into the unknown. It is about exploration and discovery rather than analysis and knowing.The reengineer lives in a stream of options, alternatives, possibilities. Ideas must be formulated before all the facts are in, tested before the environment is stable, and evaluated fore the results are conclusive.Stumbling forward and being comfortable with it.

The Profile of a Reengineer

Process-orientation

Holistic perspective

Creativity

Restlessness

Enthusiasm

Optimism

Persistence

Tact

Team player

Communication skills

To wrap it up, the perfect member would be a female engineer who has changed jobs frequently and has a background in sales. Why?

Team members share dedication to three things.

These three things should come first for all team members and the management needs to create the environment that it can happen.

The process that is being reengineered.

The needs of the customer of that process.

The team itself.

Team Building

Caring: having an environment that allows open and honest communication.

Daring: encouraging everyone on the team to be innovative and adventurous, and to ask the hard questions.

Sharing: Common objectives, there are no winners on a losing team.

Avoid Commonplace Dysfunctional Behaviors by making them known

Not listening

Idea killing

Personal attacks

Silence

Over sharing

Team management

Career paths: So, they know what will happen to them when the job is done.

Compensation: Bonus for job well done.

Celebration: fun time.

Communications: the more the merrier.

Care and compassion: Take care of them!

Do You Need Help with the Reengineering Process?

1. What do consultants do?A. Heads: Bring knowledge and brain power

B. Hearts: Deal with the motivation and perseverance of getting the job done.

C. Hands: Actually do some of the jobs of reengineering.

Pros and Cons of Consultants

ProsMore experience that will help you avoid pitfalls.

Getting access to essential skills

Third-party objectivity

ConsBecome dependent on them.

Cost $

May take you down the wrong road. Not accountable.

Assumption Busting for Fun and Profit

Rule of Whacko: Any valuable new process design will at first appear to be whacko. That is, if someone approaches you with a proposal for a new process design that strikes you as interesting and plausible, our advice is: Throw it away.

Breaking Assumptions: surfacing and questioning the underpinnings of the old process, the reasons why it was designed to work the way it did.

Assumption Busting: continuedFord accounts payable example:

Purchase order from purchasing, receiving document from the receiving dock, and an invoice from the vendor: checked to see if they all match and if they did, issue a check.Now, the person on the receiving dock takes possession of the goods, checks to see if they match against an order, and if so, authorizes payment, if not they don’t accept.

• Why wasn’t this done all along?• The old way was never designed, it just happened.• Didn’t have the technology to do it the new way.• Based on assumptions: such as, dock workers can’t or shouldn’t

authorize payments! Etc.

Assumption Busting: continued

GTE: one individual couldn’t do it all, deal with customers, test the lines, and dispatch service technicians.

Federal Mogul: every design was uniquethat engineers couldn’t interact with customers that a part had to be tooled in the same plant where it was to be made.

Assumption Busting: continuedHow do we go about identifying faulty assumptions from ones that are still valid?

Problem: First identify the problem that you are currently having, such as Ford’s accounts payable being too slow.Rule: Then identify the rule or rules that allow that problem to occur. Ford example, too labor intensive.Assumption: the ideas we take for granted that caused the rules to happen. Ford example, dock workers can’t authorize payment because they don’t have the information or authority.

Assumption Busting: continued

IBM Credit Corporation example:One person checked the applicant’s credit rating

Another decided what interest rate to charge

A third person put together the lease agreement

And a fourth prepared the response to the customer.

What is the underlying assumption here?

Assumption Busting: continued

Example, a consumer goods maker distributed its products to retailers through a network of route drivers.

A driver would come to a store, see what was missing from the shelf, go back to the van to pull inventory, bring it into the store, fill out a manifest for the store manager’s signature, and then send the form to headquarters for processing and billing. All of this depended on what was inventoried in the truck, which was hard to manage and very expensive to keep.

Assumption Busting: continuedProblem: the company is carrying lots of inventory on the trucks.Rule: the drivers decide what is needed after they arrive at the store.Assumption: The company doesn’t know what is missing from the shelf until the driver checks.Instead, use prediction models to predict what will be needed, pack it all up and shrink wrap the items for each store, load the trucks in proper order and have preprinted invoice to drop off with retailer. More efficient and reduced inventory.

The Hardest Part of Reengineering

CHANGE!Getting people to let go of their old ways and embrace new ones. All deal with people in the organization and the ultimate goal of customer satisfaction.JobsOrganizational structureMeasurement and rewardsCareer pathManagement rolesInterpersonal relationshipsValue systems

Principles of Change

Resistance to change is natural and inevitable.

Resistance doesn’t always show its face.

Resistance has many motivations.

There’s no one way to deal with resistance: Manage it!

Dealing with change the 5 Is are all based on communication!

Incentives—positive and negative

Information—dispel uncertainty and fear

Intervention—one-on-one connections

Indoctrination—make change seem inevitable

Involvement—make people part of the effort

Impediments to CommunicationDisbelief: Trustworthy? Actions speak loud.False familiarity: Got the T-Shirt already!Fear of Layoffs: Fear of the unknown.The rumor mill: real source, NO SECRETS!Sloppy execution:

incomprehensibility,AbstractionComplexityclichés

Sloppy execution

Incomprehensibility: Speak Plain non-technical

Abstraction: Be specific and use stories.

Complexity: Don’t be too specific, you will bore them to death!

Clichés: “We are in a win win situation!” Don’t be trite! Don’t over communicate!

Ten Principles of Reengineering Communications

1. Segment the audience2. Use multiple channels3. Use multiple voices4. Be Clear5. Communicate, communicate, communicate6. Honesty is the only policy7. Use emotions, not just logic8. Heal, console, encourage9. Make the message tangible10. Listen, listen, listen

Ten Principles (continued)

1. Segment the audience: A. Divide large diverse markets into smaller and

more homogeneous segments.

B. All reengineering messages must be tailored to the specific characteristics and requirements of each constituency.

C. Micromarketing is the name of the game.

Ten Principles (continued)

2. Use multiple channels of communication.A. Use a mix of presentations, articles, comic

strips, videos, design simulations, logos, etc.

B. Variety counts and so does originality.

C. Have a reengineering motto, give out hats, t-shirts, etc.

Ten Principles (continued)

3. Use Multiple Voices:A. By using different people to deliver the

reengineering messages, you will enhance your ability for understanding. Some people relate better to others.

B. Make sure they are not just giving the same message. They need to give their own perspective so the information will be richer.

Ten Principles (continued)

4. Communicate Clearly:A. Sizzle helps to sell, but it’s not enough

B. Reengineering has the four Ps.A. Purpose (Why)

B. Process (How)

C. Progress (Keep the momentum going)

D. Problems (Humility helps with relationships)

Ten Principles (continued)5. Communicate TIMES 3

A. Repetition works well.B. Do so with many ways, through many channels, and

by many people.C. Rule of seven times seven: The same thing must be

communicated 7 times in 7 different ways before anybody will believe it.

D. Rule of the fifties: The first fifty times you say something, people don’t hear it; the second fifty times, they don’t understand it; and the third fifty times, they don’t believe it.

Ten Principles (continued)6. Honesty is the only policy:

A. Lies about reengineering are not only unethical—they are foolish and counterproductive.

B. If a mistake is made, admit it. If something is unknown, acknowledge it. If something is painful, face it.

C. Truth, no matter how hard it is, is always better than leaving it up to their imagination.

D. Complete honesty has to happen consistently to build trust. Just one lie or attempt to deceive by leaving out information will destroy ALL trust.

Ten Principles (continued)

7. Use Emotions, Not Just Logic:A. Communicate passion!

B. Fear

C. Greed

D. Joy

E. Hope

F. Playfulness

Ten Principles (continued)

8. Communicate to Heal:A. Reengineering affects real people with real

lives and cause real pain.

B. Use communication to minimize the stress and trauma that it causes.

C. Messages of hope, consolation, encouragement, or appreciation.

D. We must value our employees!

Ten Principles (continued)

9. Communicate Tangibly: Use Gimmicks. A. “Tear it up.” printed on paper that can’t be torn.

Things are not what they seem, find a new way of doing it.

B. “Shake it up.” Hand warmer that wasn’t warm until it was shaken up. You can’t be passive.

C. “Break it up.” Silly putty won’t break until refrigerated. Be resourceful.

D. “We’re going to have a ball.” Give them a tension-relieving soft rubber ball.

Ten Principles (continued)

10. Listen, Listen, Listen:A. Communication is not just talking, it must be

two-way.A. It gives you feedback on how well your

communications are going.B. Opportunity for employees to vent and express

their feelings.C. Use focus groups, suggestion forms,

questionnaires, surveys, interviews, open discussion, etc.

Reshaping an Organization’s Values

Organizational values represent people’s most basic beliefs about their work; inevitably, they shape people’s behavior and how they perform that work.

As intangible as they may seem, as difficult as they may be to define, as slippery as they may be to grasp in conversation, values really lie at the heart of any successful attempt to reengineer.

Making new values a realityEnsure they are reflected in process designs

If you say you want to care about the customer, but don’t have a way to interact with them, hot air.

Have executives demonstrate them through personal behavior

Example isn’t the best, it is the only way! If we are suppose to care about the customer, the manager needs to show it first!

Use them in difficult situationsTylenol example. Pull or smoke and mirrors?

Incorporate them into measurement and reward systemsIf customer satisfaction is key, that’s what we measure!

State them clearly and uniquely

Combating the Counterrevolutionaries

1. Newton’s Third Law asserts that every action has an equal and opposite reaction.

2. Every revolution spawns a counterrevolution.

3. Counterrevolutionaries are usually motivated by the belief—things were better as they were before.

4. The following are typical arguments.

Reengineering does not work (false).

1. Reengineering has a 70% failure rate: Out of context. No reengineering project will fail if it is done correctly.

2. The organizations need to have the will, intelligence, and passion. Those will succeed.

3. Give examples of those companies where it did work and show the great results!

Reengineering is nothing new.

Different from automation:Automation adapts technology to processes, reengineering totally reconfigures processes to exploit the full potential of technology.

It’s just total quality management. TQM is incremental, reengineering is radical.

It doesn’t really matter if it is new or not, we are looking for dramatic improvement!

Reengineering is not radical enough.

One way to contend with reengineering is to try and say it doesn’t go far enough.

Since the reengineering we plan to do is going to change everything we do, how can it not be radical?

Radical change is dangerous and inhumane.

The organization can’t survive such change.Yes, reengineering does create some turmoil and real pain, it is not fatal. No pain, no gain.

Dramatic improvement has to be paid for in some way.

What is the alternative? If we go out of business, how traumatic will that be?

Reengineering isn’t for us because we are different

Reengineering is not about project, size, routine, or the back office. Reengineering is about changing the way work is done.

Reengineering applies equally to processes that are creative and to those that are routine.

Work is Work, no matter the organization.

We can’t afford it

Good for you!

If you can’t come up with the resources, reengineering must not be vital for your organization.

Contentment and complacency are dangerous feelings.

We’ve already been doing reengineering for years

They could be true.

Keep up the good work!

Make sure you keep current with reengineering techniques and practices.

Just another name for downsizing, and downsizing doesn’t work

Half true, the second part.

Eliminating people without eliminating work may lead to short-term payoff but definitely leads to long-term disaster.

Reengineering is not about getting rid of workers, it is about getting rid of work, especially work that doesn’t create value for the customer.

Downsizing doesn’t work, but reengineering does!

Reengineering is just a cost-cutting tool, but we need growth

It can cut cost, but it can also deal with cycle time, accuracy, quality, etc.

Cost-cutting may just be a benefit of finding out a better way of doing things, but it is not the reason we do them.

Customer focus on what we want to do.

Reengineering is just common sense

Thank you very much!

An idea that is simple, readily understandable, and consistent with people’s intuition is likely to be accepted and to work.