Presentation on theme: "Local Training Module For First-year Associates"— Presentation transcript:
1Local Training Module For First-year Associates Organization:Overview of Core FrameworksLocal Training Module For First-year AssociatesAssociate Handbook
2FOREWORD AND OBJECTIVE This Organization Practice(OP) document provides an overview for use in local training sessions for first-year associates. It is part of a “series on functional areas.” The objective of the series is to introduce McKinsey practitioners to the basics in each of our functional areas of expertise. All the documents in the series are comprehensive in nature and describe the current tools and frameworks in that functional areaAt the end of this document, you can find a section describing a selection of the core documents and handbooks that can give you further details on some of the frameworks descried here. All of these documents are now on PDNet; and hard copies of them can be requested from PDNet Express, which will deliver them in 24 hoursThe contents of this document have been adapted for local training sessions through “Switching Tracks” — OP’s first-year module videotape, which communicates the basic concepts in a concise and visual way using an actual client — The Scandinavian Railroad Company. It is 40 minutes long and should be presented in 3 short segments. Between these segments, the faculty member runs the attached exercises, adds any commentary he/she considers necessary to clarify the concepts, and provides personal experience on selected topics. A copy of the videotape and moderator’s guide with exercises can be requested from the Firm
3This document seeks to answer 4 questions SECTION 1 Why do associates need to consider organizational issues in every engagement?SECTION 2 What frameworks do we use to help our clients improve organizational performance?SECTION 3 What role does an associate play in organization work?SECTION 4 Where can an associate find out more?
4McKinsey’s mission is to have lasting and substantial impact on our clients. To succeed, we need to work all three of the critical elements: choose the best strategy, develop world-class operations, align the organization.These three elements both reinforce and constrain each other. The best strategy is only relevant if it is operationally and organizationally feasible. The optimal organizational design depends upon the strategic requirement and the operational methods of the client.This document focuses on one vertex of this triangular relationship. It would be wrong, however, to believe that you can achieve the impact we seek by focusing on one vertex. We need to consider all three in every study.
5CRITICAL ELEMENTS FOR IMPACT Successful strategyEfficient operationsEffective organization
6We only achieve impact when the organizations we serve are successful in implementing the strategies and operational methods we propose.However, a recent survey of engagements in which clients failed to implement proposed strategies found, in three cases out of four, that the client organization was not change-ready or even capable of implementing the strategy we proposed.To ensure that we have impact, we need to consider organizational issues as we devise strategies. We must choose strategies the clients are ready and able to implement or complement our strategy work with investment in building the organization’s skills so that the organization can step up to the challenge the superior strategy poses..
73 OUT OF 4 STRATEGIES THAT FAIL DO SO BECAUSE OF THE ORGANIZATION’S INABILITY TO EXECUTE Percent100%=340 responsesOtherMcKinsey recommendations flawedOrganization lacked the capabilities to execute strategyClient not change-ready or committed
8The demand for organizational work is increasing. Trends in the marketplace and the evolving nature of our clients largely explain this increase in demand.The pace of change in the marketplace is accelerating . A strategic choice or an operational innovation evokes a rapid reaction from competitor. Rarely can a durable competitive advantage be found in these choices. Rather it is the development of a unique organizational capability with the inherent flexibility and commitment to sustain world-class performance that provides durable competitive advantage in these times of rapid change.The clients we serve are changing as well. They have increasingly hired in-house strategic capabilities. Most have built strategy shops close to the CEO. Few, however, have the in-house capability and objectivity to do the organizational work required to make change happen.
9ORGANIZATIONAL WORK GROWING IN IMPORTANCE McKinsey’s engagement mix Percent of timeEvolving marketplaceQuickening pace of strategic adaptationDurable competitive advantage often rooted in unique organizational capabilitiesEvolving playersMany businesses acquiring in-house strategic capabilityMaking change happen remains the “neglected art”Crafting the answerHelping implement change10 years agoTodayIncreasing demand for help with organization issues and change managementSource: Survey of 23 MGMs across the Firm
10The recent evolution in our clients has not been missed by our competitors. Each of our competitors has recently introduced a branded organizational element to their portfolio. Their organizational expertise figures prominently in their marketing campaigns.
12McKinsey’s consulting approach must evolve as our clients evolve McKinsey’s consulting approach must evolve as our clients evolve. These changes provoke a shift in the nature of our work and an evolution of the role of the associate on engagements.The increased demand for organizational work impacts associates directly. Associates are drawn into leadership roles on larger teams at an earlier point in their careers. This places greater emphasis on the need for associates to develop quite soon after joining McKinsey- superb team leadership skills.
13EVOLUTION IN McKINSEY’S APPROACH From…To…“The answer”Solving for the “answer” and the change processManaging client teamsBuilding client capabilitiesSmall, analytically focused teams––average client team of 3*Multiple, highly leveraged McKinsey/client teams—Average client team of 10*CEO counseling by senior peopleCoaching and feedback at all levels*Survey of 23 MGMs across the Firm
14Before we dive into the organization materials, we should announce one critical caveat: the frameworks you are about to see are only as good as the judgment and insight used to fill them out. The frameworks are often mere checklists, useful tools to ensure you do not overlook a key dimension. The OP can provide interview guides and questionnaires that you can use to flesh out the frameworks, as well as applied examples in a range of settings. However, almost all organizational issues are “situation dependent”, and almost all client settings are unique. Your judgment, insight, creativity, and organizational acumen will determine whether you add value in the client setting .
15A CRITICAL CAVEAT Organizational practice frameworks CONCEPTUALGarbageGarbageOrganizational practice frameworksChecklistsSurveys, questionnairesApplied examplesGood judgment, keen insight, creativity, organizational acumenClient impact“Garbage in, garbage out”
16A series of frameworks are available to help clients identify and address organizational limits on effectiveness or obstacles to change. They also point toward solutions.These frameworks help teams answer two fundamental questions:¶ What change is needed?¶ How should the client implement the change?The OP has derived a set of six attributes that characterize high-performing organizations(HPO). By assessing whether your client organization exhibits these six attributes, you can diagnose whether an organizational performance gap exists as well.Additionally, the 7-Ss will help you identify strengths and deficiencies in the organization. The 7-Ss focus teams on aligning structure, staff, systems, and style to promote behavioral change and build skills in pivotal jobholders. By contrasting the required skill set (at both the organization and the pivotal jobholder level) with the current skill set, you can often clarify the organizational gap that exists.You complete the diagnostic by filling out the change board. That exercise helps teams understand the organizational skill deficits or resistance to change so they can deliberately plan to build the necessary skills and willingness to change in the organization.Once the gaps have been identified, the team needs to lay out a change program to close the gaps. The transformation triangle highlights the three critical dimensions of any effective change program-top down, bottom up, cross-functional. The proper balance among these dimensions depends on the gap, the client setting, and the competitive context.Every change program contains some mix of six fundamental energizing elements. Each must be considered as we design change programs.This section of the handbook will discuss each framework in turn.
17CORE FRAMEWORKS What change is needed? How should the client make change happen?What gaps in organizational performance exist?What organizational challenges exist?What initiatives comprise the change program?How do we create energy for the change program?High-performing organization attributes7-S frameworkTransformation triangleEnergizing elementsVisionPerfor-manceCEOledPeopleSkillsSimpleWinning formulaPivotal jobsDesign leversAgenda/platformPerformance managementVision and leadershipcommunicationOrganizational infrastructurePeople developmentProblem solving processStrategySkillsShared valuesVISIONOrganizational structureStaffManagement systemsDirection settingStructuringBottom-up energizingLeadership styleChange board
18The OP undertook a study of 10 high-performing companies, true industry leaders, that we knew very well. The companies had sustained pace-setting performance in their respective industries over 2 decades.These 10 HPOs shared six management attributes, each of which focuses on performance. By comparing your client organization to these HPOs, you may identify opportunities to improve your client organization.
19“HIGH-PERFORMANCE COMPANY” ATTRIBUTES What change is needed?How should the client make change happen?Organizational challengesInitiativesEnergizing elementsGaps in performanceDriven by leadersBuilt by relentless pursuit of before-the-fact strategies/visionEnergized by an extraordinarily intense, performance-driven environmentAligned by simple structures and core processesBased on world-class skillsRejuvenated by well-developed people systems
20The first three of the six common management attributes: ¶ Driven by leaders. The leaders of these companies had very high performance aspirations. For these leaders there was no such notion as “good enough”. At the center of these leadership groups, we consistently found demanding, unreasonable CEOs.¶ Built by relentless before-the-fact strategies/visions. HPOs spend their time looking forward, not back. Their strategies drive relentlessly for both profitability and growth.¶ Energized by an extraordinarily intense, performance-driven environment. HPOs have a demanding, occasionally punishing, work pace. There is real accountability, especially at the top. HPOs, while being very good places to work, are not always nice places to work.
21ATTRIBUTES OF AN HPO Driven by leader Very high performance aspirations held by all key leadersDemanding, “unreasonable” CEOsEffective working group at topAbility to penetrate to micro- level of their businessesSingle-minded adherence to simple, clear success measures-not just financialProductive “fear of failure”Built by relentless pursuit of before-the-fact strategies/visionHighly motivating, if not inspiring, “end” stateFrequently oriented toward industry leadershipConsistently striving for both profitability and growthPassionate defenders of core businessesUnderstanding of how industry(s) works, what customers want, and what competitors can do- and how these might changeEnergized by an extraordi-narily intense, performance driven environmentDemanding, occasionally punishing, work pace; on call all the timeReal follow-through on accountability – especially at the topAggressive learning from things that do not work“good” places to work but not always “nice”Performance shortfalls change careersMembers feel rewarded by being part of winning institution
22The last three common management attributes focus on structure, skills, and systems: ¶ Aligned by simple structures and core processes. HPOs align authority, accountability, and performance challenges. Lines of communication and approval are simple and are mirrored from one division to the next.¶ Based on world-class skills. HPOs are world class in at least one critical skill of their industry, e.g., product development in high technology, risk management in wholesale banking, direct-to-store delivery in consumer goods, best-cost manufacturing. Additionally, HPOs exhibit superior process management skills that in and of themselves become a source of competitive advantage.¶ Rejuvenated by well-developed people systems. The CEO in these companies is the Chief Personnel Officer. The CEO interacts regularly with the entire leadership group, understands the individual development needs and goals, and leads staffing reviews.
23ATTRIBUTES OF AN HPO (CONTINUED) Aligned by simple structures and core processesStraightforward alignment of authority, accountability, and performance challengesUncomplicated lines of communication and approval – line to lineSimilar internal structural units and key management processes across the companyMinimal critical staff reviewsRegular calendar of key management processes and communicationBased on world-class company skillsDo many things well, but at least 1 functional skill at world-class competence level underpins strategyAlso focus on building corporate skill in the way they run the placeCompany key management processes viewed as real competitive advantageRejuvenated by well-developed people systemsCEO is Chief Personnel OfficerClear focus on performance and motivation – successful long-term wealth-building programs seem keyManagement processes ensure leaders have “informed” view of key contributors 2-3 levels downCEO leads annual “staffing review” – best people/teams in most critical/demanding jobs“Bench strength” is a top priority
24The HPO research found something else common to the HPOs: all 10 were experimenting with self-governance. Self-governance in these HPOs means empowerment with accountability. The HPOs share the common characteristic of involving “a wide range of “or “broad cross-section of” employees in driving for improved performance. Their goal is to imbue every employee with an owner’s mind-set.Self –governance in these HPOs is different from that practiced in other “engaged and empowered” companies. In HPOs the single-minded objective of empowerment is performance.In the matrix below, the HPOs we studied were all in the top half of the matrix (high performance); many were reaching, in addition, for the right-hand side of the matrix(engaged and empowered).
25PERFORMANCE AND EMPOWERMENT AT HPOs Performance-focused, top-down-driven organizationsPerformance-driven, empowered, and accountable organizationsHierarchical, command- and control-oriented, “entitled” organizationsActivity-driven, “engaged and empowered” organizationsCommand and control Engage and empowerHighLowAveragePerformanceManagement approach
26Most large companies start out in the lower left-hand corner of the matrix (low performance and command-and-control management approach). We discovered that HPOs that have successfully transitioned to the upper right-hand corner have first achieved high performance and then experimented with and adopted empowerment. Empowerment without first establishing a true performance ethic in the company tends to result in continued low performance.If your client falls in the lower left-hand corner of this matrix, it needs to concentrate first on building a true performance ethic. Empowerment, alone, is unlikely to yield performance improvement.
27TRANSFORMATION PATH Emerson Pepsico Sonoco Sun Trust VF 3M GE Hallmark Path followed by high-performance companiesPath experienced by companies that fail to instill performance ethic firstEmersonPepsicoSonocoSun TrustVF3MGEHallmarkJohnson&JohnsonMany high perfor-mers” on the journey”Most companiesBPFP&LWallaceCommand and control Engage and empowerHighLowAveragePerformanceManagement approach
28As discussed above, the first phase of the organization diagnostic identifies performance gaps. The second phase focuses on identifying organizational issues and impediments to change. The framework most commonly used to identify organizational issues includes seven buckets that start with “S”.Strategy. An integrated set of actions that deliver a superior value to a set of customers with a cost structure allowing excellent continuing returns.Institutional skills. End-result activities the company must be really good at in order to deliver the value proposition.Shared values. Simple, agreed-upon principles that say what is important around here.Taken together, the first 3-Ss define the company’s vision: an overriding goal that people in the organization strive to achieve; that is challenging, valuable, and exciting to them; and valuable and differentiated to the intended customer. To achieve the vision, the company must design and align levers to guide the behavior of those holding pivotal jobs close to the front line – i.e., those who directly affect delivery of value to the customer.Organizational structure. An orderly and predictable system to determine who reports to whom and how tasks are divided up and integrated.Staff. The people in the organization considered in terms of their capabilities, experience, and potential.Management systems. The processes and procedures through which things get done day-to-day.Leadership style. The way leaders focus their time and attention and the personal tone they set.
29Organizational structure 7-S FRAMEWORKWhat change is needed?How should the client make change happen?Gaps in performanceOrganizational challengesinitiativesEnergizing elementsWinning formulaPivotal jobsDesign leversOrganizational structureManagement systemsLeadership styleStaffStrategySkillsShared valuesVISION
30At the heart of we mean by organizational performance is a “winning formula” creating a combination of strategy, skills, and shared values to carry out an organizational purpose.What links these elements together (the “overlap”) is the organization’s vision:The vision is the overriding goal of the organization – the place where strategy, skills, and shared values intersect. It is the single, noble purpose that guides organizational priorities and gives meaning to the day-to-day activity of the staff.For example, McDonald’s has a vision-driven “winning formula,” as described below.
31McDONALD’S WINNING FORMULA Vision :to become the leading restaurant chain in the worldConvenientGood qualityConsistentFamily-oriented environmentFair valueQuality control over all aspects of businessSuperior site selectionContinuous new product developmentStrong promotion of products and McDonald’s imageStrategySkillsShared valuesQualityServiceCleanlinessprice
32Organizations usually change in response to discontinuities – either external shocks (such as deregulation ) or internal changes (such as new leadership) that make it clear that the old , “grooved” way of doing things is no longer winning. The successful ones will create a new winning formula that is based on changes in strategy, newer or stronger skills, and/or shared values.Contrasting the new winning formula to the old formula identifies and gauges the change that the organization is considering and defines the vision for the change program.A change vision is a creed that summarizes what an organization is trying to become and why. As such, it guides organizational priorities by redefining and recombining business objectives, required institutional skills ,and corporate values about what is important around here.A change vision is at the heart of top management’s role in improving performance and is often the first step. It provides the vital bridge between the initial dissatisfaction with the status quo and the first practical steps taken in a change program – the articulation of a clear target that represents something better that is both logically sound and emotionally appealing.
33IMPROVING ORGANIZATIONAL PERFORMANCE GroovedUnfrozenRedirectedDiscontinuitiesStrategySkillsShared valuesVISIONExternal shocksNew competitors, economicsNew technologiesDeregulationInternal changesNew aspirationsNew leaderNew or stronger skillsNewstrategyCHANGE VISIONShared valuesMajor change through people
34Certain key people in the organization hold positions that determine success or failure in instituting a new strategy, skill, or shared value. These people fill what we call pivotal jobs. We will only succeed in implementing the change vision if we succeed in changing the behavior of pivotal jobholders.At McDonald’s, for example, pivotal jobs include the centralized purchasers of all raw materials for all stores, the store managers, and the hourly employees who take and assemble orders.
35PIVOTAL JOBS What people must do What are they ?Positions that have direct impact on delivery of value to the customer.Typically they-Design the product-Make the product-Sell the productPositions that must capably master new skillsWhere are they?Close to the front line
36In a recent study at a chain store retailer, the change vision included a significant improvement in in-store convenience. Two positions were identified as pivotal jobs – the store manager and the area operations manager.This study employed a contrast analysis in two forms. The first considered each element of behavior and defined how the new behavior would need to differ from current practices.A behavior contrast analysis often proves helpful in defining precisely how the pivotal job- holders need to change.
37CONTRAST ANALYSIS Pivotal jobs: store manager, chain retailer ElementsOld behaviorNew behaviorUse of timeSpend majority of time on daily routine tasks – unloading trucks, stocking shelves, etc.Devote much more attention to training/coaching, evaluating/experimenting with pricing, staffing, merchandisingJob objectiveEnsure that day-to day store operations run smoothlyManage store profitability and implementation of new convenience strategyCritical skillsConscientious, responsibleBasic math and writing skillsOld skills, plus…Good instincts about how to affect profitsLeadership qualitiesCriteriaTask completionFinancial performanceOld criteria plus added emphasis on…Customer serviceInventory managementStore appearance
38The second analysis contrasted the percentage of time spent on critical tasks under current practices and envisioned in the future.
39CONTRAST ANALYSIS BY PERCENTAGE OF TIME SPENT Pivotal job: area operations manager 100%CurrentProposedShort vendor contacts •Recruiting SM and •pharmacistDisciplining •Balancing inventory •Follow-up on telephone •messagesInventories •Paperwork •Putting out fires •Monitoring compliance •–Policies–PlanogramsAnswering surveys •Filling out appraisals •District reports •Tailor products, services, pricing, and promotion to segments•Search for new business•Evaluate business and customer service performanceExpand one-on-one time with SM and associates• Train and motivate face-to-face for customer service, inventory management…•Encourage SM to innovateClerical support should eliminate tasksMerchant/ownerCoachPlayerAdmini-straor
40The 3-S winning formula sets the standards, goals, and mission of the organization. How do you get people (particularly pivotal jobholders) to actually follow those goals?While you can dictate what skills and shared values you want , the organization must provide guidance, motivation, and monitoring to see that the right decisions are made. This is provided through the other Ss – structure, systems, staff, and style. Collectively known as the “design levers”, each of these four should be set by considering the specific skills and shared values you want to instill in the organization’s people – and balancing them with other designs that might be suggested by other specific skills and shared values needed.¶ Structure. Who reports to whom and how tasks are both divided up and integrated.¶ Systems. The processes and procedures through which things get done from day to day, including hiring, compensation, performance evaluation, promotions policy, and training.¶ Staff. The people in the organization considered in terms of their capabilities, experience, and potential.¶ Style. The way managers collectively behave with respect to use of time, attention, and symbolic actions.
41ORGANIZATIONAL DESIGN LEVERS AT McDONALD’S Winning formulaPivotal jobsDesign leversOrganizational structureCentralized buying to control fat contentHamburger University degree requiredPromotion from within to build experienceRegular inspectionsFranchise expansion based on high grades on prior inspectionsMany procedural mechanisms aimed at building employee enthusiasm and loyaltyHard-nosed, rigid attitude on how to run the businessStrategySkillsShared valuesVISIONStaffManagement systemsLeadership style
42The skills and shared values must be used to determine needed changes in organizational design. For example, McDonald’s specific skill of quality control drives many organizational design decisions.StructureCentralized buying provides more than economics of purchasing. It also helps ensure that fat content is between 17.0 and 20.5 percent and ensures that burgers are 100 percent beef.StaffOwner –operators have more say on quality of operations than absentee investor-owners.Training at Hamburger University ensures that managers really know how to make the food right. It is a $40 million facility, with 750-student capacity per 2-week session, and translation booths for foreign managers. It is the only school in the fast-food industry accredited by the American Council of Education.Promotion from within builds experience in meeting company standards and reinforces shared values.SystemsOperating systems, including job descriptions and performance appraisals, ensure that quality of operations meets standards..All franchises are inspected on a regular basis, including grades( A through F) on QSC.Unlike other franchises that give rights to territories, McDonald’s franchises cannot expand unless they show a history of high quality in operations.McDonald’s Personnel Action Manual provides mangers with a wide array of programs to keep crew members motivated and committed.StyleLittle tolerance for variance from operations standards, except as well-thought-out improvements. No shortcuts allowed.Kroc’s inspections. Before entering a franchisee’s office, Kroc would often pick up all the trash within a two-block radius of a McDonald’s restaurant and then dump it on the franchisee’s desk to show a need for greater cleanliness in McDonald’s vicinity.
43ORGANIZATIONAL DESIGN LEVERS AT McDONALD’S Winning formulaPivotal jobsDesign leversOrganizational structureCentralized buying to control fat contentHamburger University degree requiredPromotion from within to build experienceRegular inspectionsFranchise expansion based on high grades on prior inspectionsMany procedural mechanisms aimed at building employee enthusiasm and loyaltyHard-nosed, rigid attitude on how to run the businessStrategySkillsShared valuesVISIONStaffManagement systemsLeadership style
44The design lever clients exercise the most is probably structure The design lever clients exercise the most is probably structure. Too often we hope that by tinkering with boxes in organizational charts, we can solve organizational problems. Structure is really about how to arrange people and jobs for optimum performance.A few assertions about structure:There is no one best structure for any company. Structure choices for a client may change over a few years, depending on external environment, leaders’ strengths, and internal capabilities.Structural choice should be based on the desired behaviors for the organization, which are based on strategic direction.
45STRUCTURAL OPTIONS Strategic direction Desired behavior Greater uniformity across the organizationCentralizationSmall span of control; many layersFunctional structureRapid adaptation to quickly changing or complex environment, or greater response to marketDecentralizationFewer corporate staffFlat structuresBusiness unit structure to match strategic direction (geographic/product/market segment)Temporary teams across products or functionsRapid technological innovationCentralized technical staff for economies of knowledgeDecentralized task force for focus, InitiativeCost reductionConcentrating staff only at level where integration is most crucialFlatter structures; broad span of control
46The change board framework can be useful for understanding the commitment and ability to undertake major change. For each management layer and pivotal job, it asks:Who among the important players is able to perform is his/her part in providing the new skill?What do they have or lack:Conviction that the new skill is important?Courage - the “guy” willingness to do what ever it takes to develop new skills?Individual ability – that is, personal skills or talents?Organization supports – such as the necessary system support?Investing time in a change board analysis has helped a number of leadership teams understand the nature of the current gap and gain insight into the most effective skill- building program
47CHANGE BOARD Skill to be built Conviction Courage Commitment What change is needed?How should the client make change happen?Gaps in performanceOrganizational challengesinitiativesEnergizing elementsSkill tobe builtConvictionCourageCommitmentIndividual abilityOrganization supports/obstacleCapability to leveragethe commitmentLeadership group of area to be changedDown-the-linestaff affected*ExternalConstituencies**Chief executive(or equivalent)* Modified as appropriate for company** E.g., customers, suppliers, trade unions
48Specific questions can guide you as you fill out the change board. ¶ Will people have toLearn new skills?Learn new behaviors?Reestablish priorities?Delegate/assume decision making responsibility?Build new working relationships?Compromise other agendas?¶ Do people have the capacity to make all these changes?¶ Have people had positive or negative experiences with past change efforts?¶ Is the change consistent with existing cultural norms?Beliefs /valuesBehaviorsA retail chain provided this example of a completed change board.
49CHANGE BOARD – CHAIN RETAILER EXAMPLE DiagnosisDelivering in-store convenienceCourageConvictionCommitmentIndividual abilityOrganization supports/obstacleCapabilityTopmanagement (6)Intellectually convinced, butDistant from field realitiesLBO pressuresFair to strongStrong, exceptCOO lacks fieldexperienceHR position vacantLittle supportNo performance measures on in-storeHistory of top-down “customer service programsOtherOfficers/“owners”Home office (15)Field (8)Lip service“Make the field do its job”“H.O. does not understand what it is asking for”WeakModerateFairFew support“Segmentalist” rivalry among functionsInadequate operating systems“Can do” style (do not admit weakness)Area operationsManagers (125)Suspicious, but eager to believeStrongFair to weakOverloaded: span of control=60-80Store managersandassistants (3,200)Cynical (“yet another program”)Fair: ready tofollow clearorders fromaboveFair: most trained as “task masters”“Horizontal priorities” (unrealistic number of tasks assigned)Associates(30,000)Mixed , but many natural supporters?Surprisingly strong, on averageTurnover increasing; too few labor hours for full service
50A completed change board often suggests the actions that may be necessary to build the commitment and capability required to implement change within your client’s organization. In the chain retailer case, actions included:Lock – in supportCOO as “champion”Full –time change leader (facilitator)Line accountability3-year commitmentCreate shared responsibility for progressThree “skill teams,” each headed by a field “baron”District entrepreneurship: each district manager to experiment with two to three initiatives and then share lessonsBuild a success model from belowFocus on one pilot area (14 stores )Use full-time task force of high-potential area managers (eight managers, 3-to 9-month tours )“Trained “area managers return to home districts to lead pilot area process thereForce awareness of realitiesQuarterly workshops to assess progress on skillsClose observation of pilot area (“ If we can’t make it work in one area, there’s no point in talking about company wide programs” )Restructure field organizationStore staffing standardsAOM span of control, supportsNew recruiting/selectionLink to pharmacy strategy/skill gaps
51CHANGE BOARD – CHAIN RETAILER EXAMPLE StrategyDelivering in-store convenienceCourageConvictionCommitmentIndividual abilityOrganization supports/obstacleCapability to achieve change objectivesTopmanagement (6)OtherOfficers/“owners”Home office (15)Field (8)Area operations Managers (125)Store managers and assistants (3,200)Associates (30,000)Lock in supportForce awareness of realitiesCreate shared responsibility for progressBuild a success model from belowRestructure field organization
52To answer the question, “How should change happen To answer the question, “How should change happen?” , the OP developed the “organizational transformation triangle” that summarizes the three basic management tasks when dealing with change. Their relative emphasis may vary, but all three of them have to be managed to achieve fundamental behavioral change.
53TRANSFORMATION TRIANGLE Energizing elementsWhat change is needed?How should the client make change happen?Gaps in performanceOrganizational challengesinitiativesTRANSFORMATION TRIANGLE④Top managementTop-down direction settingProcess design, target, communications, etc.Front-line performance improvementUnit-by-unit, team-oriented, problem solvingCross-functional initiativesLink activities and information in new ways for break-through performanceOperationsStaffs
54The well-known GE “workout The well-known GE “workout!” change program included elements from each dimension of the transformation triangle.
55GE “WORKOUT!” Top-down direction setting/culture shaping No.1 or No.2 in every business“speed, simplicity, self-confidence”DelayeringBest practices workshopsCore process redesignProject teams to identify cross-functional issuesProcess mappingBottom-up performance improvementTown meetings: 2- to 5- day interactive sessions“Brand name” quality processesOperations: unit-by-unit redesign
56The client should seek an appropriate balance across all three dimensions of the transformation triangle. Overreliance on any dimension will impede change.
57BALANCE ON 3 DIMENSIONS IS KEY RequirementsDimensionPotential risk from overrelianceEnergizing visionCustomer/shareholder/employee triadClear performance targetsLack of commitmentConfusionCynicismPerformance winsRelevant knowledge and skill buildingExpansion expectationUnfocused effortsIgnored or undermined by managementCross-functional opportunities missedDiscontinuities addressedClearly understood process installedOld systems/structure/ processes eliminatedOverly complexBeyond existing skill and capabilities
58The OP has defined a wide array of change approaches The OP has defined a wide array of change approaches. Each change approach strikes a unique balance among the dimensions of the transformation triangle. Your challenge is finding the change approach that strikes the balance appropriate for your client situation.
59OVERVIEW OF 5 PERFORMANCE CHANGE APPROACHES BCDEDescriptionStructured process-Driven problem solving (compliance)Empowered opportunity-driven innovationValues-driven adaptive improvementCross-functional process redesignTop-down, skill-driven building/ improvementTransforma-tion emphasisExampleTOP/AVABreakthroughTQMCPRCorporate skill teamsWhen appropriateStep change needed quicklyEntitled cultureChange-ready, flexible organizationApproaching theoretical limits; performance ethic and capability in placeCross-functional redesign neededNew basis for competitive advantage neededTypical goals40% of compressible costs (imposed)Up to each team; typically, stretch targets in quality, cost, etc.Continuous improvementQuicker, cheaper, betterLasting competitive advantage
60No matter what change program is selected, the following six energizing elements should be addressed. By addressing each one, the client builds the energy required to make organizations change.
61ENERGIZING ELEMENTS Performance measurement Communications What change is needed?How should the client make change happen?Gaps in performanceOrganizational challengesinitiativesEnergizing elementsAmbitious, measurable objectivesReinforcing feedbackConsequencesPerformance measurementCommunicationsVision and leadershipProblem solving processPeople developmentOrganizational infrastructureBuild commitmentEstablish 2-way flowManage expectationsInspire actionWinning formulaWinning leadership groupSystems and processStructureRolesDoer-drivenFact-basedPeople-intensiveNew mind-setNew skills, behavior
62The OP has a wealth of experience and research to support the design of each element of a change program.
63POSSIBLE ACTIVITIES/TOOLS World benchmarksProject performance indicators frameworkPerformance mapsPerformance contracts pro formaBest practice examplesCommunications coordination team-job specificationsCommunications channels auditStakeholder analysisCommunications planCommunications workshopBest practice examplesPerformance measurementCommunicationsVision and leadershipProblem solving processPeople developmentOrganizational infrastructureLeading for successCEO time-leverage manualCore process redesignExample role description“7-S” checklistAnalytical tool kit frameworkAnalytical problem solving workshop“data to chart” video and workbooksClient advocacy videosSkill/will/diagnosticContinuous improvement principles workshopBest practice examplesFramework for designing skill-building programsDiscrete training modules — management skills (MFS), leadership skills(LFS), building high-performing teams, project management guide, designing ongoing improvementDiscrete tools — RJDs, time-usage logs, change-readiness surveys, signaling change tool kit, how to run a training workshopBeliefs/behavior-prompt sheet — staff activity surveyBest practice examples
64A packaging company applied these energizing elements as they built the skill they called value-based systems selling (VBSS):With a clear vision and leadership settled, the company decided on a problem solving process that involved six multinational skill teams, each with a credible leader.Their performance measures were narrowed to two aspects: in terms of input, they measured account plans created and number of plans created and number of people trained; in terms of output, they measured price and market share.To communicate the message, the president embarked on a “road show” to manufacturing and sales locations; the senior managers attended workshops; and a newsletter/bulletin about VBSS was begun.The organizational infrastructure was modified to establish account teams, global account managers, and an account planning function.On the people development front, an “ action learning” program was begun to teach people more about account planning.All these tools and activities were focused on achieving a new level of excellence in the core skill of VBSS that the company knew was critical to its strategy.
65VBSS Input Account plans People trained Outputs Price Share Awareness building – President’s road showSkill building through workshopsReinforcement through VBSS network bulletinsPerformance measurementCommunicationsVision and leadershipProblem solving processPeople developmentOrganizational infrastructureThe leader skill for becoming $1 billionPresident as sponsorAccount teamsGlobal account managersAccount planningMultinational skill teams with 6 credible championsPilot effort with leadership to get buy-in and adviceAccount-based “action learning” program
66Associates will often step up to manager roles on engagements that address organization issues and/or implement change. These engagements often involve multiple client teams. Associates assume responsibility for managing one or more of these client teams. These engagements also seek the active support of a broader set of client managers. Associates assume responsibility for developing influential relationships with critical client managers. Engagements which focus on organization issues therefore provide exceptional opportunities for associates.
67ASSOCIATES ASSUME MANAGER ROLES IN ORGANIZATION ENGAGEMENTS Traditional view of team rolesTeam roles on organization engagementsED/DCSAssociateSr.clientexec.EMClientmanagerteamED/DCSAssociateClientteamEM
68The effective associate manager serves three functions: The associate manager builds and sustains effective client teams that define, plan, and implement the change .The associate manager leads problem solving on multiple client teams.The associate manager forges a consensus of support for the change vision among critical client managers and ensures that managers maintain the energy level required to effect the change.All three functions are critical to success. However, in engagements that address organization issues and /or implement change, building and sustaining an effective team is often the necessary precondition to success in the other functions. The client team provides the critical insight, knowledge, and skills required to solve the organizational problem. The associate / manager needs to build an effective team environment to tap into the essential client input. The client team should hold the confidence of the critical client managers. Once the associate manager has earned the endorsement of the client team, the support of the client manager is much more likely.
69Client involvement Problem solving Team dynamics MANAGERIAL ROLESClientinvolvementProblemsolvingTeamdynamicsChief engineerFocuserStructurerQuality controllerDevil’s advocateConsensusbuilderCoach and team developer
70PRINCIPLES OF TEAM BASICS Since effective teams are so fundamental to success in organization work, the OP has invested considerable effort in understanding how to build high-performance teams. Follow these principles to build high-performance teams.PRINCIPLES OF TEAM BASICSDimensionDefinitionMeaningful purposeThe team purpose mustInspire the individual team membersJustify the investment of Firm and client resources, as well as the personal investment of each individualFor an engagement team, the purpose must include reference to substantive and sustainable client impactClear performance goalsThe best teams translate the purpose into a well-defined set of tangible and measurable goals.The goals encompassWhat will be achieved for the client in terms of performanceWhat will be achieved for the team and its individual membersNearer-term goals, as well as “completion-related” goalsWell-defined working approachThe best teams decide up front and throughout the effort how to work together day-by-day, and how individual team members will apply and develop their skills as they produce collective results above and beyond what members working as individuals could produce. Their working approach allows substantive time for “unstructured” creative team thinking/brainstormingComplementary skillsThe best teams are composed of individuals who provide or are expected to develop the full range and depth of skill needed to fulfill the purpose. Skill development is seen as a key reward for team participation. This applies particularly to functional skills, but also to problem solving skills and interpersonal skillsMutual accountabilityIn the best teams, all team members feel mutually accountable for accomplishing the team’s purpose and performance goals. Individuals do not succeed or fail – the team doesSmall numbersSuperior team performance can only be achieved by a small number of people who can spend substantial time working together as a team. A group of more than approximately 15 people has little chance of becoming a superior teamThe principles are described much more thoroughly in The Wisdom of teams, authored by Jon Katzenbach.
71PRINCIPLES OF TEAM BASICS Coach and team developerSmallnumbersMeaningfulpurposeClearperformancegoalsTEAMBASICSMutualaccountabilityComplementaryskillsWell-definedWorkingapproachSource: The Wisdom of Teams
72A team’s potential is defined by the quality of its membership A team’s potential is defined by the quality of its membership. The associate manager should, whenever possible, participate actively in the selection of team members. Recent research by the OP has found that most successful change programs were driven by a few impassioned leaders. These “real change leaders” exhibit a common set of characteristics. Look for these attributes as you consider which client people to include on the team.
73REAL CHANGE LEADERS“People with a reputation for improving performance through people – and for exceeding expectations along the way” *Commitment to a better wayCourage to challenge existing power basesPersonal initiative to go beyond defined boundariesMotivation of themselves and othersCaring about how people are treated and enabled to performStaying under coverA sense of humor about themselves and their situations* Real Change Leaders
74.Once the associate manager has assembled the right team and built an effective team environment, solving the problem should be easier. The principles of good problem solving do not change for engagements that address organization issues and/or implement change. The way the associate participates does change, however. Here are a few recurrent themes taken from interviews with associates after their first organization engagementLet the team solve the problem. You won’t have time to solve the problem yourself when you have multiple teams to manage. More importantly, the team will feel more ownership for the solution if you let them solve the problem.Teams should be productive. Focus the team on action and work. Define specific end products.If you have assembled the right team, every member has an important part of the answer. Engage the entire team in solving the problem. Every team member should have a challenge piece of the problem.Meetings are necessary evil for effective teams. Keep them to a minimum. Prepare meetings carefully so that they are a constructive use of team time.Listen. Especially on organization problems, the client often knows the answer but needs help recognizing it.
75SOLVING THE PROBLEM Structure the problem, then let the team solve it Focus the team on action and work – not process, talk, and reviewKeep the entire team engagedPrepare brief, high – impact meetingsListenChief engineerFocuserStructurerQuality controllerDevil’s advocate
76If you have the consensus of the team, it should be easier to sustain the support of critical client managers. A few basic principles merit emphasis:You need to begin building credibility with client managers early in the study. Talk to them early and often. Engage then in defining the issues and prioritizing the work. This ensures that their issues will be addressed.Managers have specific interests and motivations; these interests explain much of their behavior. You will be more effective at influencing managers if you spend a few moments trying to understand their interests. Before each discussion, consider how your recommendations impact the client manager’s interests.When issues or concerns become apparent, address them squarely. There is little value in avoiding and issue; it will come out eventually. Many issues evaporate when explicitly discussed. Many others can be resolved by specific analysis. Issues that persist need to be factored into the team’s thinking.Whenever appropriate, include key team members in important discussions with critical client managers. Then client manager will get to know the team members better and place more trust in their advice. When you include team members, the client manager can sense first-hand the strength of the team consensus. As an added benefit, team members appreciate the opportunity to interact with managers, and they can help you interpret the client manager’s feedback.Good written materials are always useful in client manager discussions. Preparing them forces the team to explicitly agree on the content. After presentation they serve as a solid record of what was said.The opportunity to interact with client managers in one of the more attractive elements of organization work. Associates can use this interaction to develop client relationship skills that will be vital in the years ahead.
77BUILDING CONSENSUS Talk to critical managers early and often Understand the motivations of the critical managersAddress issues and concerns directlyInclude key team members in important discussionsPrepare clear, concise written materialsConsensusbuilder
78We hope that you take away four major points from this session: Performance is the point of our consulting work, which involves an integration of strategy and organization.Inevitably, at the heart of all our work is change. And at the heart of change is a respect for and understanding of people.To understand organization performance and bring about lasting change, it is as important to problem solve for how ( the engagement process ) as what ( the engagement issues).Organization work provides associates an opportunity to stretch their people-management skills early.
79WHAT WE HOPE YOU TAKE FROM THIS DOCUMENT Winning performance is based on the integration of strategy and organizationRespect for and understanding of people is at the heart of all changeProblem solving for process is as important as problem solving for issuesAssociates have a significant and rewarding role to play in organization work
80WHERE CAN AN ASSOCIATE FIND OUT MORE Selected core documents and handbooks The overview of core of frameworks in Sections 1 and 2 of this document describes the basics and provides a template to better understand client organization issues, which should prove helpful in almost any engagement because no matter what the focus of an engagement is, a basic understanding of the process of change is necessary to focus on the priorities of the clientOnce you are assigned to an engagement of this kind, you may need to read more about some of these frameworks or gather handbooks about the topic. As you may know, PDNet contains a large array of documents that may be useful to you. You can get hard copies of such documents in 24 hours using “PDNet Express” through your local libraryHowever, there are thousands of documents in the Firm’s databases; therefore, the key for efficient data gathering and “getting smart fast” will be to access only a limited and targeted selection of documents when you need them. This section provides you with some hints on key, core documents of the organization practice and related disciplines
81Appendix This appendix contains: HPO bulletins Glossary of 7-S frameworkOrganization transformation triangleEnergizing elements
82GLOSSARY OF 7-S FRAMEWORK Winning formulaPivotal jobsDesign leversOrganizational structureCentralized buying to control fat contentHamburger University degree requiredPromotion from within to build experienceRegular inspectionsFranchise expansion based on high grades on prior inspectionsMany procedural mechanisms aimed at building employee enthusiasm and loyaltyHard-nosed, rigid attitude on how to run the businessStrategySkillsShared valuesVISIONStaffManagement systemsLeadership style
83Organizational structure Winning formulaPivotal jobsDesign leversOrganizational structureManagement systemsLeadership styleStaffStrategySkillsShared valuesVISIONSTRATEGYWhat is it?An integrated set of actions to deliver a superior value to a set of customers with a cost structure allowing continuing excellent returnsWhat is it important?Gives direction and purpose to organization activitiesStrongly influences what skills the organization needs, what values are stressed, and how it should be designedProvides benchmark for measuring organization’s success and redirecting its activitiesWhat must I know about it?Balance between strategic thinking and capability to execute often unmanagedStrategy formulation must consider the complexities of external environment (e.g., discontinuities gaining ) balanced with internal history and capabilitiesIncreasingly, superb performers frequently win not by “inventing it first”, but by doing it bestIn highly uncertain environments, institutional skills may help dictate strategy
84Organizational structure Winning formulaPivotal jobsDesign leversOrganizational structureManagement systemsLeadership styleStaffStrategySkillsShared valuesVISIONINSTITUTIONAL SKILLSWhat they are?End – result activities the company must be really good at in order to deliver the value propositionWhy are they important?To help people focus on the 2-4 skills critical to delivery of the value propositionThey drive organization design – other organization elements must be designed to build needed skillsWhat must I know about them?Institutional skills are organization capabilities, not just abilities of managers or other staffStrategy work is incomplete without explicit consideration of the institutional skills required to execute the strategyInstitutional skills increasingly are the primary basis for achieving sustainable competitive advantage
85Organizational structure Winning formulaPivotal jobsDesign leversOrganizational structureManagement systemsLeadership styleStaffStrategySkillsShared valuesVISIONSHARED VALUESWhat they are?Simple terms that say, “ What is important around here? “Why are they important?Provide means to achieve value proposition throughAspirations, pride, emotion, and energyFocus, guidance, and learning orientationSolution space/ tie breakersWhat must I know about them?Shared values are probably the hardest S to influenceBut ignore at your peril. Any strategy consistent with deeply grooved shared values will never be implementedThe leadership team must articulate, believe in , and be credible on shared valuesShared values are shaped by obsessive, persistent communication from leaders
86Organizational structure Winning formulaPivotal jobsDesign leversOrganizational structureManagement systemsLeadership styleStaffStrategySkillsShared valuesVISIONVISIONWhat is it?An overriding goal that people in the organization strive to achieve; that is challenging, valuable, and exciting to them; and valuable and differentiated to the intended customerWhy is it important?“Strategy and tactics are for the battlefield, but the battle must be fought for a purpose of value to society” Genichi Kawakami, Yamaha CorporationProvides meaning, motivation, and source of pride to attract and retain customers and able employeesHelps drive long-term strategy formulation and development of needed skills and valuesSupplies courage in the face of the unknown by providing sense of stability and enduring themesGuides and inspires daily behavior, reducing need for bureaucratic rules and systemsWhat must I know about it?Leader must set and live by vision for it to permeate institutionBest visions are simple, easy-to-understand, and demand nothing short of long-term excellenceFinancial goals (e.g., increase SOM, increase shareholder wealth ) are not visions; they do not excite the organization’s people or provide enough competitive differentiation to serve as standard for behaviorVision is extremely difficult to change significantly without creating discontent, reduced effectiveness, and even abandonment of institution by its best people and customersHowever, visions can and must be constantly challenged and changed at the margin to adjust for the institution’s changing environment
87Organizational structure Winning formulaPivotal jobsDesign leversOrganizational structureManagement systemsLeadership styleStaffStrategySkillsShared valuesVISIONPIVOTAL JOBSWhat is it?Positions, close to the front line, that have direct impact on delivery of value to the customer (e.g., those who design the product, make the product, and sell the product )Why is it important?Successful implementation of any change hinges upon the pivotal jobholders acquiring new skillsThinking about the new skills these pivotal jobholders must acquire pushes the depth and rigor of our thinkingWhat must I know about it?Relationship between microskills of pivotal jobs and macroskills of the organizationContrast analysis compares microskills required after a major change program to those currently required in the organizationReverse-engineer the organizational design – start with the results you expect; identify the behavioral change needed to achieve those results; then shape the “other Ss” to influence pivotal jobholders to perform as required
88Organizational structure Winning formulaPivotal jobsDesign leversOrganizational structureManagement systemsLeadership styleStaffStrategySkillsShared valuesVISIONSTRUCTUREWhat is it?An orderly and predictable system to determine who reports to whom and how tasks are divided up and integratedWhy is it important?Facilitates coordination and integrationSymbolizes prioritiesFocuses organization attentionWhat must I know about it?Design should support needed skills and shared valuesStructure is most powerful tool for energizing changeStructuring is not simpleKey structural issues includeTypes of structureSpan of controlCentralization vs. decentralization
89Organizational structure Winning formulaPivotal jobsDesign leversOrganizational structureManagement systemsLeadership styleStaffStrategySkillsShared valuesVISIONSTAFFWhat is it?The people in the organization considered in terms of their capabilities, experience, and potentialWhy is it important?Staff composition and productivity are important determinants of current and future strategic successThe people who make and sell the product/service collectively determine if the client delivers superior valueWhat must I know about it?Front-line positions require detailed attention to specific skills and shared valuesKey issues can include who to hire, how to train and coach them, how to motivate and reward them, and what information to give themSupport positions must reflect the needs of the front-line people
90Organizational structure Winning formulaPivotal jobsDesign leversOrganizational structureManagement systemsLeadership styleStaffStrategySkillsShared valuesVISIONSYSTEMSWhat is it?The processes and procedures through which things get done from day to dayWhy is it important?Most important tool forCommanding attentionInfluencing behaviorIndicating how things really work hereWhat must I know about it?Best companies employ relatively few and simple systemsThey should be shaped on a regular basisImportant types includeManagement information systems (MIS)Incentive systemsPlanningSystems to get right information in the hands of the right people are increasingly important
91Organizational structure Winning formulaPivotal jobsDesign leversOrganizational structureManagement systemsLeadership styleStaffStrategySkillsShared valuesVISIONSTYLEWhat is it?The way people focus their time and attention. There are tow typesPersonal tone (e.g., supportiveness, argumentativeness )How people spend time, what questions they ask, settings they appear inWhy is it important?The key lever in shaping values and reinforcing strategyWhat must I know about it?What people do means more than what they sayThe best leaders use style to emphasize a few simple valuesWhile personal tone is hard to change, managers can more easily adapt how they spend time, questions they ask, and settings they appear in