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Leading Change: On Target, On Time, On Budget

Leading Change: On Target, On Time, On Budget. HIMSS Dutch Holland, PhD February 2005. Management Trends/Movements. The Latest and Greatest. What’s hot in your business?. What’s Hot. What’s hot in general?. What’s Hot. Global Best Practices (GBP). What’s Required.

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Leading Change: On Target, On Time, On Budget

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  1. Leading Change: On Target, On Time, On Budget HIMSS Dutch Holland, PhD February 2005 www.hdinc.com

  2. Management Trends/Movements www.hdinc.com

  3. The Latest and Greatest What’s hot in your business? www.hdinc.com

  4. What’s Hot What’s hot in general? www.hdinc.com

  5. What’s Hot Global Best Practices (GBP) www.hdinc.com

  6. What’s Required Leading Change Effectively www.hdinc.com

  7. Today’s Business Reality Companies have two things to do: • Run the Business to get products and services out the door and get paid for them this month • Change the Business to ensure the organization will be competitive in the future To say it another way • Companies must Run the Business to eat at the end of the month • Companies must Change the Business to eat this time next year www.hdinc.com

  8. The Dual PerspectiveNeeded for Leading Change www.hdinc.com

  9. The Problem in a Nutshell! Companies run their businesses well • Fedex delivers 99.97% of its packages successfully Companies change businesses poorly • The typical big company successfully changes itself on 30% of its change trials www.hdinc.com

  10. Run the Business/Changethe Business www.hdinc.com

  11. Reasons for the Lack of Change Success Organizations are hard to change…but we need to change them anyway! Most leaders are managers and know how to “keep a business going” but not how to change it • Not trained in changing the business • Not experienced in changing the business • Not “suited” for change the business leadership • Not willing to put in the energy and stomach lining that is needed Change tools are not widely available and stress “mysterious means” www.hdinc.com

  12. Consequences • Organizational change without effective change leadership might work…eventually • People will “muddle through it …” • Muddled-through change has real costs www.hdinc.com

  13. Consequences Economic Costs • Delay or total loss of business case value of the change • Costs of work-arounds and “do overs” • Potential of missed / messed up sales • Potential of customer dissatisfaction because of messed and/or slow sales • Competitive gains … they gain while you delay • Your worst nightmare at Halloween: Hershey misses an entire Halloween candy season!! www.hdinc.com

  14. Consequences Organizational / People Costs • People overloaded and playing catch up • Organizational stress increases • Loss of confidence in management • Morale plummets • Feelings of failure and frustration • Turnover (actual or virtual) • Cynicism develops and spreads • Your worst nightmare: you work your buns off and have nothing to show for it … or you are blamed for failure … careers ruined www.hdinc.com

  15. Steps to a Change-the-Business System • We have identified, tried and tested seven steps for putting a Change-the-Business System in place • While the steps look and sound simple • leadership attention • time • discipline will be required to move to a true, balanced RTB/CTB business approach • Leaders must lead, not delegate, a CTB System into existence www.hdinc.com

  16. Step One: Adopt Dual Perspective 1. Envision “running the business” (or doing business) as separate from changing the way we run the business. 2. See “run the business” in terms of “customer business” (i.e., getting products and services out the door to fill customer orders). 3. See “changing the way we run the business” in terms of changing attributes of the business. www.hdinc.com

  17. Step Two:Align Power Sources 1. Both running the business and changing the way we do business require energy/power. 2. Focus top management’s attention on change; focus other management on running the business. 3. Ensure top management has time and concentration to focus on change. 4. Top management’s first step should be to clarify the way the business will be run. www.hdinc.com

  18. Step Two:Align Power Sources Examples: Predict what happened! • The COO of large financial services firm hands off RTB responsibilities for one year, and moves his office to one next door to his CTB team • The CEO selected his successor, named him publicly and encourage him to be the leader of the company’s strategy development and implementation team • The CEO of a large energy company named a “recently removed” Regional manager to head the corporation’s Change Team (“…so I won’t have to fool with it,” says the CEO www.hdinc.com

  19. Step Three: Clarifythe Vision for the Future 1. Determine a vision that is: • Valid • Complete • Feasible • Resourceable • Compelling 2. Arrange to communicate the vision. www.hdinc.com

  20. Step Three: Clarify theVision for the Future - Example By 2005, our company will be the market share leader in both commercial and US military aircraft We will win leading market share by having • The best aircraft reliability ratings in the industry • Lowest operating cost per hour • The highest customer satisfaction scores in the vertical lift market We will prepare to win in the future by flying and certifying a commercial tilt rotor aircraft that bridges the vertical lift and short hop markets www.hdinc.com

  21. Step Four: Set Agendas 1. Set agendas for “running the business” and “changing the business.” 2. The annual business plan is the “run the business” agenda for most companies. 3. Set a change agenda that targets company attributes that must change to reach the vision. www.hdinc.com

  22. Contents of the Business Agenda - Example 2004 Operating Plan / Targets • ROI - 21% • Free cash generated - $52 million • Market share for commercial helicopter sales - 34% • Secure funding for Production Phase of V-22 – $3.5 billion • Average aircraft reliability index – 98.5% • Win the Canadian Air Force procurement for medium helicopters www.hdinc.com

  23. Contents of the Change Agenda - Example 2004 Change Agenda • Complete instrumentation of Test Fleet(supporting “the best aircraft reliability ratings in the industry”) • Form and charter the “Customer Reliability Panel”(“the best aircraft reliability ratings in the industry”) • Complete the insurance reliability study to qualify for lower premiums for helicopter operators( “the lowest operating cost per hour”) • Complete and open for business the New Customer Reception Center( “the highest customer satisfaction scores in the vertical lift market”) NOTE: these four won’t achieve the Vision, but they do “advance the ball” toward the Vision www.hdinc.com

  24. Two OrganizationsNeeded for Change www.hdinc.com

  25. The Organization Chartfor Change www.hdinc.com

  26. Step Five:Establish Scorecards 1. Agendas have no weight without accompanying scorecards. 2. Scorecard results must have real consequences for the organization members … i.e., tied to incentives! www.hdinc.com

  27. Contents of Scorecards 1. Identify the specifics that will be graded. • Run-the-Business scorecard • Business results for period • Financial targets • Change-the-Business scorecard • Completed actions on change targets • Financial targets 2. Specify how well the specifics must be done to achieve a maximum score. 3. Cross-check scorecards with vision. a. Directional correctness b. Level of “stretch” www.hdinc.com

  28. Scorecards and Compensation - Example Major Plastics Manufacturer • Philosophy – the CEO said, “My managers earn their salary by hitting our annual targets. They are not eligible for incentive compensation unless we hit RTB targets as a company and they individually hit their CTB targets” • This philosophy pushed company to industry-leading quality and customer satisfaction levels…and cost two members of exec team their jobs for not achieving CTB targets www.hdinc.com

  29. Mind-boggling Fact Companies have trouble getting change done…because managers / employees are only evaluated, promoted, and incentivized on Run-the-Business performance (I.E., their “regular job”) In other words, we pay people not to change!! www.hdinc.com

  30. Step Six: Establish Forums 1. Forums are opportunities for leaders to work with agendas and scorecards (meetings or calendar periods). 2. Two forums are needed to emphasize the dual perspectives: • Similar priority • Similar structure • Similar operating rules www.hdinc.com

  31. Step Six: Forums – Examples Helicopter Company • RTB and aircraft deliver Status Meeting … every Tuesday afternoon, attended by COO and Executive Team • CTB Status Meeting …first Monday of every month, hosted by CEO and COO; each CTB agenda item reviewed Grocery Company • RTB status…every Monday AM…with senior team; hot problems and workarounds • CTB status…every Monday PM….with same senior team in same exec conference room; status of each CTB project www.hdinc.com

  32. A Final Check on RBCB … Have each leader construct and explain two wall charts: www.hdinc.com

  33. A Final Check on RBCB … • Run the Business…looking around the room at the wall charts should show folks who are responsible for achieving company RTB agenda for the year • Change the Business…looking around the room at the wall charts should show the folks who are responsible for achieving the company CTB agenda for the year • How do you think your managers would do? www.hdinc.com

  34. Leading With Business Opportunities • Use Run-the-Business Opportunities to shape the contents of Change Agenda • Pick Change agenda items to match “executive interest” in business opportunities • Flex Change agenda items (I.e., cancel or postpone items) around opportunities www.hdinc.com

  35. Leading With Business Opportunities - Example Helicopter Company • Had just started cycle time reduction pilot project when “big deal” order came in from Canadian Air Force • COO decided to personally lead the the Canadian project and use it as the cycle time reduction pilot Oilfield Service • Set Vision to “go global” with their services • Project underway to open Singapore office in 1998 • Big order came in from Saudi; Singapore office put on hold while new office opened in Riyadh www.hdinc.com

  36. Leading With Business Opportunities 1. SCAN business opportunities/transactions and evaluate each as a potential carrier of change. 2. SELECT and projectize opportunities. 3. LEAD the project(s) to business and change success. 4. LEVERAGE results of project for business and change. www.hdinc.com

  37. Manage the Portfolio ofChange Projects - Example Engineering / Construction Company • Nine CTB projects working…all focused on ROI improvement through “developing infrastructure” • Employees felt “there is noting in all this hard work for us” … cooperation was low Upstream Energy Company • Company has “lost momentum on change projects” • Inventory showed 72 projects underway, all sponsored by the Senior Executive Team • CEO put 65 on hold until progress was made on seven www.hdinc.com

  38. Bottom Line onChange Leadership • Change Leaders must “flex” around run-the-business issues/opportunities • Change Leadership is not delegatable but personal • Change Leadership in not reactive but pro-active • You do it personally … even if you have helpers attached to the hip www.hdinc.com

  39. Fast Takes for IT www.hdinc.com

  40. Business Red Zone • Changes are not all the same • Some changes are sweeping and far reaching …they are “Make it Big or Break it Bad” Changes • We label those changes as “Red Zones”. www.hdinc.com

  41. The Red Zone • The Red Zone is a critical time and place in the life of an organization that is characterized by the simultaneous presence of • The opportunity for Great Gain and • The real likelihood of Great Loss • In the Red Zone, failure to achieve the Gain will result in the Loss www.hdinc.com

  42. The Red Zone R e d Z o n e GAIN Company Performance LOSS www.hdinc.com

  43. Red Zone Maneuvers The most important Red Maneuvers are as follows: • Change of Competitive Vision/Strategy • Merger/Acquisition • Macro Reengineering (Enterprise or Process) • Big System Implementation (ERP or e-business) • Enterprise restructuring and/or downsizing • Culture Change • Combinations of the above The purpose of each maneuver is to grow the company. www.hdinc.com

  44. The Organization Chartfor Big IT www.hdinc.com

  45. Negative Trend • At the very time IT should be running toward the information • IT is running toward the technology! TREND Information Technology NEED www.hdinc.com

  46. Intimidation IT frequently costs itself a “seat at the table” because of … Java, Java … www.hdinc.com

  47. …and In Conclusion Change is the Rule … So we better get pretty darn good at doing it! www.hdinc.com

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