Ron Crabtree, CIRM, CSCP, MLSSBB | July/August 2012 | 22 | 4
Bringing about agreement to accomplish lasting transformation
In the last edition of “Lean Culture,” I introduced several concepts I gleaned from a Harvard Business Review article titled “The Tools of Cooperation and Change.” I invited readers to locate their companies on a matrix of four quadrants, with one axis representing the level of agreement on business goals throughout the organization and the other representing agreement on how to achieve those goals. (See Figure 1.) I also introduced four sets of change management tools—power, leadership, management, and culture, each corresponding to the quadrant of the matrix where it is most effective.
Now, I’d like to expand upon two of these tools and explore how some real-life organizations have used them in their quests to bring about change.
Power tools correspond to the lower-left quadrant of the matrix, a situation indicating low agreement on both goals and how to achieve them. Examples of power tools include coercion, threats, fiat, role definition, and hard-nosed negotiation. Power tools can be effective in low-agreement circumstances—but only if leaders wield enough authority. One instance of power tools in play occurred during JPMorgan Chase’s merger with Bank One in 2004. The CEO aggressively drove technology changes, including threatening to make all decisions regarding a technology upgrade himself if they were not performed in six weeks. The same CEO also reconfigured a quota control system, endangering the jobs and bonuses of the branch managers who relied on those quotas.
Kaizen events are one strategy companies use to quickly drive changes on the shop floor. In my time working with General Motors, I saw my colleagues employ this technique as a power tool, squeezing immediate price reductions from suppliers, who understandably were reluctant to change their business methods. However, the automotive giant had the clout to de-source any vendor that refused to participate. Through extensive and rapid engineering changes, GM was able to use the ultimate power tool of physically changing work, rendering it impossible to revert back to the old ways.
Management tools, on the other hand, relate to the lower-right quadrant—low agreement on business goals, but high agreement on how to achieve them. These techniques include financial incentives; hiring and promotion; training; standard operating procedures; control systems; and measurement systems, such as the balanced scorecard and hoshin kanri, which is a method for developing and implementing strategic goals (also known as policy deployment). In the right circumstances, measurement systems to drive change can lead to amazing results.
Let’s explore in detail two case studies in which measurement systems played a large role in the journey toward change. Both companies were similarly sized, were privately owned, and shared financial information with employees—in fact, both engaged in profit sharing, where employees could personally benefit from high performance.
At the first company, a plant manager was charged with moving metal-forming equipment for use in construction sites to another location. His team performed careful time and motion studies, as well as a rationalization analysis of how to leverage lean techniques and achieve flexible assembly at the new site. The goal was to produce 100 finished units in a single eight-hour shift, a feat never previously accomplished at the company. Studies indicated this was possible; however, months went by without the goal becoming realized. Finally, the plant manager installed a large, $2,000 monitor, which displayed in real time the number of units remaining until the target was met.
Within 12 days, the magic number of 100 units was reached for the first time. During the next month, this became a routine occurrence; and two months later the team hit 120 units. The plant manager was ecstatic, and the monitor paid for itself every week in increased productivity. Best of all, no other actions were necessary.
The second company, a manufacturer of printed circuit boards, also was in the process of adopting lean manufacturing. During the implementation, managers recognized that rework and corrections comprised 35 percent of total costs. However, there were insufficient data to perform a root cause analysis and uncover the reasons behind this. Plus, the company lacked the technological infrastructure to efficiently track and record these data.
The management team’s solution was to display issues visually on white boards as they were identified and analyze the results on spreadsheets. Not only were the white boards standardized and conspicuously placed in each department, but the company also committed time and resources for material review boards and clerical support for recording the information. Company leaders explained that capturing the amounts of rework and the resulting human effort and scrap would enable them to perform an investigation into the root causes of the problem in upstream process steps. They went to great lengths to point out that the process was not intended to place blame, but to discover what was breaking down in the operation.
However, despite the efforts and encouragement of management, the project was a dismal failure. An investigation revealed that employees were reluctant to record the needed information and continued performing rework as before. The employees had no shortage of excuses, including that recording was too difficult and they lacked the ability to guess root causes.
What was different in the two situations? In the first, there was a high level of agreement about what to do—make more product and thereby further enjoy the benefits of profit sharing—as well as on how to achieve it. Workers all recognized the benefits of recording hourly production results against a goal and celebrating incremental breakthroughs.
In the second environment, company culture differed considerably. While staff members were in fundamental agreement about what to do—reduce rework and boost operating performance—they lacked agreement about how to solve the problems. Employees secretly saw the system as a way to place blame and promote rivalries. Without buy-in, the measurement tool could not get the job done.
In the end, what worked at the second company was ratcheting up standard work and preventive measures. The engineering team served to force the necessary changes with tightly dictated work methods and more rigorous inspection standards—which you may recognize as power tools as opposed to management tools.
Change the plan
The authors of the Harvard Business Review piece warn that without a “modicum of agreement on both dimensions of the matrix,” the techniques they describe generally won’t work. I believe this explains why strategic plans often fail. If you find that agreement is lacking in either axis on the change management matrix, this is a barrier to success that requires action. A specific plan with clear accountabilities can close the gaps and enable a higher likelihood of success.
Ron Crabtree, CIRM CSCP, MLSSBB, is president of MetaOps and coauthor of four books on operational excellence. He also writes an online magazine; runs an online radio show; and teaches, presents, and consults. He may be contacted at email@example.com.