change and why it fails

04/12/23Lean Manufacturing Consortium

Dan Stoelb 1

SO YOU WANT TO BE A CHANGE AGENT?

LESSONS FROM THE TRENCHES-

WHAT IT TAKES TO SUCCESSFULLY LEAD CHANGE IN ANY

ORGANIZATION


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Learn why most organizations fail to achieve the full benefits from their change programs, no matter whether they are implementing Lean; 6 Sigma; Demand Flow; Theory of Constraints or similar programs.

Understand what are the Critical Success Factors (CSF’S) that are necessary to successfully lead and implement organizational change (TQM; Lean: 6 Sigma; Demand Flow)

Provide an overview of what it takes to be an effective change agent.


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The material presented here is the result of experience; trial and error and research of successful implementation of change “in the trenches”, in many types and sizes of organizations, over the last 20 years.

The principles and content presented are applicable nor matter what the change program is modeled after (Lean, 6 Sigma, etc)


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OVERVIEW –

Why Most Change Programs

Fail


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Being a Change Agent is one of the most rewarding career positions that a person can have.

At the same time, it can be one of the most challenging and frustrating positions.


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Many organizations choose an internal Change Agent solely on the belief that the concepts of Lean Manufacturing; 6 Sigma, Theory of Constraints; and similar programs are “common sense” and they can “figure it out” on their own.


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Experience and research over the past 20 years has shown that choosing the

correct person to be the organizational Change Agent is one of the most critical factors that will impact the failure or success of an

organizational change program.


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Experience and research have shown that there are many commonalities between the various forms of “change” regarding the tools, methodology and concepts, such as:

- Emphasis on formal problem-solving; problem identification and problem resolution. - Elimination of waste or obstacles to flow; - Value-stream analysis, current-to-future state - Getting the people who do the work to “buy-in” to the change and be part of the process. - Leadership. - Commitment. - Total Organization Change in all Functions.


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Experience and research have also shown that the three most common causes for failure or lack of optimization of results from the various change programs are:

- Underestimating the “people issues” involved in making the change become part of the “organizational culture”.

- Lack of effective performance measurements that tie strategic goals to the daily activities in the “trenches” that will impact and change daily performance. - Lack of accountability for results.


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While a Change Agent needs to be technically competent, it is just as important that the Change Agent possess excellent “ Soft “ or “People Skills”.

It has been said that Change is about 60-70% people related issues/skills and only about 30-40% technical issues/skills.

So why do so many organizations still fail to place appropriate importance on the “people” aspect in

their selection of a Change Agent or underestimate the criticality of the

“People Side of Change”?


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So much emphasis is placed on the “tools” of implementation rather than the process of change which causes many people to believe that change is more about “implementing the tools” rather than the leading and managing the process of change.

The change in organizational culture and people’s attitude and their approach to work are more critical elements of the process of change than are the “tools” that will determine ultimate success

The world is full of technically competent people, but is sorely lacking in people with effective people skills.

There is a saying that “95% of the people KNOW WHAT TO DO, only 5% CAN MAKE IT HAPPEN.”


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The technical knowledge of effective change has been known for over 90 years but still less than 10% of the companies in the world have ever attain Excellence in their results.

- Frederick Taylor (Scientific Analysis) - Henry Ford (Flexible Manufacturing) - Alan Morgenson (Work Simplification) - Value Analysis (Industrial Engineering Perspective) - Ohno and Shingo (Toyota System) - Goldratt (Theory of Constraints) - Womack (Lean) - Motorola/GE (6 Sigma)


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The following questions need to be asked:

Can people tie their daily work actions to business system performance problems/issues so that they focus on correcting root causes for the problems they are responsible for?

Are decisions made in the framework whether specific actions will move people closer to the stated strategic goals and priorities or will the specific actions move people further away?

Is each department’s performance measures clearly linked to the strategic objectives and goals of the company?


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Is the performance of the entire company actually more important than local department performance? Is teamwork a cultural reality or do we have functional silos and barriers?

Unless the activities and performance of all people in an organization are focused on achieving the strategic goals and vision as an entire organization and not focused on merely individual or departmental goals, any change efforts undertaken will most likely fail or at least fall short of expectations.


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Even in this information age we live in, it is not uncommon for a lack of clear communication of the Business Operating System (BOS) strategies, goals and priorities. But this situation sets the environment within which most companies operate and get people “in the trenches” frustrated when their behavior and performance doesn’t achieve the strategic or stated goals, even though the “right tools” are being used.


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Gaining agreement on these priorities; strategies and goals of the BOS must be obtained before attempting to go any further. Until there is a clear and unified understanding of direction and priorities throughout the organization and

more importantly at the “trench level; confusion and division will rule within the organization.


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Five major dilemmas often undermine successful programs and their progress.

- The first is that no matter how competent or motivated leaders, managers and employees are, the day-to-day activities usually cause them to focus on the short-term needs of the moment and what is immediately happening in their area instead of the long-term strategic goals of the organization or the needs of their customer (internal and external)

- The second dilemma is the fundamental difference between the nature of the business strategy and the day-to-day operations.


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The third is lack of a “sense of urgency” within the organization.

Unless people understand why it is critical for the organization and themselves personally to embrace the changes, and understand what the future will look like, people will continue to “hold on for dear” life to

what they are accustomed too.


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The fourth is that performance measurements that “add up all the benefits” that are being reaped from the implemented changes often do not always easily capture or compute in dollar and cents numbers.

Many changes involve indirect or “soft costs” that are more of a accurate barometer of the successful changes that have taken place than the traditional financial costs.

Examples: Change is attitudes; behavior; work ethic; customer focus; improved leadership; teamwork; commitment.


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The fifth is lack of effective leadership and/or combined with the WRONG Organizational Change Agent who was selected, was selected for the following reasons:

- That strong technical skills are the major criterion for successfully implementing change. - That the change program should be an “engineering skills” focus and that the Change Agent should come from Engineering. - That the Change Agent needs to come from the Company’s Industry field. - Believe that if you change the process, you will then change people’s attitude (partly true).


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One of the areas that is most often underestimated by managers when implementing change is the law of physics that states, “An object at rest tends to stay at rest, while an object in motion tends to stay in motion”.

In other words, inertia towards change is natural and is a force that can be changed only with strong, consistent and focused efforts by a positive and visionary leadership. We all understand that there will be resistance to change, but we often fail to understand what “ people things” we need to do to overcome this inertia or how long it will take to change the inertia into self-propelling, forward motion.


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Far-reaching changes call for significant alterations in how the organization works as a TOTAL SYSTEM and how INDIVIDUALS and DEPARTMENTS BEHAVE in the new system.


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Need to build a consensus for change based upon a common understanding of how each area and each person is contributing or not contributing to the overall organizational success


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Performance measurements must be developed so that information on performance is not isolated fragments of information, but integrated feedback that will provoke positive response in achieving strategic goals.

Most current measurements rely too heavily on financial indicators that provide information too late to allow for quick response or change to occur.


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Peter Drucker has stated that the most critical tool that is missing in most organizations today is an effective performance management system that integrates all organizational resources and functions to focus on the critical goals and actions that are needed for success


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There are several common causes for this results shortfall, but the most critical one if you want to change people’s actions, you must create an effective performance management system that ties the day-to-day activities to achieving customer and organizational strategic goals.

Performance Management is one of the most critical and most misunderstood management tools necessary to achieving the optimum results you are looking for.


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The purpose of performance management is to motivate behavior changes leading to continuous improvement over the current state through individual and team self-motivation in the areas of customer service; flexibility and productivity.


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The National Association of Accountants showed that 60 percent of financial and operating officers in US operations were dissatisfied with their current performance measurement systems. Even in Japan, 46 percent of the executives believe their performance measurement systems leave something to be desired.

If you are relying on a traditional performance measurement system you are probably not getting the answers you need or the behavior changes you require to become more competitive and achieve the dramatic results from your lean or change initiatives

Until performance measurements are specifically tuned to the game plan and objectives, they are probably yielding misleading or irrelevant information, or worse, motivating people’s behavior

that undermines the very goals your are trying to achieve.


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Most performance information is provided much later after the actions occur to PREVENT OR CHANGE CURRENT BEHAVIOR. By the time most performance information is provided, people cannot accurately pinpoint the root cause and often ignore the information since it “is in the past”.


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When performance information is lacking, people will focus on what they are doing now, and not be focusing on whether or not

they are helping the organization to succeed.” The actual execution of most

organizational programs does not occur at the senior or mid-management level. Rather, it occurs at the departmental/functional level and at the front-line level.


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The drivers for all BOS systems should be premised on the following:

- Customer focus (internal and external customer needs)

- Quality(the total cost of poor quality needs to be quantified)

- Delivery (Lead and Cycle Times); Waste(Non-Value added).


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These drivers can serve to focus everyone throughout the organization on both external and internal performance. Then by developing feedback systems that are immediate and timely, any deviation from the standard or goal can be readily addressed to get the performance back on target.

Simple visual information displays can provide

constant feedback on performance and be established for any department or function in an organization (Manufacturing; Accounting; HR; Quality; Engineering; Procurement; Sales/Marketing).


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(1) Customer Satisfaction is first; (2) Productivity is second; and (3) Flexibility is third. The challenge for most companies is that they have to

play “catch-up” in all three areas and sometimes misdirect their efforts by not building a coherent, integrated common approach. Many companies do things piecemeal, in no special order.

Going after the ‘right stuff” in the “right order” is crucial to success


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Critical Success Factors (CSF’s) are those few critical areas where things must go right for the business to flourish and achieve its strategic goals


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- Foster learning by continually relating actions to strategic objectives.

- Give added emphasis to the market-driven side of the pyramid (market; customer satisfaction; quality; delivery; flexibility).

- Set priorities and action agendas in the day-to-day activities that are the “true performance drivers’ for success.

Evaluate day-to-day performance against the four operational measurements


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A “cookie cutter” approach to performance measurement will most likely result in failure. Be aware of approaches that advocate if organization X did this, that it can be exactly copied in your organization hook, line and sinker.

One of the biggest mistakes that organizations make when looking for tools and “best approaches:” is to copy 100% what worked for another organization. While this may make the structure and tools that are chosen easier, it fails to take into account the unique aspects of your own organization, specifically, the human systems within an organization.


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This system deals with how people are organized for work; how they interact with each other and between functions; attitudes; and the culture within the organization. The technical side of lean and other change initiatives can be learned by anyone. Effectively using those tools requires leadership skills that are often ignored and lacking, which negatively impacts the success rate of the change/lean initiative.


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Another survey by the Forum Corporation found similar gaps between actions (reality) and words (strategy). Although many companies claim that customer satisfaction is important, less than one-third of the employees surveyed said that customer satisfaction was one of their organizations’ top three priorities.

And this gap between what executives say drives the organization and what takes place in reality, has changed very much, over a decade later. Without a common understanding of quality and customer’s expectations synchronized with operations, there is little chance that the end results you strive to achieve will actually occur!


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At your next staff meeting or if you call a special meeting and gather all department managers together, ask the following questions and develop detailed understanding of the answers to these questions. After you have analyzed the answers, develop a unified BOS strategy, goals

Does our current performance measures foster an environment of continuous improvement?

Are our current measurements mainly financial-oriented rather than non-financial measures?

Are each department’s performance measures clearly linked to the strategic objectives and goals of the company?

Does each department clearly understand the strategic goals; objectives and priorities of the BOS? Does it drive team members behavior as they go about their daily work actions?

Are decisions made in the framework whether specific actions will move us closer to strategic goals and priorities or will the specific actions move you further away?


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When someone enters a work cell or department is it clear as to the status within the department or do you have to go around and ask several people what is happening? Can someone tell an abnormal from a normal state?

Is the performance of the entire company more important than local department performance? Is teamwork a cultural reality or is there functional silos and barriers?

Does one measurement system take into account quality, delivery, cycle time, waste and safety?

Does the measurements focus everyone on reducing time in all processes?

Can people tie their daily work actions to business system performance problems/issues so that they focus on correcting root causes for the problems they are responsible for?

Are customer expectations quickly translated and communicated into operational actions?

Are the measurements simple, relevant; consistent and used as a catalyst for improved performance?


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In many organizations, at least 80% of the responses to the questions result in a clear misunderstanding within the organization as to the vision; goals and priorities of the organization. What else usually happens is that it becomes clear that what is happening at the value-adding points in the processes or services, is out of sync with customer and BOS goals.


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An exercise like this helps drive home the common cause for the frustration companies find in their change initiatives. People’s behavior at the value-adding points are not in sync with each other; there is no consistency of focus or priority; people’s behavior does not support the direction the company must move toward.


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Why do we continue to think that everyone knows the basics of change, leadership and performance, when the evidence in our own organization’s performance clearly illustrates that misdirection; misunderstanding and poor performance exist?”


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“”The Factor of 12 is a constant. No matter what industry or size organization, the success rate with a particular approach will be limited. The Factor of 12 simply states

that for any improvement program (change) that is undertaken only 12% will ever achieve full success. So no matter what program is embraced only a minority

(12%) will see the significant results it was seeking. This is why companies try one approach and most of them end up discarding the program, and try the next “new

program” tbat is hailed. No single approach will work for everyone”.

Daniel Stoelb,

Lean Manufacturing Network


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The Factor of 12 states that only 12% of organizations that undertake a specific program will ultimately achieve the full success/results from that program. The following process is used to arrive at the Factor of 12:

(1) Out of 100 companies that are presented the information of any program, 1/2 of those (50%) will not be interested in applying the program, since they see no value to their organization.

(2) Out of the remaining 50%, one half will experiment with the program and decide not to use it, while the other half will become interested about implementing the program.

(3) Out of the 25% that decide to implement the program, 1/2 of these companies will achieve limited success with the program, and at some point in time, will look for the “next program” to continue moving forward.

(4) The other 1/2 (of the 25% group that implements the program) will remain persistent and achieve the full benefits and success with the program.

NOTE: The real factor is 12 ½%, but the Factor of 12 sounds “cleaner” that the Factor of 12 1/2

So through the change process only 12% will have the persistence, stamina, leadership and ability to fully implement any specific program and achieve

significant organizational performance results


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The Factor of 12 also explains why we see the continuing rise and fall of various disciplines (Quality Circle; TQM; TOC; Reengineering to name a few) and every few years a “new "program is developed that touts it as the answer for all organizations, all industries. It is not because one specific program doesn’t work, but rather, because the percentage of success will be low with any specific approach.


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Why are so many people selected as Change Agents deficient in effective

people skills?


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SO YOU WANT TO BE A CHANGE AGENT? “Soft Skills” are not something that is covered

effectively in training seminars or in Business School’s curriculum.

Most people in their personal lives do not know how to effectively use people skills, so they don’t effectively use them in their professional lives either.

Most training covers “by the numbers” and “the tools” of change which is easier to teach than are the “soft people skills”.


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Leadership.

Communication.

Conflict Resolution.

Training.

Flexibility.

Empathy.

Perception.

Experience.

Persistence.

Mentorship

change and why it fails

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