eame - managing people and behaviours_white_paper

Inspiring Business Performance

In format ive gu ides on indust ry best pract ice

Managing People and BehavioursGetting the best from your organisation

THE OL IVER WIGHT – WHITE PAPER SER IES

Strike a balance

Introduction

To stay on top in today’s complex and competitive business environment it is more

important than ever for organisations to keep improving performance and strive for

business excellence.

All too often when implementing business improvement programmes, however,

organisations launch into tackling their processes and tools with enthusiasm and

vigour, but overlook the importance of people and behaviours. If businesses want to

implement sustainable performance improvement, it is essential they first recognise that

people are the key drivers in any change programme and that success depends on the

organisation’s ability to cultivate the right environment for change.

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To extract the best possible performance from any business, it is vital to strike the right balance between people and behaviours, processes and tools. Hitting the ‘sweet spot’ where these overlap is fundamental to facilitate lasting change. Not only must businesses address all three in equal measure but also approach them in the correct order; and that means people first.

Many organisations fall at the first hurdle because they turn their attention to processes and tools first and then look to align their people afterwards. In this case ‘people-dependent processes’ are created, and wherever there is a dependency on people there will be variation, which may lead to error and fire fighting. The improvement programme inevitably fails and at that point there is a tendency to blame the systems in place, when in fact it is not the tools themselves causing the issues, it is because they have been set up incorrectly.

Figure 1 shows the interdependency of people and behaviours, processes and tools and the sweet spot in the middle where they meet. It is critical to work anticlockwise around these three core components: processes must be designed to meet the needs of the company first, and aligned to people and behaviours (after the appropriate education and training has taken place); tools can then be better specified and aligned to processes, allowing the software to deliver the required information back to the people making the decisions. It becomes a virtuous circle.

By Lloyd Snowden

Oliver Wight Partner

Figure 1: Principle objective of integration

Oliver Wight International


Design for full integration

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In a modern business environment, end-to-end integration of the organisation is essential. A company cannot service customers in the most efficient, cost-effective and profitable way, unless its processes, people and tools are integrated and aligned. And the expected behaviour has to suit the design of the company.

As an organisation strives for business excellence, it must move up the maturity map (Figure 2). The great majority of enterprises sit within phase one, but a business at the bottom of phase one is likely to have a very informal culture, whereas a business at the top of phase one is likely to be more structured, with people behaving much more in line with the requirements of the business.

There are four major categories of organisational design: functional; process/team-based; matrix and virtual. Each will have challenges particular to that type of environment and will therefore demand and facilitate different types of behaviour.

The best functional organisations will have some cross-functional teamwork but for the most part they tend to operate with discrete,

independently managed silos. With a command and control environment, these businesses may be able to punch their way out of a bad position using a ‘tell and do’ approach but they must ensure this is not so autocratic as to have a detrimental impact on the working environment.

As a business matures towards phase two, it will move to a structure where the functional barriers have been removed, and processes become more end-to-end. These are process or team-based organisations.

Matrix organisations are typically at phase three. They combine the best characteristics of functional organisations (development of people and talent) with those of team- or process-based organisations - the breaking-down of barriers and establishment of teamwork.

At phase three, there will be knowledge-based automation of processes and finally at phase four, these processes are integrated by technology. Virtual organisations within phase four, are those where key departmental activities may be outsourced. Maturing to this phase from the firefighting environment of phase one, mandates a dramatic cultural change across the organisation.

Figure 2: Integrating the business - maturity



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Realising opportunity through organisation development

As the business matures through the development phases and the structure and design of an organisation changes to suit the environment, the leadership style also needs to change to nurture the appropriate behaviour and culture for maximum opportunity to be realised.

Figure 3 shows that organisations in phase one are characteristically deeply vertically integrated; with an inward ‘eyes down look in’ focus in order to gain control. Power is concentrated with a handful of people at the top who provide ‘command and control’, which is then cascaded down the organisation. Organisations moving from the bottom to the top of phase one often refer to their journey as ‘transformation’ or being in a ‘turnaround environment’; in so doing, they can achieve a 3:1 productivity improvement and advance performance levels from around 70% to 90%. Once the business has reached the top of

phase one – the business is ‘in control’ and at this point the senior level of the business can take a step back, decompressing the organisation as some managers move their focus from the short-term and start to think more about the future. This is when strategic planning as a process comes in to play and the management style moves from just ‘managing’ to management and leadership.

In order to continue changing the behaviour of a company and generate further cultural improvement, the structure needs to be flattened through a focus on core processes, which means a move to a process- or team-based organisation. In this case, authority is shifted downwards, giving employees increased autonomy and decision-making power. Businesses in phase two will have decreased the number of layers from the CEO right through to the shop floor from typically, 12-14 (in phase one) to just 5-6. This flatter structure with its business process focus, gives the organisation more opportunity to address velocity of process, which means at phase two, waste is progressively eliminated, performance levels approach 99% and costs are reduced.

In moving from phase two in to phase three, another 3:1 productivity improvement can be achieved - i.e. the same performance with fewer people, because processes have been automated. With an even flatter structure, there is more control at the bottom; with everyone clear about what they are doing, and empowered to act. It is here a business can start the move towards becoming a virtual organisation.

Phase four companies are market leaders, the top companies in the world. Unlike the functional organisation in phase one, with eyes-down thinking, phase four companies undergo a complete inversion with an ‘eyes-up and look out’ mentality.

Figure 3: Organisation development



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An important prerequisite of maturity is the formation of a strong team-based culture. This necessitates education and training; individuals at the bottom of phase one move from ‘innocence’ through ‘awareness’ to ‘understanding’ at the top of phase one; to ‘competence’ and eventually, ‘excellence’ at the top of phase two (Figure 4).

As the organisation matures, people will mature in to different teams at different rates, so in change management, a degree of patience is required. However, it is important to enable people to distinguish between a group and a team.

In phase one, when the management team sees there is a problem, they will select four or five people to become a ‘group’; this group will have one person selected as leader, who is wholly accountable and responsible for the actions of the group.

When a business matures to phase two, the management team can select ‘teams’ instead of groups. Members of multi-functional teams are held jointly responsible and accountable, and the team leader may change as the project progresses, because different skill sets can be required at different times.

Mature to a team-based culture

Within a continuous improvement environment, teams will operate through a cycle as shown in Figure 5. The knowledge base builds through education and training and is applied (by the teams) to the task at hand. This in turn provides learning, which is fed back to the knowledge pool and used to improve over and over again.

Figure 4: People / environment maturity development


Figure 5: Cycle of improvement



Since it is people that will be implementing change, and on whom success depends, building the right foundation for sustainable change must begin with people.

These days, Integrated Business Planning (IBP) sits at the heart of many organisations as the management process of choice to run the business; it is a true people process, designed to empower individuals at all levels of the organisation. Integrated Business Planning uses top down messages from the strategy, business plan and measurement hierarchy to enable effective, integrated decision-making. It is capable in bringing about a huge cultural change in the organisation, but successful deployment depends on the critical mass of the organisation understanding both the direction and strategy of the business.

People – the key cog in Integrated Business Planning

Integrated Business Planning enables teams in the organisation to deploy ‘top-down’ messages on a monthly basis and integrate them with the ‘bottom-up’ performance. Comparing the two means business gaps are identified and decisions can be made. People are the constant and key factor because they communicate and deploy the top-down messages; they run the Integrated Business Planning process; deliver the bottom-up performance; and enable the decision-making. (Figure. 6).

The right people, with the right behaviour and the right knowledge, will design the right processes – and with visibility of performance, the right business improvement tools can be deployed. Integrated Business Planning helps organisations move up the maturity map because it breaks down paradigms and encourages development from a a functional structure to a more integrated process-based one – progressively removing traditional functional barriers and generating the capability for individuals to work multi-functionally rather than in silos, leading to improved communication, and greater understanding of one another’s roles and responsibilities. Let’s face it, roles and responsibilities run the company; not the organisational chart.

The challenge is to implement a change management programme in parallel with Integrated Business Planning, so behaviours are changed and the full advantages of integrated processes and teams can be realised.

Changing the behaviour of individuals is never easy and more often than not, presents the greatest barrier to change. Past paradigms often remain, even when the reason for the paradigm has been removed. So, what can be done to get people to discard these unhealthy paradigms, become inspired by change, and work together for the future direction of the company?

Figure 6: Critical relationships and dependencies


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One result of the top-down message from the strategic planning process is that people will understand the company values and guiding principles. With these, the right environment and culture can start to be created; one where people work together, understand how they should think and behave and know what kind of team they are expected to work within.

Leaders must walk the talk - they must excite their people about change and the future direction of the company; everybody must understand, believe in, and live the company values. The potential of the ‘silent majority’ – 90% of the organisation – can only be realised with hard work, consistency and alignment to a common agenda.

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Empowerment lies at the heart of not just managing and leading the business but also driving business improvement. However, when implementing change, businesses often miss out the implementation of the strategies and tactics required, and jump straight to actions (see Figure 7). Consequently, when people are empowered to make decisions, they don’t know how because the linkage provided by the roadmaps and programmes is missing.

The definition of empowerment to follow is ‘responsibility matched with authority’. People need to feel empowered to do their job more effectively, and recognise the impact they have on change. There are four simple questions which people need to know the answers to:

• What is my involvement?• What is my ownership?• What level of empowerment do I have?• How am I going to engage the rest of the

organisation to enable me to do business?

The more people are educated about which processes they own and how they can influence change, the more they will act responsibly, make the right decisions and feel energised by change. People need to feel valued. By making the organisation’s policies and procedures readily available, people will be enabled to act without having to constantly refer to their managers, thus allowing them to make key decisions that will drive change.

Information and data availability is a very important aspect of communication, so both must be easily accessible.

Empower people to change

Figure 7: Developing the top down



Education is key in achieving best practice behaviours because it provides people with the knowledge of what best practice is. Unless people understand why change needs to be made and what they need to do to make it happen, they won’t be able to implement change, or take part in the process of change.

Educate and train for success

Creating a culture of improvement hinges very much on establishing a ‘two job’ attitude: ‘the job I do and the job I will do better’. If people do not develop this way of thinking, they will always be waiting for somebody else to change first. Education is the key catalyst.

The first barrier to overcome is the stigma attached to admitting you do not already know something. This requires instilling a desire to learn - that lack of knowledge is not a failing, but an opportunity to learn and progress. People should be encouraged to be inquisitive.

Once people and behaviours have been integrated with processes and tools, training rather than education becomes the priority - training people how to use the tools, and how to integrate information with their colleagues.

But education must come first. It provides the essential building blocks for determining the right behaviours with which the processes and tools can be integrated. Without it, organisations lack the solid foundation for developing a culture of continuous change and ultimately can never achieve true business excellence.

Figure 9: Successful implementation needs


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Measurements provide a powerful tool in driving and maintaining the right behaviours. They allow people to see where they are and how their decisions are driving improvement.

‘Hard’ measures, i.e. KPIs, must be clearly defined and have an obvious link to the strategic business objective. The old adage applies: ‘measure me right and I’ll behave right; measure me wrong and I’ll behave wrong; don’t measure me at all and I’ll behave however I like’.

Properly defined KPIs make decision-making both more logical and straightforward, but these hard measures alone cannot drive the right behaviour; they need to be balanced with ‘soft’ measures.

The balanced scorecard (Figure 10), introduced by Kaplin and Norman over 40 years ago,

Measure to improve

is designed to ensure people look at their business, not just in terms of hard performance, i.e. finance and production outputs, but also from a soft perspective; measuring performance in terms of satisfying customers, employees and buyers.

This balanced attitude needs to be drilled down through the different levels of the organisation, so everyone looks at how the business is performing from a variety of angles; from the perspective of the customer, supplier, finance, and so on. Introducing measurements in this way ensures people understand how they must work together, as well as providing reassurance everybody is measured in the same way. Thus, helping to remove the ‘us and them’ culture that prevails in functional organisations and encouraging a one-body organisation.

Figure 10: Measurements hierarchy


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Continuous improvement schemes differ depending on the organisation’s maturity. When businesses begin a change programme at the bottom of phase one, use of continuous improvement (CI) tools is prevalent to identify opportunities for improvement in the organisation, (as shown by the large arrow in Figure 11). As a business matures and a culture of improvement develops, the need for CI tools diminishes, (the grey arrow in Figure 11 gets smaller) both because there are fewer opportunities to improve and because other tools become more relevant. Yet it never stops; continuous improvement is always required and there will be some instances in which CI tools remain effective, for example, in identifying the root cause of problems.

The right tools at the right time

In phase one, CI tools should be used to implement the ‘two job culture’ to ensure there is ownership of the improvement, by the people who need the improvement, rather than by external teams of CI experts. In this way not only will the improvement be achieved but local paradigms will also be changed.

As a company improves, and its business maturity develops to phase two capability, the functional organisation structure found in phase one, is challenged as end-to-end business processes are implemented. These processes effectively signal a change to the functional structure, as it becomes a process- or team-based organisation. Now it becomes logical to implement ‘Lean’, and focus on

Figure 11: Driving business improvement maturity challenge

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Through establishing the right leadership style and educating people to work within a team-based structure, the right behaviour and culture can be achieved to ensure change is both effective and lasting.

The Oliver Wight Proven Path provides a proven methodology for sustained cultural change. Its focus begins with leadership. Leaders must be on board from the outset and they must allocate sufficient resources - time, money and people - for change to happen.

It’s crucial too that people are equipped with the required knowledge, so they can start to apply best practice within their clearly defined roles and responsibilities. External consultants can play a part here because they

Proven path; proven results

have the knowledge to share, as well as the experience to help change attitudes and inspire people to new ways of working. However, sustainable improvement has to come from within. Knowledge must be transferred to the organisation’s executive team and cascaded down through the organisation using coaching and education to embed that knowledge into the fabric of the business.

With the right mind-set, each and every individual will be able to understand and implement best practice, not just from a personal point of view, but an end-to-end perspective. It is this that brings lasting business improvement and allows an organisation to get the very best from its people.

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eliminating waste and driving process velocity. Although some companies do implement Lean in phase one, it can only be applied vertically at that stage, which by definition, misses the opportunity of eliminating waste between the functions. As a result the improvements made are usually only three to four per cent, whereas applying Lean methodology in phase two allows waste between functions to be addressed and for improvements to reach 30% to 40%. Six Sigma assumes Lean has already been implemented and should therefore be applied

in phase two once Lean has been implemented and the improvements secured. As Figure 11 shows, the percentile performance in phase two moves up to 99.5% and the mathematical modelling capability of Six Sigma comes in to its own to detect and resolve variations. The final decision is the most appropriate time to develop your Agile capability. Agility is a great offering for clients, providing it is cost-effective and doesn’t require a fire-fighting approach for its delivery. Phase two again offers the most stable environment for an agile response to be determined and planned.

Inspiring Business Performance

About Oliver Wight

Oliver Wight has a 40 year track record of delivering business improvement to some

of the world’s best-known organisations. We believe that sustainable improvement can

only be made through your own people. So unlike other consultancy firms, we transfer

our knowledge to you, which means you can achieve performance levels and financial

results that last.

At the leading edge of management thinking and practice, our Integrated Business Planning (IBP) model lies at the heart of our clients’ journey to outstanding business performance. Oliver Wight originated Sales and Operations Planning in the 1980s and IBP can most simply be described as advanced S&OP; evolving from its production planning roots over 40 years into

the fully integrated management and supply chain collaboration process it is today. IBP allows the senior executive to plan and manage the entire organisation over a 24 month horizon, aligning tactical and strategic plans each month and allocating critical resources to satisfy customers in the most profitable way.

The information contained is proprietary to Oliver Wight International and may not be modified, reproduced, distributed or utilized in any manner in whole or in part, without the express prior written permission of Oliver Wight International.

Oliver Wight EAME LLPThe Willows, The Steadings Business CentreMaisemore, Gloucester, GL2 8EY

T: +44 (0)1452 [email protected]

www.oliverwight-eame.com

Oliver Wight Asia/Pacific

131 Martin Street, BrightonVictoria 3186, Australia

Oliver Wight Americas

P.O. Box 368, 292 Main StreetNew London, NH 03257, USA

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