Thoughts on Implementing Organizational Change
by R. Keith Mobley, MBB, CMRP
Have you ever been involved in an attempt to improve the performance of your department or one function, such as maintenance or quality, in your plant or corporation? Ever wonder why the attempt did not work at all or failed to reach its full potential? If you have, the reason was probably a list of deficiencies or omissions, or perhaps it was because cosmic forces preordained that improvement is not possible. Sound familiar?
One thing that I have learned the hard way is that attempting to improve one segment or one function of a plant or corporation is virtually impossible. It would be so simple if one could do so, but the interdependence of plant and corporate functions precludes a simple solution to what is always a complex problem. In my early career—yes we had industrial plants back then—we attempted time after time to improve our maintenance organization. (After all everyone knows that poor maintenance causes all of our problems.) I was a freshly vetted engineer and had all of the answers; I had just spent four years learning them. We applied all of the latest management methods and tools. We hired and trained planners, retrained supervisors and did everything we knew or could find to improve our effectiveness and efficiency. Through hard work and perseverance our performance did improve, our crafts worked almost at optimum efficiency and controllable wrench-time was nearly perfect. We had arrived! Or had we?
Our joy was short-lived. After a few months of tracking the overall impact of our hard work; we dejectedly had to acknowledge that it had not had any real impact on the plant’s performance. Yes, maintenance, at least those parts that were within our span of control, was at world-class levels, but the plant was not. Even parts of the maintenance function were still well below acceptable levels. Lack of spare parts, poorly designed equipment and operator errors continued to limit our ability to maintain the plant’s installed capacity.
I did not recognize it at the time, but we had hit a “glass ceiling.” We had improved the maintenance organization but in a vacuum—nothing outside the maintenance organization had changed. Production, supply chain, procurement and all of our partners in the plant continued to perform as before—nothing had changed. It took too long for this realization to finally sink in, but once acknowledged, it was logical and clear to me that maintenance improvement was not possible without also improving all of the outside factors that directly or indirectly affected its performance.
In later years as I progressed up the corporate ladder, there were numerous opportunities to implement continuous improvement programs in various functional areas of the plant. I must be a really slow learner, because much of this time we used the same techniques and methods used in my initial attempt to improve the maintenance function. We adopted the latest management techniques, tools, and techniques; attended all the conferences; and read all the books. I even became a founding member of the Japanese Total Productive Maintenance Institute (JITPM) and became an advocate of its approach to production-maintenance improvement. That’s right—TPM is a production improvement process that happens to include maintenance. We did it by the book, calisthenics every morning, knocked down office walls, nothing was left out. What do you think the results were?
Well, although we did achieve marginal improvements within the production and maintenance functions, the plant did not improve to the expected level of performance. We still had problems meeting market demands, sustaining a competitive position in the marketplace and the myriad of other performance indicators that define a successful company. Any idea why?
There is a definition of insanity floating around out there that states, “Insanity is continuing to do the same thing over and over again and expecting different results.” That is so true. Every time we attempted to isolate one department, one functional group or even one plant from the whole corporation, all attempts at sustainable improvement failed. We kept hitting a glass ceiling. We could only go so far with continuous improvement and no further, and we could never sustain the modest improvements that were achieved.
Rather than prolong the agony of this story, let me go directly to the answer of how you remove the glass ceiling that prevents sustainable, real continuous improvement. Once I finally found the answer, it was so simple. You must include everything and everyone in the change. Please believe me when I tell you that we have tried every possible combination: maintenance and production; procurement and supply chain; human resources and operations; and no matter what the combination, we were never able to achieve and sustain desired goals—not until we holistically tried to improve the entire corporation. Imagine my shock when it actually worked.
For me, this epiphany occurred over twenty years ago, and since then, I have had many, many opportunities to verify and validate this simple, yet complex solution. If you want to improve your plant or corporate performance, then you have to include everything and everyone. Pockets of excellence, improving select functions or focusing on a single factor, such as quality, simply do not work.
What are the Glass Ceilings?
All plant, company and corporate functions are interdependent and cannot effectively operate in a vacuum. In most cases, the functions are isolated into vertical silos, each with its own view of the way business and work should be conducted. The interdependency of functions creates a series of glass ceilings that preclude individual functions or areas of the plant or corporation from achieving or sustaining acceptable performance levels. These external, or non-controllable factors, severely limit if not prohibit continuous improvement efforts.
Functional Isolation (Vertical Silos)
The first glass ceilings that must be broken are these vertical silos. The interdependence of the functional groups that make up all plants demands that these functions work seamlessly together as a single, focused team. This simple fact is the primary reason that any attempts to improve maintenance or quality or safety or any other single-function or single-focus continuous improvement program are doomed to failure. If we use maintenance as an example, the glass ceiling is fixed by the engineering, procurement, materials handling and production functions. Without the direct support and active involvement of these outside functions, maintenance cannot achieve and sustain best-in-class performance.
For this discussion, let us assume that we can create a uniform, plant-wide team that includes all of the plant’s functional groups. Working together, we create standard processes, procedures and practices that will enable us to effectively plan, schedule, manage and execute all of the day-to-day activities required to operate and maintain the plant’s installed capacity. Have we broken through? Are we now capable of achieving and sustaining best-in-class performance? Are there any more glass ceilings that limit our ability to be the best we can be?
Unfortunately, there is another category of glass ceilings that must be broken – those created by the corporate or corporate-level functions that determine or create the tactical and strategic direction for the company. This category includes the following functions:
Plant Management and Business Philosophies
One obstacle that we see all too often is preconceived or in-grained philosophies that govern the planning, management and execution of business and work within the individual plant or plants that make up the company. In too many cases, the philosophies are diametrically opposed to effective performance and represent an almost insurmountable glass ceiling. Too many corporations are run based on the instincts of its executives rather than on data that define a true picture of the market and operating performance of the plants.
A recent client is a prime example of “running the company on our stomach”—their way of saying instinct—and the mismatch between market demand and installed capacity. For years, their plants have been operating at less than 30% asset utilization and with an average of 500 SKUs per plant. Because their “stomachs” told them they were effectively utilizing their assets, nothing changed. Our first recommendation after evaluating their eleven plants was to consolidate. They were able to reduce the number of plants and average number of SKUs, and as a result, reduce their cost of goods sold by tens of millions annually.
In addition, the corporate reward and promotion criteria compounds the obstacle that must be overcome before the functional groups within the plant can excel. These criteria are short-term—generally two years or less—and arbitrary in nature. They are rarely tied to true performance measures or to sustainable growth and survivability. As a result, too many decisions are made to assure the next promotion or next bonus, and not on achieving a sustainable level of best-in-class performance. For example, if I were to become a new plant manager or vice president of marketing, none of the processes, systems or methods that precede my appointment will be considered in my performance review. Only those policies, processes and procedures that I put in place will be considered. As a result, the only way that I can get my next promotion is to remove everything and start over. And, the new processes only have to work until I get that promotion. After that, it’s someone else’s problem.
Marketing is the corporate function charged with interpreting the short- and long-term market demands that will dictate the products and services that the plant or plants must provide to assure company survival. The ability of the marketing group to accurately anticipate market demand is essential, and clearly defines one of the glass ceilings that must be overcome before any plant or function within the plant can achieve and sustain best-in-class performance.
In addition, the marketing function directly drives the research, development and innovations that are an integral part of all companies. Individually, and in combination, these functions create one or more glass ceilings that must be broken or resolved before the individual plants, and certainly the company, can be successful.
The vision of the future, and specific product and other market data, provided by the marketing function is essential at the plant level. This data provides plant management with a clear definition of market demand that is essential before the plant can be configured to meet the anticipated demand. This process of matching the plant’s installed capacity to market demand is critical for survival and long-term success. For the few plants that are in a “sold-out” situation, e.g. where the market demands for their standard products exceeds their capacity; this is not a major problem. Unfortunately, fewer and fewer plants are in a “sold-out” situation. More and more plants find themselves with excess capacity and struggle each year to effectively utilize their assets. Today, you are more likely to find plants that are utilizing less than 50% of their installed capacity, and many are below 30%. In these situations, the partnership between an effective marketing function and plant management is essential—without it, the plant cannot survive.
A recent example of the impact that a disconnected marketing function can have on plant performance is from a chocolate and confectionery company. For the past ten years, the marketing forecasts have dictated that the plant produce more than 500 different products (SKUs) grouped roughly into five families of products. To compound this demand, the marketing function also forces an average of 200 new products or innovations on the plant each year. To do so effectively, the plant must be able to consistently make quick changeovers, minimize CIP and be near best-in-class in flexibility. The problem is that the plant was designed to make large volumes of a few families of products. The plant’s physical layout, as well as material flow through the plant, preclude the ability to be flexible—quick changeovers and short-duration CIP are just not possible.
Obviously, there is no logical reason for a situation like this. All it takes is a little communication and cooperation between the marketing, plant and production management. This is a real example of a glass ceiling that is prevalent in far too many corporations.
I readily admit to being old and on the downhill side of my business career, and perhaps out of step with today’s popular management philosophies, but how do you run a plant, company or corporation without a tactical and strategic business plan? To me, this is as natural as breathing, but few companies, including major corporations, have an effective business planning process. This absence is perhaps the most serious glass ceiling that limits performance. To me, it seems so simple. One must have a plan that defines what, where, when and how the company will achieve its goals and objectives.
The strategic (e.g. three to five year) and tactical (e.g. one year) plans provide the focus and direction that each functional group within the plant or corporation needs in order to define their roles and responsibilities as an integral part of the corporate team. Without a unifying plan, each of these functional groups is free to define its role without any concern for the integrated team. Typically, the result is vertical silos where each group operates totally independently of its neighbors. The result is a dysfunctional organization that cannot function as a cost-effective or value-added plant or company.
The supply chain includes procurement, logistics, transportation and distribution of the raw materials, MRO parts, work-in-process, material handling, warehousing and distribution of finished goods. Deficiencies within the extended supply chain are a major glass ceiling that must be overcome before individual plants or plant functions can achieve and sustain best-in-class performance. In addition, failure to seamlessly integrate the supply chain into the corporate and plant team is a certain guarantee of poor overall performance. After all, without the timely availability of proper materials, few plants can operate at any level.
Because of the extended supply chain’s complexity, it is difficult to effectively plan, schedule, manage and execute the requisite functions needed to effectively support plant operations and meet market demands. Our experience has shown that the only successful approach is to value-stream map the entire process and develop standard policies, processes and procedures that govern and seamlessly integrate each of the individual functions and actions into a single focus effort. This process is identical to the reengineering processes that have proven successful at the plant function level, but applied to a very complex corporate-wide function.
How do You Break Through the Glass Ceilings?
If you have read carefully so far, the answer should be clear, or at least beginning to form in your mind. The solution to true best-in-class performance and the ability to compete and survive in today’s market is simple—or is it? While there is no absolute guarantee that all of the glass ceilings you face can be broken, the following steps will greatly improve your chances:
Lead from the Top
One absolute that I have learned is that sustainable change must be led from the top of the organization. There must be a visionary, a strong leader committed to creating a learning organization that embraces continuous improvement and the culture change that is integral to it.
Effective leadership is the key to Reliability Excellence and world-class performance. Without it, there is little chance of success. Simply stated, change must be led from the top and implemented from the bottom. Leadership’s central role is to set values and directions, creating and balancing value for all stakeholders as well as driving performance. This role must be the focus of world-class organizations. Success requires a strong orientation to the future and a commitment to both improvement and innovation. Increasingly, this requires creating an environment for empowerment and agility, as well as the means for rapid and effective application of knowledge.
Continuous change is not optional for companies that want to survive in the global market that all industries face today. Just sustaining status quo is an almost guaranteed course to failure; but how do you create and sustain continuous change? Here are some proven ideas that will improve your chance of success:
Create a Sense of Urgency – With the possible exception of companies that are operating at a severe loss, the first hurdle that must be overcome is simply convincing the workforce that there is a real need for change. This is not simply a problem of hourly workers’ failure to understand the need for change; too many managers even at the highest level also suffer from this problem. The old adage that “profit hides inefficiency and ineffectiveness” is alive and well. No one in a profitable company, even when the profit is marginal, ever asks how much profit we are leaving on the table. Instead, they ignore complacency and inefficiency. To overcome complacency, senior management must create a sense of urgency throughout the workforce. In extreme cases, they may have to create a crisis just to get the workforce involved and focused on improvement.
Create a Guiding Coalition – Continuous improvement or change must be led from the top, implemented from the bottom of an organization and involve the entire workforce. The primary keys to success are to find the natural leaders within the company and harness their strengths to help you lead the change effort. Finding the right people is critical and should not be hampered by emotions, titles, or position. The use of cross-functional teams that include all levels of the organization is a proven method for building coalitions that are essential for long-term success. Each of these teams should include all stakeholders, e.g. functions directly involved in the focus area, as well as those that influence or are influenced by the focus area.
Develop a Vision – Senior management must provide a clear, concise vision of the future. The focus team concept can resolve the details of what and how to implement and sustain change, but they must have a clear vision of what the future should look like. Without a clear vision, each of the focus teams will create solutions for their individual focus area, but the composite results of all focus teams may not lead the company to improved profitability.
Communicate the Vision – In too many cases, developing a vision or mission statement is a short-term process. Senior management or a cross-functional team comprised of stakeholders in the organization will spend a few days or a few months developing a statement, but once developed, the vision is not pursued. Senior management must “sell” the vision, and that means they must continuously communicate and reinforce their view of the future state of the company.
Empower the Employees – Change cannot be dictated — it must evolve through a combined effort of the workforce. To be successful, senior management must empower the workforce. Give them the responsibility and authority to determine what needs to be changed and how those changes should be implemented. The final step in the empowerment process is for senior management to hold the employees accountable for success.
Generate Short-term Wins – It is difficult to sustain the level of concentration and effort required to develop and implement positive change. Too often, the workforce will lose momentum and interest without some indication that their efforts are generating the desired results. Senior management must ensure that objectives, goals and targets are constructed in a way that will assure measurable, short-term gains that are clearly visible to the entire workforce. It is desirable to “stretch” the workforce, but you must ensure that the stretch is limited to achievable goals.
Breaking old habits and creating an environment that is conducive to continuous improvement, e.g. change, is neither easy nor quick. My final word of advice is to follow through. The dynamics of change are well defined and should be your guide. It will take between 18 and 24 months of focused effort to change the work culture in your company. If you become distracted, too busy, or for any other reason remove the pressure to change before this interval, the workforce will revert to its natural stage, e.g. its old way of doing things.
Change dynamics also show that at least 28% of the workforce must be directly and actively involved in the change process to assure success. This critical mass, if they become advocates of the process, will expand the processes throughout the workforce.
Successful continuous change is possible; but it is an evolutionary process that takes time and your focused effort. Always remember old habits: even yours, are hard to break. But if you think positively, it can be done.
Holistic not Functional Change
As I hope this article has pointed out, partial change or partial improvement is difficult to achieve and impossible to sustain. There is only one sure way to become a best-in-class survivor in today’s marketplace and that is to improve the entire company—not just select parts or functions. Whether we admit it or not, all plants, companies and corporations rely on individual functions and groups, which must be effectively integrated before they can perform at an acceptable level. Choosing to undertake only a portion of the change is not an option—success dictates that everything must be changed and that everyone must be a part of the change.
Do not forget, ignore or omit corporate functions such as business planning, marketing, sales, supply chain, or innovations. These functions are literally the “tail that wags the dog”; they determine the boundary conditions for the plants and without careful coordination and integration of the conditions and plant capabilities, acceptable performance levels are not possible.
While holistic is the only viable solution, there are options that can be applied to the implementation of change. Attempting to simultaneously eliminate all of the waste and losses that have developed over years (or decades) from all of the functional areas of your plant or corporation would be difficult and cost-prohibitive. Therefore, the most cost-effective approach is to implement change in discrete steps that are designed to first build a strong foundation, and over time, develop and implement the necessary changes throughout the organization.
The sequence selected should be predicated on a thorough analysis and evaluation of the entire organization, e.g. company or corporation, and prioritized by the return-on-investment and impact of change in the selected areas or functions.
Success Takes Time
Correcting the deficiencies that have taken years, and in many cases decades, to form will also take time to correct. The change process cannot— and should not—be rushed. You must have the discipline and patience to follow best practices throughout the design, preparation, implementation and institutionalization stages of the process or it will all be for naught.
Remember that in addition to evaluating the myriad of policies, processes, procedures and practices that make up every aspect of business life, you are also changing the way your workforce thinks, makes decisions and performs their day-to-day tasks. Just this transformation will take time. As a general rule, transformational change will take a minimum of 18 months and is likely to require 24 to 36 months to become completely entrenched—institutionalized—in the culture—to become the norm.
Keith Mobley has earned an international reputation as one of the premier consultants in the fields of plant performance optimization, reliability engineering, predictive maintenance and effective management. He has more than thirty-five years of direct experience in corporate management, process design and troubleshooting. For the past sixteen years, he has helped hundreds of clients worldwide achieve and sustain world-class performance. Mr. Mobley is actively involved in numerous professional organizations. Currently, he is a member of the technical advisory boards of: American National Standards Institute (ANSI), International Standards Organization (ISO) as well as American Society of Mechanical Engineers (ASME) and others. He is also a Distinguished Lecturer for ASME International.