No Time For Heroes

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One of the issues that can arise during a lean transformation is figuring out how to deal with the corporate heroes that exist in virtually every organization.  These are the “go to guys” whenever a major problem arises.  They are generally hard workers, know their processes well, and measure their worth by the number of highly visible problems they are involved in solving.

This can become a significant issue because a lean thinking organization values those who prevent problems and work well in teams more than those who wait until problems occur and swoop in to save the day.  The behavior often exhibited by the heroes is the opposite of what you are trying to establish in the transformation.

On the positive side, heroes tend to be hard working, smart, and highly experienced in the company’s operation – all things that are valuable to the organization’s success.  On the negative side, however, these people often have a hand in creating problems, or at least have the ability to address problems before they become critical or high profile issues.  They also tend to keep important process information close to the vest because they view it as a key to their success.

The Difficulty in Changing Hero Behavior

One of the biggest issues in dealing with the heroes is that, for years we have rewarded them for the behavior they exhibit.  Heroes tend to like a lot of attention and publicly delivered compliments for their actions.  As the organization becomes more lean-focused, though, it becomes clearer to people that addressing problems means understanding and addressing root causes so we can reduce the likelihood that they will occur in the future.  We cannot tolerate people who have the ability to prevent problems but wait until they occur before taking action.

Getting heroes to understand the consequences of their behavior will require a lot of coaching and one-on-one discussions to help them realize that they may have been rewarded and promoted in the past for the wrong reasons. And although changing behavior is a difficult and often futile undertaking, it is the responsibility of the leader to make the effort because the problem we are addressing is most likely one we created.

In many instances, it is critical to get the hero involved in the development of standard work because they understand their processes so well.  We must attempt to document and make available to everyone information that they have most likely held close in the past.  This is a process that will have to be tested and retested in order to assure that all necessary information has been extracted from the person and effectively documented.

Step 1: Recognize the Problem

Addressing the problem of hero worship will not be easy.  Correcting behaviors first requires admitting that heroes are, in fact, a problem. Chances are, you and others have come to rely on these people when high impact problems occurred. Recognizing that is is a crutch for ineffective processes, however, will help you see the situation more clearly.

Expect a lot of complaining, pushback, and even attrition as you embark on the process of bringing heroes back down to earth. Like any change process, though, succeeding will require clarity in the vision and consistency in the message.

The Effect of Structure on Performance

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NOTE:  This blog is moving!  Please read future posts at http://leadingtransformation.wordpress.com 

No one component may seek its own reward without destroying the balance of the system. Each component is obligated to contribute its best to the system as a whole. – W. Edwards Deming

What effect does an organization’s structure have on the ability to be successful?  For years, western business has clung to the notion that a functional organization is the most beneficial, but what effect does this really have on overall performance?

Doesn't the performance of the organization as a whole matter more than the performance of any individual area?  If so, is there a correlation between the two?  If individual functions optimize their own performance, does this automatically improve performance of the larger organization?

A SYSTEMS THINKING PERSPECTIVE

Lean requires a systems thinking mindset; meaning that the success of an individual function is determined by the contribution it makes to the organization.  Over an over again, I have seen examples in functionally-structured companies where individual areas - intentionally or unintentionally - focus on their own goals with little or no regard to the effect they have on other areas.

This tendency toward functionally-focused goals, which is common in western business, is a significant contributor to the construction of silos within the organization that are difficult, if not impossible, to break down without a drastic change in leadership and culture.

The alternative is a process-oriented structure that drives people to focus on the performance of the system rather than an individual area.  Each person uses his or her own special knowledge and skill to optimize the system; and rewards are based on the overall performance of the system.

The common argument against moving from a functional to a value stream (or process-oriented) structure is that sharing between specialists and improvement within the functions will cease to occur.  Although it is possible for this to happen, it is not a strong enough reason to remain in a functional structure.  Systems can  be created to assure that learning and sharing of information within functions occurs.  Since people tend to be inherently interested in their areas of specialization, assuring function-focused learning systems are effective is most likely easier than getting the various functions work effectively with each other to achieve organizational goals.

I have worked with organizations over the years that wanted to deploy lean thinking but were afraid to let go of a functionally-oriented structure.  In these instances, the functional pull toward individual goals and rewards had generally won out over the drive to optimize the organization and led to sub-optimal results.

I once worked with a manufacturing company where the supply chain team directly supported operations by procuring materials used on the production line.  On-time delivery performance for one particular factory was consistently around 60%, which negatively impacted customer satisfaction.  According to operations data, roughly 75% of late deliveries were attributed to material shortages.

Since the product produced within this factory was strategically critical for the company, team members within operations felt significant pressure to improve performance.   Although supply chain team members also felt pressure to improve delivery performance, they reported to a corporate function separate from operations and were primarily driven to reduce material and inventory costs rather than improve delivery.

Because of the situation, delivery performance continued to suffer, motivation was low, stress levels were high, teamwork suffered, and employee turnover increased.  Although from the outside this problem seemed easy to remedy, organizational politics and the natural tendency to cling to a functional organization (i.e., the we've-always-done-it-that-way syndrome) prevented the shift to a process-oriented structure.

Organizational transformation cannot occur without transformation of thought.  Everything that is known must be questioned to determine whether or not it helps the organization move toward its vision.  In most cases, without a significant reduction in the white space between teams, functions, and locations, the ability to sustain any improvement in performance will be difficult, if not impossible.

Profound Knowledge & Sociology

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Sociology: noun \ˌsō-sē-ˈä-lə-jē, ˌsō-shē-\.  the science of society, social institutions, and social relationships; specifically : the systematic study of the development, structure, interaction, and collective behavior of organized groups of human beings. [Merriam-Webster.Com]

W. Edwards Deming’s Systems of Profound Knowledge has been a cornerstone to successful lean deployment for the last 20 years (longer, if you consider that it began with his 14 Points for Management).  As written in an earlier post, I am a strong believer that the level of success with lean is directly related to the level of understanding and application of Deming’s system of management.

The four components of Profound Knowledge as presented by Deming include Knowledge & Learning, Appreciation of a System, Variation, and Psychology.

Deming rightly presents the need for leaders to have an appreciation for psychology because of the fact that effectively leading requires knowing how to relate to people.  Although it should be obvious, I have run across many people in leadership positions over the years who were severely short of people skills.  There are differences in people and effective communication and motivating individuals requires understanding and working with these differences.

How About Sociology?

One aspect of leadership I always felt was missing from Deming’s system is sociology.  Organizations consist of a number of individuals and teams, and in addition to knowing how to relate to and motivate people individually, leaders need to be able to continually develop and improve teamwork.  This can not be done without an understanding of sociology.

There are natural and cultural forces within people that drive them to identity strongly to the teams to which they belong.  Although these forces can be beneficial to improving performance, they can also be destructive to the organization, as a whole.  It is all too common for people to put the needs of the immediate team ahead of those of the company.  Even if this is unintentional – which in most cases it is – it is still very toxic to the company’s culture.

Maintaining a Unified Focus

One of the basics of organizational sociology is tendency of a group to break apart when its members start developing conflicting interests and objectives.  Competition between factions develops and the ability to keep people focused on a common purpose becomes difficult, if not impossible.

Without strong leadership and an understanding of group behavior, internal competition (or apathy toward those outside of the immediate team) can grow to the point where correcting behavior can be extremely challenging.

Many leaders do not recognize the complexity involved in the individual and team goal-setting process.  In far too many instances, there is too much going on to take the time necessary to assure objectives are aligned and well understood by all involved.

Catchball, a process for communicating direction, expectations, and objectives between levels in the organization, is critical to assuring that consistency is maintained and people work toward the achievement of a common purpose.  Unfortunately, catchball takes time and, without a respect for organizational sociology, will not help prevent competition from developing and sub-optimizing performance.

Although sociology is apparent throughout Deming’s writings, I believe elevating it to the level of importance assigned to psychology, variation, knowledge, and systems thinking would help more leaders understand how critical it is to organizational success.

Getting Support from Support Functions

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"Everyone here has a customer.  And if he doesn't know who it is and what constitutes the needs of the customer . . . then he does not understand his job."  - W. Edwards Deming

One of the most difficult jobs of a leader is getting everyone in the organization to work toward the same objectives.  The issue is especially difficult in support functions where team members are generally isolated from customers, which makes it harder to create a connection between work performed and the success of the business.

The problem is magnified even more when the company utilizes a shared services model (i.e., decentralized business units with centralized support functions).  I've heard many business unit leaders over the years complain about poor quality service and lack of support from corporate functions.  In many cases, business units hire their own support people - even if it results in the company doubling up in some positions - in an effort to have more control over these functions.

With the focus and pressure on reducing costs these days, more companies are implementing the shared services concept and combining support functions into a single team in an effort to reduce the company's costs of providing support.  If not done correctly, though, this concept can actually increase costs due to poor quality service or slow response to operating units.

Establishing and communicating the company's purpose can help, but it's not enough.  It is also important to show people how their roles align with the purpose and, without a systems thinking mindset, this can be very difficult, if not impossible.

It's About Value for the Customer

The key to reducing the total cost without sacrificing the quality of support is to continually focus on value.  Focusing on value to the customer is what keeps everyone aligned on what is truly important, and helps make decisions regarding where to invest and where to cut much easier.

It is the entire company's responsibility to serve the customer, and doing it effectively requires a systems thinking mindset by those in leadership positions.  But merely telling people to be systems thinkers is not going to make it happen.  Increasing understanding of the company's high-level system requires education and coaching on a continual basis . . . and the value stream map is a great place to start.

A company's value stream is the chain of events that the transforms knowledge, information, and materials into goods or services to customers.  The value stream is how the company serves its markets and makes its money.  In theory, a company should not do anything that is not directly related to the value stream because it does not provide value to customers or bring in revenue.  Even those functions that exist for purely regulatory reasons should be oriented directly toward supporting the value stream's efforts to serve the customer.

The better people understand the company's value stream (i.e., the high-level system), the better they will understand their jobs.  It will become much clearer to everyone why their job exists, who they serve, and where improvement efforts need to be focused.

The Value Stream Map and Shared Services

Once developed, the value stream map (a diagram, or flowchart of the value stream) becomes the foundation to implementing an effective shared services function.  The internal service providers are just as critical to the company's success as the operations functions.  Without an understanding of the value stream, however, it is difficult to know exactly what value service functions provide to the organization, and particularly how to improve quality and reduce costs.

With this in mind, implementing an effective shared services function requires addressing the following:

• Clarifying expectations that serving customers is everyone's responsibility, and those who do not directly serve external customers are responsible to support those who do (i.e., their internal customers);
• Develop the purpose of the shared services function.  Since this is most likely a new approach for the company, it is important to bring support team leaders together to develop the purpose and assure that, once developed, the purpose is clearly communicated throughout the company;
• Map the company's value stream.  Develop the high-level value stream map for the company and clarify how the shared services functions fit into the system.  Follow up with more detailed maps to show how each support function serves the value stream, keeping in mind that support functions can also serve each other;
• Understand the barriers to effective teamwork.  There are likely obstacles that will interfere with getting people to focus completely on serving the value stream.  These obstacles (e.g., fear, or objectives and rewards that discourage serving internal customers) need to be clearly identified and addressed.

Outsourcing services or cutting support budgets will not, by themselves, result in improving company performance.  It is critical to clearly understand the interactions between functions that exist and how these relationships contribute to serving the external customer.  It is only with this level of understanding that costs can be reduced while service to customers is improved.

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Breaking Down the Silos

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GETTING PEOPLE TO WORK TOGETHER & SHARE BEST PRACTICES

One of the biggest issues facing leaders today is figuring out how to get people in different areas of the company to work together and share best practices. Whether the people are in different departments or locations, a lack of teamwork is a frequent problem and is difficult to resolve.

Whenever I am asked to help with this type of problem, I ask the following questions to the leaders to probe into the organization’s culture and leadership practices.

· How do you evaluate the performance of people and regions?

· What do you do if a particular location or person does not seem to be meeting objectives?

· When meeting with people or visiting different locations, what do you generally talk about?

· What is the company’s purpose? Is it clearly understood throughout the company – i.e., in different locations? How do you know?

In many cases, the answers to these questions point to the company’s leadership practices as the main cause of the problem of a lack of teamwork and sharing. The company’s system for evaluating performance, in addition to the actions and behaviors of management tends to inadvertently create barriers that interfere with the desire and ability of people to share information and/or accept ideas from others.

Evaluating Performance

It is important to exercise care when using measures to drive behavior because it just might work – although not necessarily in the way you intended. Holding a sales manager accountable for sales in his region tends to drive him to focus on sales in his region – even if it hurts sales in another region.

The following are actual examples of failed attempts to improve performance by holding people accountable to goals based on individual or localized measures.

· In a mid-sized global manufacturing and service company, the CEO measured the revenues generated in each region and made it clear to the sales managers that they were responsible for increasing sales in their assigned territories. Bonuses were based on exceeding forecasts and whenever he visited the different regions, he would meet with the team and review their YTD results and plans for growth.

The sales manager in Slovakia was an expert in a particular application of one of the company’s products. Although there were similar opportunities in other regions, the other sales managers needed the support of this person to capitalize on them. Because of pressure from the CEO, however, the Slovakian sales manager could not afford to take time away from his region to help others. He was aware (and frustrated) that this type of behavior did not benefit the company as a whole, but he felt he was doing what was necessary to meet his objectives and keep his job. As a result, he met his targets (as did the other regional sales managers), but the company missed out on a fairly easy opportunity to grow revenues.

Other companies I have worked with experienced similar results. Salespeople fighting over credit for cross-regional accounts, and different regions of the same company competing with each other for business are common results from the pressure to meet targets set by leaders.

· A purchasing agent in a manufacturing company was evaluated on containing costs for the products she purchased. Her main responsibility was to purchase pipe used by the production department for one of the company’s main products. She met her goal by procuring pipe from a variety of sources which saved on material costs, but resulted in a great deal of variation in the quality of pipe, as well as late deliveries. As a result, the production department experienced late shipments, increased cycle times, and additional labor costs to process the pipe. The situation hampered the ability of the production people to meet their targets and resulted in a deterioration of teamwork between procurement and production.

Organizations are far too complex to assume that evaluating performance of people or regions based on isolated or localized measures will result in optimizing the results of the whole. The issue has psychological and sociological ramifications which results in complications that have to be dealt with carefully.

If you take a cat apart to see how it works, the first thing you have in your hands is a non-working cat. – Douglas Adams

It is not possible to effectively lead an organization by breaking it into pieces and setting goals for each piece. What matters is the performance of the entire organization . . . not the individual people or departments.

In the sales manager example above, the CEO needed to stop worrying about the individual salespeople and focus instead on the sales of the entire organization. The objective of the regional sales managers should be to increase revenues for the entire organization – which by the way also involves procurement, production, engineering, and finance, as well as all sales managers. If the CEO made it clear to the team that their objective was to increase sales for the entire organization, the sales manager in Slovakia would feel empowered to help sales managers in other regions increase business. He would also feel better about his job knowing that he is helping other salespeople improve overall company’s results.

It’s About the Team

Getting people to work as a team requires treating them as a team. On the other hand, when you measure and hold people accountable as individuals they will act as individuals.

Although it seems simple, this premise tends to be difficult for many leaders because we are taught in business schools about the importance of performance reviews and increasing accountability to improve performance. Getting people to work together, however, requires holding the team – and ultimately the team’s leader – accountable for achieving results.

What About the Stars?

When you begin to manage and reward the team instead of individuals, there is a chance you will lose the “superstars” who like to work alone and be rewarded for individual effort. In every instance where I have seen this happen, however, the company actually improved performance after a superstar left. In the right environment, teams are much more effective than individuals – even if those individuals are superstars. Ridding the organization of those who put their own needs ahead of the company as a whole tends to unleash the talents of the team, enabling amazing things to occur. Superstars tend to shine in dysfunctional organizations where people do not work well together. Once teamwork starts to improve, the superstar starts to hamper, more than help performance.

Try It . . . It Really Does Work

When I work with organizations on teamwork-related issues, I suggest initially implementing changes in a pilot area to help reduce the apprehension of the leaders to change the way the organization is managed. In the sales example, the CEO agreed to change the high-level measures for the European business unit and focus on revenues and EBIT for all of Europe instead of country-by country. Regional measures remained, but were only used by sales managers and their teams to determine what was happening at the local level and to determine if action needed to be taken to improve results.

As a result, the level of teamwork between sales managers improved, and by year-end, revenues exceeded forecast by 27%. Sales actually declined in some regions because the team decided to focus on the areas where the biggest growth opportunities and higher margins existed – which contributed to EBIT surpassing budget by 57%. Customer satisfaction also increased because people in different regions were now working together to serve needs and resolve problems.