Six Steps to Effective Change Six Steps to Effective Change ManagementManagement

Randall Schaefer CPIMRandall Schaefer CPIM

With thanks to Professor Steven A. Melnyk, PhD.With thanks to Professor Steven A. Melnyk, PhD.

Eli Broad School Of Management at Michigan State UniversityEli Broad School Of Management at Michigan State University

IntroductionIntroduction

The Western Electric StoryThe Western Electric StoryThe Western Electric StoryThe Western Electric Story

The lesson of this storyThe lesson of this story

�� Change management is vitalChange management is vital

�� Change management may failChange management may fail

Main Points of this Presentation Main Points of this Presentation

�� A poorly thought out, poorly structured, and A poorly thought out, poorly structured, and poorly implemented change process will poorly implemented change process will alwaysalwaysfailfail

�� A well thought out, well structured and well A well thought out, well structured and well implemented change process implemented change process may may fail… but your fail… but your chances for success are betterchances for success are better

It Starts with FrustrationIt Starts with Frustration

�� The sources of frustration are infinite The sources of frustration are infinite

�� For change to occur, the frustration must be For change to occur, the frustration must be strongly felt by someone in authoritystrongly felt by someone in authoritystrongly felt by someone in authoritystrongly felt by someone in authority

�� There is a sixThere is a six--step process for managing step process for managing changechange

Step 1 Step 1 –– Frustration ReconnaissanceFrustration Reconnaissance

A A –– Confirm the frustration is justifiedConfirm the frustration is justified

�� Evaluate current, quantitative (numerical) data?Evaluate current, quantitative (numerical) data?

�� Evaluate qualitative (expert opinion) data? Evaluate qualitative (expert opinion) data?

Informed opinionsInformed opinions may bemay be more valuable than numerical more valuable than numerical

data that only validates the frustrationdata that only validates the frustration

B B -- Define an alternative and how to get Define an alternative and how to get therethere

�� Describe a desirable, highDescribe a desirable, high--level alternative to the level alternative to the condition causing the frustration condition causing the frustration condition causing the frustration condition causing the frustration

�� Describe, at a high level, actions that will take you from Describe, at a high level, actions that will take you from the current frustration to the desirable alternativethe current frustration to the desirable alternative

C C –– Find a Champion Find a Champion

�� Respected, task driven, organizational skills, access to Respected, task driven, organizational skills, access to resources, authorityresources, authority

�� Need not be the person who first recognized the need Need not be the person who first recognized the need �� Need not be the person who first recognized the need Need not be the person who first recognized the need for changefor change

�� If your company has no one fitting the above If your company has no one fitting the above description, then you must go outside the company to description, then you must go outside the company to find the champion find the champion

Step 2 Step 2 –– Determine if its Wise to Go ForwardDetermine if its Wise to Go Forward

A A –– Determine if peers/superiors will support Determine if peers/superiors will support the change and change processthe change and change process

�� The status quo generates a powerful inertiaThe status quo generates a powerful inertia

�� Top management must be convinced that the status quo Top management must be convinced that the status quo �� Top management must be convinced that the status quo Top management must be convinced that the status quo costs more than the changecosts more than the change

�� It is harder to maintain support for the change It is harder to maintain support for the change process process than than the change itself the change itself

�� Is your management willing to back up words with actions?Is your management willing to back up words with actions?

B B –– Determine the necessary resourcesDetermine the necessary resources

�� Resources will be required; they will cost moneyResources will be required; they will cost money

�� Enthusiasm for the change + natural concern for costs =Enthusiasm for the change + natural concern for costs =�� Enthusiasm for the change + natural concern for costs =Enthusiasm for the change + natural concern for costs =

temptation to underestimate the required resourcestemptation to underestimate the required resources

�� Time, not money, is often the constraintTime, not money, is often the constraint

Required time always seems excessive to those anxious for the benefits ofRequired time always seems excessive to those anxious for the benefits of

the change but not involved in the process the change but not involved in the process

C C –– Present the change as consistent with the Present the change as consistent with the corporate culturecorporate culture

�� An organization’s culture is the source of its stabilityAn organization’s culture is the source of its stability

�� Culture clash Culture clash ---- a makea make--toto--stock company wants to become stock company wants to become makemake--toto--order with selectable optionsorder with selectable options

�� Change leaders must be sensitive to subtle differences in Change leaders must be sensitive to subtle differences in how the change is presentedhow the change is presented

D D -- Develop the implementation planDevelop the implementation plan

Turn your list of required activities (from step one) into a highTurn your list of required activities (from step one) into a high

level implementation plan of sequenced activities,level implementation plan of sequenced activities,

prerequisites, assigned responsibilities, and deadlinesprerequisites, assigned responsibilities, and deadlinesprerequisites, assigned responsibilities, and deadlinesprerequisites, assigned responsibilities, and deadlines

At minimum, the plan must be:At minimum, the plan must be:

* valid * valid

* acceptable * acceptable

* defensible* defensible

* feasible* feasible

Main point of Steps 1 and 2Main point of Steps 1 and 2

Do not go forward with too few resourcesDo not go forward with too few resources

Research shows that when a change fails, mostResearch shows that when a change fails, most

organizations end up worse off than if they had organizations end up worse off than if they had organizations end up worse off than if they had organizations end up worse off than if they had done nothingdone nothing

When a company launches changes with enthusiasm and When a company launches changes with enthusiasm and abandons them as quickly, it burdensabandons them as quickly, it burdens

future changes with an expectation of failurefuture changes with an expectation of failure

Step 3 Step 3 –– Develop keystone metricsDevelop keystone metrics

Keystone metrics are a limited number of performance Keystone metrics are a limited number of performance

indicators used as reference pointsindicators used as reference points

The keystones identify the broad intent of the changeThe keystones identify the broad intent of the change

The data they display shows how the change is progressing The data they display shows how the change is progressing

Goal Goal –– double inventory turnsdouble inventory turnsWhich metric is the keystone?Which metric is the keystone?

1 Average setup time for manufactured parts1 Average setup time for manufactured parts

2 Days supply of inventory2 Days supply of inventory2 Days supply of inventory2 Days supply of inventory

3 Qty. of purchased parts carrying minimum buy quantities3 Qty. of purchased parts carrying minimum buy quantities

4 Average through4 Average through--put time for manufacturedput time for manufactured partsparts

“Days supply of inventory” “Days supply of inventory” is the keystoneis the keystone

Average setup time for manufactured parts…Average setup time for manufactured parts…

Qty. of purchased parts carrying minimum buy qtys…Qty. of purchased parts carrying minimum buy qtys…Qty. of purchased parts carrying minimum buy qtys…Qty. of purchased parts carrying minimum buy qtys…

Average throughAverage through--put time for manufactured partsput time for manufactured parts

are are detaileddetailed metrics that that would be developedmetrics that that would be developed

to support the to support the keystonekeystone metricmetric

Clarify the keystone with a gap analysisClarify the keystone with a gap analysis

Keystone gap analysis fulfills 4 important functions

1. Defines where we are1. Defines where we are

2. Defines how far we have to go to get to where we wish to be2. Defines how far we have to go to get to where we wish to be2. Defines how far we have to go to get to where we wish to be2. Defines how far we have to go to get to where we wish to be

3. Becomes the basis for measuring progress3. Becomes the basis for measuring progress

4. Becomes the basis for creating reasonable expectations4. Becomes the basis for creating reasonable expectations

Reasonable expectations are vital to Reasonable expectations are vital to maintaining top management supportmaintaining top management support

Expectations must address:Expectations must address:

�� Where we wish to beWhere we wish to be

�� How long we will take to get thereHow long we will take to get there

�� The pace of changeThe pace of change

�� The path of change if the pace is nonThe path of change if the pace is non--linear linear

Step 4 Step 4 –– Develop Detailed MetricsDevelop Detailed Metrics

Detailed metrics communicate what each individual must do to support the changeDetailed metrics communicate what each individual must do to support the change

Detailed metrics keep people focused and coordinated Detailed metrics keep people focused and coordinated

Detailed metrics show the progress of activities necessary to support the changeDetailed metrics show the progress of activities necessary to support the change

Detailed metrics must: Detailed metrics must: •• be verifiable and quantifiable be verifiable and quantifiable •• use easy to understand standardsuse easy to understand standards•• clearly state acceptable/unacceptable resultsclearly state acceptable/unacceptable results•• be presented in a format meaningful to those responsible for resultsbe presented in a format meaningful to those responsible for results

Goal Goal –– Convert the factory to lean productionConvert the factory to lean production

Which is the bad metric?Which is the bad metric?

1 1 Percentage of employees convinced that lean is vital to the Percentage of employees convinced that lean is vital to the

future of the company future of the company

2 Percentage of manufactured parts with secondary routings2 Percentage of manufactured parts with secondary routings2 Percentage of manufactured parts with secondary routings2 Percentage of manufactured parts with secondary routings

3 Percentage of suppliers capable of delivering just3 Percentage of suppliers capable of delivering just--inin--timetime

4 Percentage of manufactured parts with SMED capability 4 Percentage of manufactured parts with SMED capability

Bad metricBad metric

“Percentage of employees convinced that lean is “Percentage of employees convinced that lean is vital to the future of the company” vital to the future of the company”

�� Difficult to gather the dataDifficult to gather the data

Each employee would have to be questioned each time the Each employee would have to be questioned each time the metrics were posted metrics were posted

�� Impossible to verifyImpossible to verify

Would require you to believe what they tell youWould require you to believe what they tell you

�� Impossible to quantifyImpossible to quantify

How much conviction constitutes “convinced”?How much conviction constitutes “convinced”?

Beware of metrics distortionBeware of metrics distortion

�� People fear change because it is an opportunity to failPeople fear change because it is an opportunity to fail

�� The greater the change, the greater the temptation to The greater the change, the greater the temptation to attach a less threatening interpretation to the changeattach a less threatening interpretation to the changeattach a less threatening interpretation to the changeattach a less threatening interpretation to the change

�� Remember the “telephone game”?Remember the “telephone game”?

�� Assure that the people’s understanding of the change Assure that the people’s understanding of the change does not become “watered down”does not become “watered down”

Step 5 Step 5 –– Sell and manage the changeSell and manage the change

�� Selling the change refers to generating acceptance Selling the change refers to generating acceptance throughout the organizationthroughout the organization

�� Convincing employees to Convincing employees to supportsupport the change is the the change is the most important part of most important part of managingmanaging the changethe change

�� Do the usual things Do the usual things -- articles in newsletter, open articles in newsletter, open meetings to address employee concerns, etc.meetings to address employee concerns, etc.

�� Selling the change will result in employees divided by Selling the change will result in employees divided by the 10/10/80 rule the 10/10/80 rule

Anticipate the 10/10/80 rule Anticipate the 10/10/80 rule

10% 10% -- the supportive few the supportive few will immediately see the will immediately see the benefits and actively support the changebenefits and actively support the change

10% 10% -- the nasty few the nasty few will invent reasons to be will invent reasons to be uncooperative and will speak against the change at uncooperative and will speak against the change at every opportunityevery opportunityevery opportunityevery opportunity

80% 80% -- the passive majority the passive majority won’t care about the won’t care about the change but will go along as long as management change but will go along as long as management supports the changesupports the change

Focus on the 80% Focus on the 80%

Early success can convince the 80%Early success can convince the 80%

�� Change projects have several componentsChange projects have several components

�� You cannot address them all at once You cannot address them all at once

�� It is tempting to first address components that It is tempting to first address components that promise the biggest rewardpromise the biggest reward

�� It is prudent to first address components with It is prudent to first address components with low complexity, low cost, short lead time and a low complexity, low cost, short lead time and a high probability of success high probability of success

Publishing the metricsPublishing the metrics

�� The leader must periodically publish the metrics and be The leader must periodically publish the metrics and be prepared to answer questions about themprepared to answer questions about them

�� Never hide a metric because it is trending in the wrong Never hide a metric because it is trending in the wrong �� Never hide a metric because it is trending in the wrong Never hide a metric because it is trending in the wrong directiondirection

�� When metrics trend wrong, and management continues When metrics trend wrong, and management continues to support the change, it sends a powerful message to to support the change, it sends a powerful message to employees employees

Step 6 Step 6 –– Intervene when necessaryIntervene when necessary

When a metric is out of control:When a metric is out of control:

�� Judge whether the cause was foolish expectations or Judge whether the cause was foolish expectations or process failureprocess failure

Correct foolish expectationsCorrect foolish expectations

�� Judge whether process failure was smart failure or Judge whether process failure was smart failure or stupid failurestupid failure

Metrics Metrics -- smart and stupid process failuressmart and stupid process failures

Smart failures Smart failures –– Everyone did the right thing but resultsEveryone did the right thing but results

were not as anticipated because something waswere not as anticipated because something was

overlooked when the metric was developedoverlooked when the metric was developed

Change the process and/or metricChange the process and/or metric

Stupid failure Stupid failure –– An employee deliberately fails to do theAn employee deliberately fails to do the

right thing and results reflect itright thing and results reflect it

Discipline the employee; terminate if the attitude continuesDiscipline the employee; terminate if the attitude continues

SMART FAILURES SMART FAILURES VS. VS.

DUMB FAILURESDUMB FAILURES

KNOW THE DIFFERENCEKNOW THE DIFFERENCE

knowing how to manage each is vitalknowing how to manage each is vitalto successful change managementto successful change management

Discipline is vitalDiscipline is vital

Tolerating an uncooperative employee showsTolerating an uncooperative employee shows

other employees that management is not seriousother employees that management is not serious

about the changeabout the change

It encourages others to take shortcuts, not followIt encourages others to take shortcuts, not follow

instructions or snipe at the changeinstructions or snipe at the change

Out with the oldOut with the old

Intervene to stop employees from continuing Intervene to stop employees from continuing old processesold processes

Inertia will convince Mary she must continue herInertia will convince Mary she must continue herInertia will convince Mary she must continue herInertia will convince Mary she must continue her

old processes until Joe first changes his old processes until Joe first changes his

It may be necessary for Joe to change processesIt may be necessary for Joe to change processes

before Mary but it’s not an acceptable excusebefore Mary but it’s not an acceptable excuse

Mary must not be allowed to hunker down withMary must not be allowed to hunker down withher old, comfortable processesher old, comfortable processes

She must notify the change leader that Joe isShe must notify the change leader that Joe isholding her upholding her upholding her upholding her up

Joe should be disciplined for not changing his processes Joe should be disciplined for not changing his processes as instructedas instructed

Mary should be disciplined for not alerting management Mary should be disciplined for not alerting management that Joe was causing her delaythat Joe was causing her delay

Final commentsFinal comments

When you’ve finished these six steps, you’ll have done everythingWhen you’ve finished these six steps, you’ll have done everythingto maximize the chances of your change being successfullyto maximize the chances of your change being successfullyImplementedImplemented

��Evaluated the initial frustrationEvaluated the initial frustration��Evaluated the wisdom of going forwardEvaluated the wisdom of going forward��Developed a few keystone metricsDeveloped a few keystone metrics��Developed detailed metrics to support the keystoneDeveloped detailed metrics to support the keystoneSold the change to employees and managed the details of the changeSold the change to employees and managed the details of the change��Sold the change to employees and managed the details of the changeSold the change to employees and managed the details of the change

��Intervened when necessaryIntervened when necessary

This does not assure success but makes it moreThis does not assure success but makes it more likelylikely

Final commentsFinal comments

If you have done an excellent job on each step, your If you have done an excellent job on each step, your odds increase even moreodds increase even more

Excellence seems to attract luck to you and Excellence seems to attract luck to you and cooperation from others cooperation from others cooperation from others cooperation from others

Contact infoContact info

Randall Schaefer CPIMRandall Schaefer CPIM

Rschaefer@magimfg.comRschaefer@magimfg.comRschaefer@magimfg.comRschaefer@magimfg.com