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A certain large corporation - let's call it Goliath - used to need six months to know what it had sold in every store; it now needs only one week. But one of its competitors knows everything its stores have sold within eight hours. That competitor is now the biggest in its field; Goliath isn't anymore. As Goliath learn... |
There's another lesson in the fall of Goliath. At first glance, the young company seems to have ousted Goliath by using advanced technology. Its distribution and merchandise-tracking systems made those of Goliath seem like Stone Age relics. But a closer look shows that there was more to the upstart's success. Its enter... |
Businesses often invest in technology with the idea that it can improve productivity by itself. The result is often failure. The textbook example is the application of new machinery in British mines during the industrial revolution. The equipment should have improved productivity dramatically, but it had the opposite e... |
If technology is not enough to give competitive advantage, what is? It's a central question for HR professionals. With the change curve almost vertical, HR and other support services are often called upon to institute changes, sometimes major ones, not only in technology, but also in policy, structure, and strategy. Ho... |
A father took his 12-year old son boating. He had him motor out of sight of land and distracted him with conversation. Then he said, "Son, plot a course to the harbor." The son replied, "I can't. I don't know where we are." The father told his son never to forget what he had just learned: only when you know where you a... |
The lesson applies to business just as strongly as it does to boating. Business people sometimes decide they need to change an organization and even begin the process, but they don't know exactly where their organization is. If you want to get to Manhattan but don't know that you're starting in Brooklyn, you might even... |
How do you find out where your organization is, and exactly where you want it to be? Through metrics-measures-which come in three basic types: vision metrics, metric arrows, and metric targets. |
Vision metrics tell you where you are - exactly. They measure the current state of the variables you're focusing on. Which variables to focus on depends on the enterprise's objectives, and on the scale of the change that is sought - different scales have different metrics. Some common metrics are cycle time, head count... |
For support organizations like HR, customer satisfaction can be confusing, because the customers fall into at least four groups: |
Sponsors, who pay the bills or authorize that they get paid, generally include executives and, ultimately, shareholders. |
Consumers, who consume the services HR offers, are generally employees of the company. |
Suppliers, who deliver services to HR that become a part of the service HR provides. |
Delivery partners, who are from other parts of the organization and are involved internally in making the service work-e.g., the finance function, marketing function, and public affairs function. |
Each group listed above is interested in the services HR provides and how much they cost. But the reasons for their interest vary. You must address each group's needs to gain support for change from all of them. However, it is crucial that you determine which of the customers is the most important to successfully imple... |
Customer satisfaction and costs, two of the most important vision metrics, are interconnected. For example, if you aim to change the way you interact with retirees, you must determine what retirees want (usually, more service and a higher level of service), the cost for the services, and what retirees are willing to pa... |
Metric arrows and targets |
The metric arrow tells you the direction you want to move in. Metric arrows point either up or down; for example, the metric arrows for cost and head count generally point down, while that for customer satisfaction points up. You use metric arrows before you've done enough analysis to know exactly how big a change is a... |
Metric targets are the specific goals that a company commits to achieve. The goals that are selected should be both meaningful and attainable. A target might be attainable but not meaningful, e.g., a 5% change is no change. Or a goal might be meaningful but not attainable, e.g., a 100% change may not be attainable give... |
In determining what's attainable and what's meaningful, a key concern is to make sure the change you seek aligns with the business objectives of the whole enterprise. It's especially crucial to be sure that the level of change you try to bring about is aligned with level of change required by the enterprise business ob... |
There are four increasingly ambitious levels of change that you can consider. The first includes just the internal functioning of HR. This includes those tasks, services and products delivered by people assigned to the HR function, and/or people carrying out HR functional activities. An example would be the internal co... |
The next more ambitious level you can try to change, the HR process, includes the above tasks, services, and products, but also includes the time and energy that people outside of HR apply to completing the process of their delivery. In addition to HR's efforts in delivering the above-mentioned medical plan, this level... |
The third, still more ambitious, level of change focuses on the HR products or services. To continue our example, if the HR product is the medical plan, this level would add the costs of the medical services themselves to all the previously mentioned costs. |
The fourth and most ambitious level, human organization, consists of everything in the previous three levels, but also includes all costs related to having people in the organization: payroll, rent, travel, conference rooms - the whole range. |
Although it is obvious that these four levels have increasing costs associated with them, it can be surprising to see how these costs multiply. For example, if the cost of the HR function is 100 units, the cost of the HR process is 400, the cost of the HR products 1,300, and the cost of the human organization 4,600. Th... |
Because of the greater potential rewards at the higher levels of change, the temptation is to begin by changing the human organization level, but in almost every case you must start by working on the HR function costs. Once you've reduced the HR function costs, you can build on that success by improving the HR process ... |
Having decided what level of change to focus on, you can now determine your metric targets. In general, whatever the level you focus on, some significant reductions in cycle time and cost are a must, as is an increase in customer satisfaction. A 30 - 80 percent improvement is generally possible. |
What can such numbers look like? If the cost of the HR function is $90 million, that can be reduced by as much as $72 million. On the level of the HR process, if its cost is $350 million, it can be reduced by up to $280 million. That kind of change is obviously meaningful, and is usually attainable - if preceded by car... |
FIVE LEVERS FOR CREATING CHANGE |
Your success in attaining your metric targets depends on one factor above all: the quality of your strategies for achieving the change. We call these strategies "levers" for creating change, and they encompass five elements: |
(1). methodology for managing change |
(2) managing the enterprise culture to support change |
(3) organization design |
(4) process design |
These levers do not operate independently but work together like a gear set. Your choices in one lever will affect all the others-which method you use to manage change, for example, will depend on the enterprise culture, the organization design, and so forth. Therefore, if you make a change in one lever without conside... |
A key mistake that many organizations make is to focus on one lever while ignoring another. As I said at the beginning, of all the levers, the one that's most often misused this way is technology. Many failures have resulted from people investing in technology, thinking that by itself, with no consideration of the othe... |
Remember that the levers are interdependent and that: |
Adjustment in one lever affects the others. |
Movement in one lever without consideration of others increases risk. |
Risk is reduced by having a balanced approach. |
Risk is reduced by thinking through implications. |
1. METHODOLOGY FOR MANAGING CHANGE |
The methodology for managing change depends on an organization's willingness, ability, and capacity to change. |
o Willingness to change is closely tied to the second lever, organizational culture. Willingness does not involve skills so much as attitude towards accepting new ways of doing things. |
o Ability to change refers to the competencies needed to allow the organization to make the changes it has agreed to. An example is the skill to run productive meetings. |
o Capacity to change is a function of the number of activities going on concurrently in the organization. A good motto for change management is, "We can do anything, but we can't do everything." To ensure that change is made successfully, you have to throttle the amount of change activities. The capacity to change can ... |
Stages of Change. Regardless of the organization's willingness, ability, and capacity to change, it will inevitably go through the following four stages of change: |
Denial: When first presented with a change, any person or organization, no matter who or what, will go through a denial phase. In this phase, people cannot admit that change is needed or understand why it is needed. They have no clear idea of what the change is about. |
Resistance: If you've been making an effort to change an organization and you begin hearing very loud resistance, you should rejoice. It shows you've gotten past the denial stage and into the next stage, resistance. In this stage, the change is resisted as people try to protect the status quo. |
An important point is that both the denial and resistance stages are loud. When you move to the next phases, the environment becomes more quiet, and the organization tends to forget that there ever was any denial or resistance. Don't expect to get any credit for helping people through the earlier phases; they won't rem... |
Exploration: During this stage, the group begins to explore the potential that the new approaches offer. They begin to see "what's in it for me" in new ways. At this stage they have not yet let go of the old, but they are open to the new. |
Commitment:. At this stage, the group feels ownership of the change and will carry it out. |
The key thing to remember is that there is no way to get from denial to commitment without going through resistance and exploration. The challenge is to minimize the depth and breadth of the curve. |
How do you minimize the change curve? First, you choose among the four basic approaches to dealing with change. These approaches are: |
(1) Power-oriented-based on nonnegotiable directives from management; |
(2) Educational- still somewhat nonnegotiable, but including activities to try to educate the targets of the change on why the change is important to the organization; |
(3) Facilitative- significantly less power driven and using facilitation techniques to help targets better understand and participate in the development of the change activities, and |
(4) Collaborative-controlled by the targets and jointly managed by everybody involved in the change. |
History shows that the less work done to understand the implications of the levers, the more power-oriented the change tends to be. For instance, in the installation of computer systems, a good indication that the change is being managed from a power position is that the only metrics talked about are cost and time to i... |
Which of the four approaches you should you choose depends on the organizational culture and the output metrics you've established for the change. The power approach brings the appearance of change in the short run but brings change acceptance very slowly. If instant, short-term results are what you need, this might be... |
A simple formula, derived from Richard Beckhard and Reuben T. Harris, gives a useful way of thinking about how to overcome resistance to change. The formula states that in order for change to occur : |
F = first steps toward reaching that vision |
If any of D, V, or F are zero or near zero, you can't overcome the resistance to change. If there's not a "burning platform" for change-not enough dissatisfaction (D) with the current situation - you must spark it. If there's not a vision (V) of what can be, you must paint one. And if there are not clearly articulated ... |
The enterprise culture reflects the organization's management style, which has three components: |
(1) Leadership style. Does the management lead or direct? |
(2) Communication style. Is it an open or closed communication style? Is the messenger shot? |
(3) Level of empowerment. Is the organization empowered to make change? Or when the organization makes change is it second-guessed? |
These three elements must be diagnosed, and steps must be taken to begin the move toward a more leadership-oriented, open, and empowered culture. The more progress achieved in these areas, the more success the change effort will have in the enterprise. |
From the standpoint of a support service like HR, there are four basic types of organizational design. The first type is the traditional structure. That's where the customer of the support service is the organization itself. In the case of HR, the HR manager is responsible for working with everybody in that organizatio... |
Because the customers are segmented and have different needs, the traditional structure make it difficult to satisfy them all. This presents a significant constraint on that organization's ability to embrace change. |
The next type of organization design is the expanded traditional. Within this framework, some of the more administrative functions are centralized and added to the service that the corporation provides to its various business units. This offers some improvement over the traditional structure in that it allows you to ap... |
The next type of design is a service center. Like the expanded traditional design, this focuses on administrative services that lend themselves to economies of scale; but it differs from the expanded traditional design in that these services are not centralized and provided by the corporation to business units. Instead... |
The final type is what's called the shared or leveraged service approach. This migrates furthest from the traditional approach and is the most advanced organizational design available today. It has four components. The first component is kept from the previous approach-the service center-but the other three are new. |
o The center of scale, which is the same as a service center, has as its customers employees doing transactions. Costing of a center of scale is generally based on head count. The key metrics are short cycle time, low cost, and high customer satisfaction. |
o The center of expertise provides the organization with activities that require special competencies that are not based on scale. Some HR examples are compensation planning, recruitment, training, and employee development. Costing of the center of expertise is generally based on services provided. The key metrics are ... |
o Business partners work directly with management, and are similar to traditional HR managers, except that they don't have direct responsibility for the transactions or expertise. In implementing any ideas they come up with, they would use a center of expertise to provide support. They also might serve as organizationa... |
Their job is to focus on the one- to three- year planning of how to optimize the use of people to support the business objectives of the unit to which the business partner is attached. The key metrics are relationship value, customer satisfaction, and business value generated. |
o The final component of the Shared Service Model is called the role group. The people within the role group have similar duties to those of the business partner, but their customers and their scope are different. Business partners' customers are line management, whereas the role group's customers are the corporate exe... |
There are three basic approaches to process design: |
(1) Automate existing processes. This requires detailed mapping of existing processes, because as you change the parts of the process you need to understand exactly how the changes will affect the whole process. |
(2)Reengineer the process. If you choose this approach, you need much less detailed mapping of existing process. |
(3) Purchase a packaged process. An example of a packaged process is a software package that enables employment verification processes. If you take this approach, the only mapping you need of existing processes looks at the connection points between the new process and the existing processes it feeds outputs to and get... |
Having decided whether you're going to simply remodel your process by automating what you do, design a whole new system, or buy a mass-produced one, you're at last ready to think about your fifth lever, technology. Technology may not be sufficient to bring effective change, but it is usually critical and takes enormous... |
1. Core system The core system is what supports the HR function, and it any be any of the major HR management systems (such as PeopleSoft, Oracle, HRizon, and SAP). The core system is the basic technology engine to manage the people-related data of the organization. When selecting a core system, the enterprise tries to... |
2. Ancillary or auxiliary systems. These can have a functional focus, an enterprise focus, or an operating-element focus. It is important that the auxiliary systems integrate with the general technological approach used in the enterprise. For example, the enterprise's groupware approach might include the entire enterpr... |
3. Overall infrastructure. If the core HR system that is being installed is the first manifestation of a new technology in the enterprise, there is a higher risk that the system will not be effective. The risk is reduced if the enterprise has an overall technology infrastructure. Some enterprises do not. Based on the t... |
Whatever the level of the infrastructure, when you're considering change, it is important to understand where that infrastructure is now and where it is going in the future |
Key Factors Regarding Infrastructure: |
There are three key factors to consider when you seek a technology infrastructure that facilitates change in an organization. |
The first infrastructural key is enterprise-wide data standards. These allow you to adapt the system to changing organizational designs and structures, and will let you share data across the organization without the time-consuming task of having to transfer from one standard to another. Without enterprise-wide data sta... |
The second key is an enterprise technical architecture. Without understanding the enterprise technical architecture (which includes word processing, spreadsheet, and other programs used by the company), it is difficult to have the flexibility to change the organization quickly. Operating without a uniform technical arc... |
The third key is to have an infrastructure that supports client-server technology. Client-server technology can be a major change facilitator in an organization-if the following elements are in place: |
(1) A well-understood total quality management program within the enterprise. This provides a conceptual framework in which change can be accepted as a way of life in the enterprise. |
(2) Detailed, accurate, rigorous, activity-based costing of the products and services delivered to the full range of customers. Understanding the market costs of products and services allows market pressures to operate and provides the cost side of the cost/value relationship. |
(3) Reengineering has been done on the workflow processes that the client-server technology applies to. |
We can illustrate the use of the levers by examining the experiences of two companies in managing major changes. |
1. Installing New Technology |
The first example involves a company that was trying to incorporate an information system into its HR function. In doing so, it did not consciously consider the five "levers," but all five levers are present whether one considers them or not. |
In this case, the company used the power approach to lever one (methodology for managing change); this was based on a traditional, centralized approach to organization design (lever two), and used a top-down, nonnegotiable leadership style of enterprise culture (lever three). The company handled the fourth (process des... |
The company's most systematic approach to change in this project was in lever four (process design), in making the decision to purchase packaged technological solutions. The core system that the company selected continues to work well, although some specific application packages have since been outmoded. |
Although the software the company purchased was reasonably well-chosen, and the company achieved its metric of having the system installed on the scheduled date, the automation program did not produce the expected results. The reason was the human factor. Because the change had been managed using a power approach, it m... |
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