Q&A with:Abraham Zaleznik
Published:August 13, 2008
Author:Martha Lagace
To what extent does a leader's inner life affect his or her behavior and actions toward other people?
HBS professor emeritus Abraham Zaleznik, skilled in the practice of psychoanalysis and an admirer of the insights of Sigmund Freud, is well positioned to study the question. Zaleznik has authored or coauthored 15 books as well as the now-classic 1977 Harvard Business Review article "Managers and Leaders: Are They Different?" His latest book, Hedgehogs and Foxes: Character, Leadership, and Command in Organizations, explores motivation, decision making, and leadership skills as they progress in life and in business.
HBS Working Knowledge asked Zaleznik to reflect on the inner life of leaders.
Martha Lagace: Your book is an intellectual and introspective discussion of leadership that seems rare in the literature of leadership today. What motivated you to write the book, and how did you draw on your background in psychoanalysis to approach contemporary characters and issues in leadership?
Abraham Zaleznik: When I wrote my first book on the job of the foreman (1950), an observation and an idea took hold: Leaders have to achieve psychological independence to enable them to apply their talents to the work at hand. This independence frees the leader to expand on his or her talents and thereby become an object to allow subordinates to identify with and to cultivate and apply their own talents in the interests of meeting and even expanding on objectives.
Through years of research work, writing, and reading it became even clearer to me that I was on the edge of understanding and adopting two principles: Leaders need a healthy dose of narcissism to lead, and they also need a healthy dose of paranoia to avoid the trap of group dependency.
While all this was going on, in reflecting on my research and writing, I became absorbed in extensive reading in the social sciences, notably anthropology and above all psychoanalysis. I suppose I could be accused of hero worship when I read intensively and extensively the writings of Sigmund Freud, leading me to apply for candidacy in the Boston Psychoanalytic Institute and then applying for and being granted a waiver of medical and psychiatric prerequisites so that I could receive full training in clinical psychoanalysis. The American Psychoanalytic Association certified me for the practice of psychoanalysis in 1971.
Hedgehogs and Foxes is my 15th book. It is a study of leaders acting in a role but wittingly or unwittingly bringing to this enactment their character. An individual's character is outwardly represented while it is a product of development starting with early childhood. Even when leaders try to hide and disguise their character, their traits are recognizable to others.
Character is on display as leaders structure their organizations and go about making decisions. Some prefer to be intimately involved in the decision process. Others prefer to delegate early on and to remain at a distance from the give-and-take of reaching conclusions. For the research that led to writing Hedgehogs and Foxes, I relied on secondary sources, but focused on critical episodes.
For example, Dwight D. Eisenhower characteristically favored consensus and only reluctantly faced confrontation. The critical episode here was Eisenhower's difficulty during World War II in confronting Field Marshal Bernard Law Montgomery, much to the exasperation of Generals George S. Patton and Omar Bradley. Montgomery fought hard to convince Eisenhower that Eisenhower should remain in England and turn over command to him, with Patton and Bradley as subordinates. To the consternation of Patton and Bradley, Eisenhower first sought to placate Montgomery but finally confronted him when Montgomery failed to follow orders to play his part in the battle plans. An aide to Montgomery intervened and convinced Montgomery that instead of a stern letter, Eisenhower was on the verge of replacing him as commander of one of the armies.
Q: What do the hedgehog and fox metaphors mean in relation to the complexities of leadership?
A: The title of the book is a debt I owe to Isaiah Berlin, the British scholar. Berlin borrowed the notion from the ancient Greek philosophers that hedgehogs know one big thing while foxes know many things. Applied to leadership, hedgehogs reduce reality to one single principle, while foxes know many things and are prepared to adapt to a complex view of the world.
For example, behavioral psychologists have studied pigeons and found that once discovering randomly which button when pressed yielded a corn pellet, pigeons would repeat the act, a form of repetition compulsion. Unfortunately, leaders often become addicted to the compulsion to repeat in the present what succeeded in the past. Human affairs require adaptation and the avoidance of the repetition compulsion.
Q: Your book describes leadership dilemmas facing well-known individuals historically and currently, including Robert S. McNamara, Ronald Reagan, Martin Luther King Jr., and George W. Bush. Could you focus on just one individual and share with us briefly what fascinated you as a scholar of leadership?
A: In addition to the example above of Eisenhower and his reluctance to confront and instead rely on consensus, another example from the book concerns the education of Robert S. McNamara.
He was a brilliant student at the University of California and at Harvard Business School, where he became a member of the HBS faculty. McNamara was a devotee of managerial control, an expertise he applied in his work at the Ford Motor Company and later at the Department of Defense as secretary in President John F. Kennedy's cabinet.
His mantra was measurement. As secretary of defense, McNamara developed, along with key subordinates, including Robert Anthony of the HBS control faculty, long-range procurement cycles. He even tried to get the U.S. Navy to subscribe to a common aircraft for the three branches of the military. The Navy refused to go along, since this branch was concerned about aircraft operating from carriers.
McNamara urged field commanders in Vietnam to apply measurement to enemy losses, but did not realize until it was too late that the measurements were unreliable to assess enemy losses. The most reliable assessments came from correspondents like Neil Sheehan and David Halberstam. McNamara published a book years after he retired to reassess the Vietnam War and his role in it as secretary of defense. His main theme was the failure to examine critically the assumptions leading to U.S. involvement in this disaster. Editorial writers took no pains to spare McNamara's feelings.
The moral I took away from his story is to avoid the perils of the hedgehog and its reliance on a single belief, in this case measurement, and the technology of control.
Q: You authored the 1977 Harvard Business Review article titled "Managers and Leaders: Are They Different?" As you think about business 31 years after that article appeared, do you see changes in the roles you described back then? What have you learned about leaders and managersin business today that encourages optimism, and what gives you concern?
A: Managers are oriented to process, while leaders are attuned to substance. Process is concerned with establishing procedures for solving problems, while substance deals directly with the problems at hand. Process is soon related to obsessive thinking and depressive emotional states, while substance energizes and draws on imaginative thinking. Managers tend instinctively to delegate; leaders like to get involved in working toward solutions to substantive problems.
The picture in business today (along with government) is bleak. The mantra today is to lay off workers and staff, cut costs to the bone. The American automobile industry may not survive as we have known this bellwether star in the industrial firmament. This industry is a prime example of the dangers of the repetition compulsion. I am in a pessimistic frame of mind, and I don't see change until after the U.S. presidential election, and we rid ourselves of the disastrous George W. Bush administration.
Q: How will you continue to explore the rich aspects of leadership that you have described in Hedgehogs and Foxes? What is your next project?
A: I just signed a contract with Palgrave Macmillan for a new edition of a book that I wrote in 1990, Executive's Guide to Motivating People: How Freudian Theory Can Turn Good Executives into Better Leaders. The book is an introduction to psychoanalytic theory and aims to help the executive develop psychological mindedness. It will be sent off to the publisher in December 2008. After that, I will work on two volumes of my collected papers. The first volume will be addressed to an academic audience and the second volume to an audience of practitioners. Both volumes are rich with ideas that have intrigued practitioners and academics, and together will stimulate the imagination of readers.
Book excerpt from Hedgehogs and Foxes: Character, Leadership, and Command in Organizations, by Abraham Zaleznik
Individuals who are caught up in empowerment movements, both nonviolent and violent, substitute one form of dependency—on an authoritarian program or leader—for another—economic privation. Liberation, from these and other forms of dependency, requires freeing the ego from group psychology and from neurotic disabilities that restrict the development of the individual.
Once restrictive governments are replaced, new goals have to be developed with the aim of enhancing the ego through education, economic opportunity, and personal freedom. …
Empowerment movements have sprung up in the United States and other developed countries with democratic institutions. Empowerment movements have been adopted in the name of feminine liberation and equality of the sexes. In complex organizations empowerment programs seek to alter hierarchies, to "flatten" the organizational structure, decreasing the authority of top levels while increasing the autonomy of the lower levels. These ideological approaches carefully avoid the fact that hierarchy is a form found in nature. Assemble a group, give it a purpose, and if left to its own devices, it willorganize itself into a hierarchical structure in the shape of a pyramid.
True empowerment is a result of individual transformation from dependency to autonomy following the path of maturation from infancy onward. … Education and training to develop competencies is the sure, albeit slow, route to empowerment through the enhancement of talents, whether in developed economies or third world nations. In underdeveloped nations the route toward self-engendered empowerment may be longer, and the results may be slower to materialize, but whether in developed or underdeveloped economies, self-empowerment requires motivation. The desire to develop and strengthen the ego must be internalized, and this comes with the cultivation of talents.
Unlike mass movements under the leadership of a charismatic leader, empowerment of individuals through the development of talents comes through education and training. Identification with gifted teachers, who stimulate learning, is a microscopic process that occurs not only in the formal atmosphere of the classroom but also in the seemingly mundane activity in factories and offices—wherever people assemble to accomplish work.
Excerpted with permission of the author. Copyright © Abraham Zaleznik, 2008.
About the author
Martha Lagace is the senior editor of HBS Working Knowledge.
12/15/2008
Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?
Published:December 4, 2008
Paper Released:October 2008
Authors:Edward L. Glaeser and William R. Kerr
Executive Summary:
Some places, like Silicon Valley, seem almost magically entrepreneurial with a new start-up on every street corner. Other areas, like declining cities of the Rust Belt, appear equally starved of whatever local attributes make entrepreneurship more likely. Many academics, policymakers, and business leaders stress the importance of local conditions for explaining spatial differences in entrepreneurship and economic development. This paper uses data from the U.S. Census Bureau to characterize these entry relationships more precisely within the manufacturing sector.
Key concepts include:
Local costs and relevant natural advantages (e.g., coastal access, energy prices) are very important for new manufacturing start-ups.
Manufacturing start-ups are particularly drawn to cities with suitable labor forces in terms of occupational distributions. This labor dependency holds across all sizes of start-ups.
New start-ups are drawn to areas with smaller, more entrepreneurial suppliers. Local customers are less important for manufacturing startups.
Measures of general entrepreneurial culture did not predict manufacturing entry well.
Paper Released:October 2008
Authors:Edward L. Glaeser and William R. Kerr
Executive Summary:
Some places, like Silicon Valley, seem almost magically entrepreneurial with a new start-up on every street corner. Other areas, like declining cities of the Rust Belt, appear equally starved of whatever local attributes make entrepreneurship more likely. Many academics, policymakers, and business leaders stress the importance of local conditions for explaining spatial differences in entrepreneurship and economic development. This paper uses data from the U.S. Census Bureau to characterize these entry relationships more precisely within the manufacturing sector.
Key concepts include:
Local costs and relevant natural advantages (e.g., coastal access, energy prices) are very important for new manufacturing start-ups.
Manufacturing start-ups are particularly drawn to cities with suitable labor forces in terms of occupational distributions. This labor dependency holds across all sizes of start-ups.
New start-ups are drawn to areas with smaller, more entrepreneurial suppliers. Local customers are less important for manufacturing startups.
Measures of general entrepreneurial culture did not predict manufacturing entry well.
Abstract
Why are some places more entrepreneurial than others? We use Census Bureau data to study local determinants of manufacturing startups across cities and industries. Demographics have limited explanatory power. Overall levels of local customers and suppliers are only modestly important, but new entrants seem particularly drawn to areas with many smaller suppliers, as suggested by Chinitz (1961). Abundant workers in relevant occupations also strongly predict entry. These forces plus city and industry fixed effects explain between sixty and eighty percent of manufacturing entry. We use spatial distributions of natural cost advantages to address partially endogeneity concerns.
Performance Persistence in Entrepreneurship
| Published: | December 3, 2008 |
| Paper Released: | September 2008 |
| Authors: | Paul A. Gompers, Anna Kovner, Josh Lerner, and David S. Scharfstein |
Executive Summary:
All else equal, a venture-capital-backed entrepreneur who starts a company that goes public has a 30 percent chance of succeeding in his or her next venture. First-time entrepreneurs, on the other hand, have only an 18 percent chance of succeeding, and entrepreneurs who previously failed have a 20 percent chance of succeeding. But why do these contrasts exist? Such performance persistence, as in the first example, is usually taken as evidence of skill. However, in the context of entrepreneurship, the belief that successful entrepreneurs are more skilled than unsuccessful ones can induce real performance persistence. In this way, success breeds success even if successful entrepreneurs were just lucky. Success breeds even more success if entrepreneurs have some skill. Key concepts include:
- There is evidence for the role of skill as well as the perception of skill in inducing performance persistence.
This paper presents evidence of performance persistence in entrepreneurship. We show that entrepreneurs with a track record of success are much more likely to succeed than first-time entrepreneurs and those who have previously failed. In particular, they exhibit persistence in selecting the right industry and time to start new ventures. Entrepreneurs with demonstrated market timing skill are also more likely to outperform industry peers in their subsequent ventures. This is consistent with the view that if suppliers and customers perceive the entrepreneur to have market timing skill, and is therefore more likely to succeed, they will be more willing to commit resources to the firm. In this way, success breeds success and strengthens performance persistence.
Quality Management and Job Quality: How the ISO 9001 Standard for Quality Management Systems Affects Employees and Employers
| Published: | December 11, 2008 |
| Paper Released: | August 2008 |
| Authors: | David I. Levine and Michael W. Toffel |
Executive Summary:
Nearly 900,000 organizations in 170 countries have adopted the ISO 9001 Quality Management System standard. This is a remarkable figure given the lack of rigorous evidence regarding how the standard actually affects organizational practices and performance. Proponents claim that quality programs such as ISO 9001 improve both management practices and production processes, and that these improvements, in turn, will increase both sales and employment. Documenting and training proper work practices can also reduce potentially dangerous "work arounds," and thus could reduce the risk of workplace accidents and injuries. Some critics, on the other hand, point to the potential for quality programs such as ISO 9001 to be detrimental to employees by documenting work practices, resulting in routinization that may reduce skill requirements and increase repetitive motion injuries. This paper reports the first large-scale evaluation of how ISO 9001 affects workers, focusing in particular on employment, total payroll, average annual earnings, and workplace health and safety. Key concepts include:
- Companies that adopt ISO 9001 subsequently grow faster in sales, employment, payroll, and average annual earnings than a matched control group. ISO 9001 adopters are also more likely to remain in business.
- ISO 9000 adopters subsequently become more likely to report zero injuries eligible for workers' compensation. However, there is no evidence that a firm's total or average injury costs improved or worsened subsequent to adoption.
Several studies have examined how the ISO 9001 Quality Management System standard affects organizational outcomes such as profits. This is the first large-scale study to examine its effects on employee outcomes such as employment, earnings, and health and safety. We analyzed a matched sample of nearly 1,000 companies in California. ISO 9001 adopters subsequently had far lower organizational death rates than a matched control group of non-adopters. Among surviving employers, ISO adopters realized higher rates of growth of sales, employment, payroll, and average annual earnings. Injury rates also declined slightly at ISO 9001 adopters, although total injury costs did not. These results have implications for organizational theory, managers, and public policy.
How Could Our Company Get a Grip on Rising Employee Insurance Premiums?
How do most companies deal with a change in an employee's health insurance election (i.e., adding family coverage) in terms of how much an employer pays versus how much the employee pays for the increased premium? Our employees only pay 12.5 percent of their health insurance premium, so if someone adds family coverage because of a situation change, our company is suddenly paying a much higher total salary for this person. We are wondering if it is feasible to require the employee to pay a higher percentage of the premiums, if this change is not negotiated at the time salary is negotiated.
—Sickened Over Rising Costs, financial services, Princeton, New Jersey
—Sickened Over Rising Costs, financial services, Princeton, New Jersey
Every fiscal year companies are required to assess their financial situation and determine how to manage benefit offerings within their established budgets. The size of the benefits budget ultimately determines the employer's ability to maintain competitive benefit programs for all its beneficiaries, and this affects the level of employee contribution amounts that will be required.
There are many methods used to allocate employee contribution requirements, but the key is that employee contribution levels must always be nondiscriminatory. Secondary considerations tend to be ease of administration, communication, adverse effect on participation, and overall competitiveness.
A common method of allocating contributions is to charge a flat percentage of cost. This appears to be the method used by your organization—employees pay 12.5 percent. The total plan costs are then broken down into premium rate tiers (or premium equivalents if self-insured) to equitably spread the costs to all participants based on family status.
Although employees electing family coverage will continue to pay the same 12.5 percent contribution rate, their contribution cost will be higher. The primary advantage of your flat-percentage contribution method is that it solves most of the equity issues and enables you to openly share the entire cost of each benefit offering.
Regarding the timing of negotiating an employee's election and corresponding contribution, the Internal Revenue Service regulates when participants can change their employee benefits elections under a pretax deduction plan. IRS rules only allow a midyear change to health, disability or group-term life insurance coverage elections when there is a change in the person's family or employment status. New hires have 30 days from their employment date to sign up. Otherwise, employees must wait until the annual open enrollment period.
For most companies with calendar-year plans, November is the usual time when open enrollment is held. Therefore, if your organization is holding open enrollment, employees should make any changes to their family election now.
SOURCE: Dean Hatfield, senior vice president and health practice leader, New York, November 6, 2008
There are many methods used to allocate employee contribution requirements, but the key is that employee contribution levels must always be nondiscriminatory. Secondary considerations tend to be ease of administration, communication, adverse effect on participation, and overall competitiveness.
A common method of allocating contributions is to charge a flat percentage of cost. This appears to be the method used by your organization—employees pay 12.5 percent. The total plan costs are then broken down into premium rate tiers (or premium equivalents if self-insured) to equitably spread the costs to all participants based on family status.
Although employees electing family coverage will continue to pay the same 12.5 percent contribution rate, their contribution cost will be higher. The primary advantage of your flat-percentage contribution method is that it solves most of the equity issues and enables you to openly share the entire cost of each benefit offering.
Regarding the timing of negotiating an employee's election and corresponding contribution, the Internal Revenue Service regulates when participants can change their employee benefits elections under a pretax deduction plan. IRS rules only allow a midyear change to health, disability or group-term life insurance coverage elections when there is a change in the person's family or employment status. New hires have 30 days from their employment date to sign up. Otherwise, employees must wait until the annual open enrollment period.
For most companies with calendar-year plans, November is the usual time when open enrollment is held. Therefore, if your organization is holding open enrollment, employees should make any changes to their family election now.
SOURCE: Dean Hatfield, senior vice president and health practice leader, New York, November 6, 2008
How Do I Make the Transition From Training to Recruiting?
My career is taking me away from training and development and into recruiting. How could I gain education, mentoring or experience before pursuing the move in earnest?
—Making a Transition, educational consultant, finance/insurance/real estate, Oklahoma City, Oklahoma
—Making a Transition, educational consultant, finance/insurance/real estate, Oklahoma City, Oklahoma
First off, realize that during tough economic times, the challenges facing a new recruiter are multiplied many times. So if you expect to succeed, you need to be prepared to make a maximum effort.
Like sales, recruiting is a profession that doesn't benefit from a great deal of academic attention in universities. Because so few universities offer courses in recruiting, becoming an excellent recruiter requires a lot of initiative and self-development.
Depending on your level of exposure to multiple companies, you have probably already realized that there are two types of recruiters: those who actually go out and actively source great talent and deliver exceptional customer services, and those who sit back and "process" applicants who come to them. The latter group (administrators-turned-recruiters) gives recruiting a bad name, and they are often among the first people laid off when the economy takes a nose dive, so you should strive to fit into the first category.
Begin by making a list of the skills and capabilities that you need to master. You can do this by looking at a variety of recruiter job descriptions from companies that are well known for valuing top talent. Such descriptions are readily available on major job boards or on job boards specifically for recruiters.
Be aware that the personal attributes necessary to be a successful recruiter differ from those required in training. Although both fields require skills in research (candidate sourcing/competitive intelligence) and assessment (interviewing), recruiters need to be more competitive and even aggressive. They also need strong "sales" skills to close tough candidates. (In fact, the sales profession bears similarities to recruiting such that many recruiting managers opt to send new recruiters to sales training versus recruiter training.)
The inexpensive way to learn corporate recruiting is by reading articles written by thought leaders and leading corporate practitioners on the Internet. A good place to start is the online Recruiting and Staffing channel of Workforce.com. Also, there are several recruiting-oriented Web sites and online communities that provide readers with hundreds of articles covering every aspect of recruiting. They also offer forums for asking questions and sharing ideas with literally thousands of other recruiters from every industry and region throughout the world.
There is so much content on recruiting available that staying on top of it can be overwhelming. You can keep track of the latest tools and practices (employment branding, social network recruiting, etc.) or the best firms (e.g., Google, Microsoft, Ernst & Young, Sodexo) by creating an electronic "alert" on search engines such as Google covering any topic in recruiting. These alerts scan newly indexed news, blog posts, etc., and send the information to you via e-mail.
If formal training is desired, look at sales training first. For formal training on sourcing, consider firms like AIRS and JobMachine. To learn more about subjects beyond recruiting, consider spending a day with legendary recruiters such as Michael Homula and Lou Adler.
Finally, getting one or more recruiters to mentor you is also an excellent idea. You can identify potential mentors in online forums and discussion groups. You can also find them on social networking sites like LinkedIn (most recruiters are on it) and Facebook.
The most effective way to meet a large number of potential mentors face to face is at professional meetings. Most metropolitan areas have professional associations for recruiters. A great example is the Northwest Recruiters Association, founded by Jason Warner (now a recruiting/training leader at Google). Such groups often hold regular monthly meetings. In addition, there are national recruiter conferences where you can run into a bevy of leading recruiters and thought leaders. National event producers include ERE.net, Kennedy Information, SHRM/EMA, HCI and IQPC.
SOURCE: John Sullivan, San Francisco State University, November 6, 2008
Like sales, recruiting is a profession that doesn't benefit from a great deal of academic attention in universities. Because so few universities offer courses in recruiting, becoming an excellent recruiter requires a lot of initiative and self-development.
Depending on your level of exposure to multiple companies, you have probably already realized that there are two types of recruiters: those who actually go out and actively source great talent and deliver exceptional customer services, and those who sit back and "process" applicants who come to them. The latter group (administrators-turned-
Begin by making a list of the skills and capabilities that you need to master. You can do this by looking at a variety of recruiter job descriptions from companies that are well known for valuing top talent. Such descriptions are readily available on major job boards or on job boards specifically for recruiters.
Be aware that the personal attributes necessary to be a successful recruiter differ from those required in training. Although both fields require skills in research (candidate sourcing/competitive intelligence) and assessment (interviewing), recruiters need to be more competitive and even aggressive. They also need strong "sales" skills to close tough candidates. (In fact, the sales profession bears similarities to recruiting such that many recruiting managers opt to send new recruiters to sales training versus recruiter training.)
The inexpensive way to learn corporate recruiting is by reading articles written by thought leaders and leading corporate practitioners on the Internet. A good place to start is the online Recruiting and Staffing channel of Workforce.com. Also, there are several recruiting-oriented Web sites and online communities that provide readers with hundreds of articles covering every aspect of recruiting. They also offer forums for asking questions and sharing ideas with literally thousands of other recruiters from every industry and region throughout the world.
There is so much content on recruiting available that staying on top of it can be overwhelming. You can keep track of the latest tools and practices (employment branding, social network recruiting, etc.) or the best firms (e.g., Google, Microsoft, Ernst & Young, Sodexo) by creating an electronic "alert" on search engines such as Google covering any topic in recruiting. These alerts scan newly indexed news, blog posts, etc., and send the information to you via e-mail.
If formal training is desired, look at sales training first. For formal training on sourcing, consider firms like AIRS and JobMachine. To learn more about subjects beyond recruiting, consider spending a day with legendary recruiters such as Michael Homula and Lou Adler.
Finally, getting one or more recruiters to mentor you is also an excellent idea. You can identify potential mentors in online forums and discussion groups. You can also find them on social networking sites like LinkedIn (most recruiters are on it) and Facebook.
The most effective way to meet a large number of potential mentors face to face is at professional meetings. Most metropolitan areas have professional associations for recruiters. A great example is the Northwest Recruiters Association, founded by Jason Warner (now a recruiting/training leader at Google). Such groups often hold regular monthly meetings. In addition, there are national recruiter conferences where you can run into a bevy of leading recruiters and thought leaders. National event producers include ERE.net, Kennedy Information, SHRM/EMA, HCI and IQPC.
SOURCE: John Sullivan, San Francisco State University, November 6, 2008
What Issues Will Top Our HR Agenda in Coming Years?
How will economic, social and demographic trends change for our workforce by 2020? Which key factors would you recommend that our organization focus on to meet the needs of our future workforce?
—Sleepless in Tacoma, Washington
—Sleepless in Tacoma, Washington
The truth is that a full response to this question could be the subject of a book. But for the near-term future, there are a number of issues for you to keep in mind. First, people are scared.
Most organizations don't have a clue just how insecure people feel about their economic futures, and that insecurity is hurting productivity.
So what should you do about it? Reassure people with the truth about the financial stability of your organization. If you must reduce the force, then over-communicate. Make sure that you keep people informed so that they feel "in" on things. Also, better days are coming and people should know that we have been in a similar situation in the past.
Second, the new generations have different values and see employment differently. As we move into the future, a growing number of older workers are moving out of the employment arena and more young people will be moving in. That means that companies will need to adjust.
Training for these young people will be most effective when packaged in gaming and simulation. This is only one example of how their presence will affect the workplace.
Third, the single most critical issue facing corporate America is the dire need for workforce development. Our schools have failed to educate our young people. We have folks graduating from high schools and colleges who cannot read and write.
We actually have millions of people who are perfectly trained and very capable of handling jobs that no longer exist. Thus, these folks need to be retrained or prepared for the balance of their lives.
Your role—and you will have no choice but to accept it—will be to support workforce development by offering training in basic skills as well as advanced training.
Finally, this lack of trained personnel will aggravate the already severe shortages of skilled workers.
Even with widespread layoffs, we have significant shortages in many occupations. This situation is not going to get better; on the contrary, we can expect a worsening problem, reflected in longer times-to-fill, shorter windows for hiring, and much greater cost to replace valued employees.
The answer will be to "grow your own" talent.
SOURCE: Joyce Gioia, Greensboro, North Carolina, November 3, 2008
Most organizations don't have a clue just how insecure people feel about their economic futures, and that insecurity is hurting productivity.
So what should you do about it? Reassure people with the truth about the financial stability of your organization. If you must reduce the force, then over-communicate. Make sure that you keep people informed so that they feel "in" on things. Also, better days are coming and people should know that we have been in a similar situation in the past.
Second, the new generations have different values and see employment differently. As we move into the future, a growing number of older workers are moving out of the employment arena and more young people will be moving in. That means that companies will need to adjust.
Training for these young people will be most effective when packaged in gaming and simulation. This is only one example of how their presence will affect the workplace.
Third, the single most critical issue facing corporate America is the dire need for workforce development. Our schools have failed to educate our young people. We have folks graduating from high schools and colleges who cannot read and write.
We actually have millions of people who are perfectly trained and very capable of handling jobs that no longer exist. Thus, these folks need to be retrained or prepared for the balance of their lives.
Your role—and you will have no choice but to accept it—will be to support workforce development by offering training in basic skills as well as advanced training.
Finally, this lack of trained personnel will aggravate the already severe shortages of skilled workers.
Even with widespread layoffs, we have significant shortages in many occupations. This situation is not going to get better; on the contrary, we can expect a worsening problem, reflected in longer times-to-fill, shorter windows for hiring, and much greater cost to replace valued employees.
The answer will be to "grow your own" talent.
SOURCE: Joyce Gioia, Greensboro, North Carolina, November 3, 2008
How Do We Guide Managers to Ask the Right Questions When Interviewing Candidates?
What recruitment guidelines can we give to line managers who are involved in our recruiting/hiring process? How can we get them to ask the right questions or follow the right processes/procedures?
—Searching for Answers, mining/oil/gas, Johannesburg, South Africa
Having the right fit is the key to keeping talent on board. Although managers do have the clearest sense of which employees are the right fit for an organization, they often see the selection process as a less-important part of their job. By "right fit" we mean a person whose skills (technical and interpersonal) and interests match the requirements of the position at hand, and whose core values are consistent with those of the organization. Your managers need to spend time identifying the critical success factors for a position, preparing for and conducting thorough interviews, evaluating and comparing the candidates, and selling the job and the organization. Here are some tips:
Determine Fit
● Analyze the job and get input from others to clarify tasks, traits, and style required.
● Prepare for your interview using a grid with your questions:
- Create set questions to make certain the candidate has the skills and style you are looking for.
- Ask behaviorally based interview questions about candidates' past experiences, and be consistent by asking them of all candidates.
- Use appropriate testing and assessment tools.
- Involve multiple interviewers to get diverse perspectives about each candidate.
- Ask the candidates what would entice them enough to take your job vs. that of key competitors; make sure you are meeting their needs as well.
Sell the Candidate
● Be prepared to sell your position, team and organization by addressing the key issues raised by each candidate.
● Think carefully about what you and your team can offer and be ready to give specific examples. For example, if you are offering a great team environment and camaraderie, demonstrate that by having all team members meet and briefly talk with your top candidates.
● Think about your team or organizational "wow" factors--those things that differentiate you from all others. It might be your cutting-edge technology, ultra-creative environment or fun-filled atmosphere.
"Fit is it" when it comes to hiring. If you get the right people in the right roles on your team and for your organization, you will absolutely increase the odds of retaining them in the future.
SOURCE: Beverly Kaye, co-author, Love 'Em or Lose 'Em: Getting Good People to Stay(Berrett-Koehler, 2005), July 17, 2006.
How Do We Reduce the Chance Our Employees Will Unionize?
What are companies doing to reduce the likelihood of employees wanting to join unions?
—Looking Over Our Shoulder, education, Columbus, Ohio
Dr. Charles Hughes of the Center for Values Research once said, "Companies that get a union deserve it, and they get the one they deserve." We agree. Though unions in the U.S. private sector have largely become irrelevant, they still exist, and pose a threat to businesses that prefer to deal directly with their workforces. So what are union-free companies doing?
In short, they are treating people well enough that the union proposition is of no perceived value, and no interest. More specifically, they realize that people give up on their management for the same reasons that they give up on their spouse or significant other--when they believe they have been abused, ignored, taken advantage of or disrespected.
As evidenced by the meltdowns at passenger airlines and automakers, unions can no longer make credible claims to providing pay, benefit or job security advantages. Forward-thinking organizations are removing unions' last remaining value proposition by installing viable employee complaint resolution procedures, notably those with a peer review element. Indeed, a number of companies have seen formerly unionized portions of their workforce decertified by virtue of having adopted a scrupulously fair Alternative Dispute Resolution process.
Union-free companies are beginning to do a better job of listening. We have noticed in our own practice that employers are paying more careful attention to climate survey results. The ones who are really serious about it are incorporating those results into their business metrics, and holding managers as accountable for people results as they do for production results.
Most organizations are dealing more aggressively with non-performers and malcontents--people who stand to gain the most from the Byzantine work rules that often accompany a collective bargaining agreement--and also with managers whose boorish behavior provides fertile territory for an organizing campaign in the first place. The use of executive coaching often provides good results for those in the latter category.
Some companies are using open-book management principles as a way of dealing in good faith, and telling their employees the truth--about everything, large and small. They share with them good news, and bad. And when it's bad news, they tell them early, in person, and with some human sensitivity.
All other things being equal, people tend to trust managers they see a lot more than ones they don't. Absentee or invisible managers make people wonder what they're up to, and do little to create the kind of worker/manager relationship that keeps unions at bay. Workers simply don't vote to bring in a union to represent them against managers with whom they have a trusting, respectful relationship. Managers who demonstrate that they genuinely care about their employees are rarely repaid with a union certification.
How Lean Is Too Lean?
What are some indicators to look for if our workforce has become too lean after our company went through a workforce reduction two years ago? Last year we had an additional 27 people exit the company voluntarily. What signs should we look for to indicate the employees are overworked and stressed out? —Not Enough Cooks, administrative assistant, utilities, Giddings, Texas | |||||||||||||||||||
There are three reliable sources of information that can indicate how employees are managing with workload. First, there are behavioral indicators. Are more people taking sick leave now compared with pre-reduction? Are there more complaints, more team conflict? Is the loss of 27 employees higher than your previous turnover rate? What's the conversation like in the break room—or do employees no longer have the opportunities to mix and chat? Are employees routinely working longer hours and weekends? Have leave applications slowed down? Have customer complaints increased? To support these behavioral observations, your organization ideally would gather empirical data from former and/or current employees. Employees who have decided to leave can provide reliable information about the impact of workload. Implement an effective exit interview process to enable the organization to understand the true causes of loss. For example, of the 27 who left last year, how many did so for reasons that your organization could have influenced? If those resignations reasons relate to overwork, then conduct a cost comparison: How much does it cost to replace staff and retrain new people to full productivity compared with how much it costs to reduce workload pressures through various means? For example, let's presume the breakdown of the 27 people as follows:
To replace eight employees with an average salary of $60,000 (using a conservative 30 percent of salary as replacement cost) would equal $144,000—some of which should be reallocated to fund workload reductions through, for example, additional staff, additional skills or improved processes. The third source of reliable information comes from current employees. Only if your organization is prepared to address overwork issues should you approach current employees to ask about their experiences of life at work. Conduct a survey with a sample of staff and explore what people consider to be great (and not so great) about working at your company—and how they would change it if they could. Employees will identify means of reducing workload other than just employing more people. Workflow improvements, removing red tape, skills improvements—a range of simple solutions can emerge from asking staff questions about improving life at work. If you currently believe there may be an adverse reaction to workload pressures, then proactively gathering information "from the horse's mouth" can reduce the future risk of losing staff and represents a sound risk management strategy. SOURCE: Lisa Halloran, Sydney, Australia |
How Much Inventory Is Too Much?
One of the most embarrassing situations for a supply chain manager is to run out of stock. Especially if it brings certain operations to a halt.
More inventory guards against stockouts. However, inventory represents costs that executives seek to minimize. You need a balance between high cost and high risk, which involves calculating the safety stock level (SSL) for each key inventory item.
There is no perfect safety stock calculation applicable to all situations. According to the book "Purchasing and the Management of Materials" by Gary Zenz, "The size of [safety stock] depends on the importance of the particular item to the process, the value of the investment, and the availability of substitutes on short notice."
One calculation that I came up with as a benchmark for having too much safety stock is this:
Maximum SSL = MHDU x (MHLT - ALT)
Where,
MHDU = Maximum historical daily usage
MHLT = Maximum historical lead time
ALT = Average lead time
The theory behind this safety stock calculation is that you will have just enough inventory in stock if two “catastrophic” events happen simultaneously:
Your supplier's lead time slips to the longest it’s ever been with that supplier; and
On those days that your supplier is late, your company uses the most inventory it has ever used.
In most situations, this is probably too much safety stock to have on-hand. However, this calculation is a good measurement for determining if your SSL is set too high.
12/14/2008
Three Steps for Aligning Projects to Business Priorities
By Ashwani Aneja
A company with a Six Sigma deployment identifies a process improvement area within the business. It is easy to figure out what comes next – just define the problem, set the goal, select the project team, pick the team leader and get out of the way. Right? Well, sort of...but before deployment leaders get the project rolling, they must first make sure they have chosen the right project – one which is in line with business priorities.
If a wrong project is selected, it may not have the full business buy-in, project bottlenecks may not be removed due to other business priorities, the project team may be frustrated and the end result may be that the project has to be scrapped, or, if the project is completed, the business may not feel a positive impact. It is a lose-lose situation for all involved in the process improvement effort, especially for the Six Sigma Sponsor or Champion who can lose credibility with team members and company leaders alike. So how can one make sure projects selected are in line with business priorities?
Project selection is one of the most critical and challenging activities faced by Six Sigma companies. In most companies, difficulty arises in sizing and packaging opportunities to create meaningful projects. To be successful, the project selection process must be well defined and disciplined. A three-step approach can assure a successful project selection process. The steps are:
Step 1: Identify the relative importance of strategic business objectives
Step 2: Identify the relative importance of specific key business processes
Step 3: Calculate the relative importance of key metrics of key processes
Step 1
The purpose of Step 1 (Table 1) is to understand business in depth and to focus on business priorities. The process is:
a. Compile the company's list of strategic business objectives (SBO).
b. Weight the impact of each SBO on gross profits on a 1-to-5 scale (1 = low impact, 5 = high impact).
c. Assess the current status and entitlement of each SBO on a 1-3-9 scale (1 = not in control, 3 = partially controlled, 9 = in control).
d. Calculate the gap between the current status and entitlement for each SBO.
e. Assess the feasibility of significant improvement using 1-3-9 scale (1 = difficult to improve, 3 = moderate effort to improve, 9 = easily improved).
f. Assess the impact of SBO on gross profits on 1-3-9 scale (1 = low impact, 3 = moderate impact, 9 = high impact).
g. Calculate the absolute rating by multiplying gap and feasibility and weighted impact on gross profits.
h. Add all the absolute ratings to get a grand total of absolute ratings.
i. Calculate the relative importance of each strategic business objective by dividing its individual absolute rating by the grand total absolute rating.
The outcome of Step 1 is that from its list of strategic business objectives, the company can identify the key strategic business objectives that can be considered for Six Sigma project selection.
| Table 1: Relative Importance of Strategic Business Objectives | |||||||
| Strategic | Impact |
|
|
|
|
| SBO |
| New Product Development Effectiveness | 5 | 1 | 9 | 8 | 1 | 40 | 0.14 |
| Presales Customer Education | 4 | 1 | 9 | 8 | 1 | 32 | 0.11 |
| Customer Communication | 3 | 3 | 9 | 6 | 1 | 18 | 0.06 |
| Attrition of Business Partner | 2 | 3 | 9 | 6 | 3 | 36 | 0.13 |
| Customer Service Level Inconsistency | 5 | 1 | 9 | 8 | 3 | 120 | 0.42 |
| Custmer Churn | 5 | 1 | 9 | 8 | 1 | 40 | 0.14 |
| X | |||||||
| Y | |||||||
| Z | |||||||
| Grand Total | 286 | ||||||
Step 2
Step 2 (Table 2) shifts the focus from strategic business objectives to processes that impact the key business objectives. The process for Step 2 is:
a. Compile list of business processes existing within the business.
b. Link each process with each SBO on 1-3-9 scale (1 = no relationship, 3 = some relationship, 9 = high relationship).
c. Calculate each process's importance rating – the product of SBO relative importance and each process relationship with SBO.
d. Calculate the absolute importance rating for each process by adding all the individual importance ratings for that process.
e. Calculate the grand total absolute process importance rating by adding the absolute ratings for all processes.
f. Figure relative process importance rating by dividing individual absolute importance ratings for each process by the grand total absolute process importance rating.
| Table 2: Relative Importance of Specific Key Business Processes | |||||||||
| Strategic | SBO |
| Pre- |
| Billing & |
|
|
| Call |
| New Product Development Effectiveness | 0.14 | 3 | 0.42 | 1 | 0.14 | 3 | 0.42 | 1 | 0.14 |
| Presales Customer Education | 0.11 | 9 | 1.01 | 1 | 0.11 | 1 | 0.11 | 3 | 0.34 |
| Customer Communication | 0.06 | 3 | 0.19 | 3 | 0.19 | 3 | 0.19 | 9 | 0.57 |
| Attrition of Business Partner | 0.13 | 1 | 0.13 | 1 | 0.13 | 1 | 0.13 | 1 | 0.13 |
| Customer Service Level Inconsistency | 0.42 | 3 | 1.26 | 9 | 3.78 | 1 | 0.42 | 9 | 3.78 |
| Custmer Churn | 0.14 | 3 | 0.42 | 9 | 1.26 | 9 | 1.26 | 9 | 1.26 |
| X | |||||||||
| Y | |||||||||
| Z | |||||||||
| Absolute Process Importance (Grand Total = 17.74) | 3.42 |
| 5.60 |
| 2.52 |
| 6.20 | ||
| Relative Process Importance | 0.19 |
| 0.32 |
| 0.14 |
| 0.35 | ||
Step 3
The purpose of Step 3 (Table 3) is to further drill down from processes to key metrics that add value to the business. After identification of metric by using this approach, one can get business insights that help when it comes time to select projects for improving business processes. The process for Step 3 is:
a. Compile the list of key metrics for each process.
b. Assess the current baseline and entitlement for all metrics on 1-3-9 scale (1 = not in control, 3 = partially controlled, 9 = in control).
c. Calculate the gap between the current status and entitlement for each metric.
d. Calculate relative metric importance by multiplying gap and relative process importance rating.
| Table 3: Relative Importance of Key Metrics of Key Processes | ||||||
|
| Relative |
|
|
|
| Relative |
| Presales | 0.19 | Sales Rep's Score on New Product | 1 | 9 | 8 | 1.52 |
| Billing & Dispatch | 0.32 | Percent Billing Complaints | 9 | 9 | 0 | 0.00 |
| Retention | 0.14 | Percent Conversion – Proactive Retention | 1 | 9 | 8 | 1.12 |
| Call Center | 0.35 | Call Per Sub | 3 | 9 | 6 | 2.10 |
Based on the relative metric importance, a chart like Figure 1 below can show which metrics are important to be considered for Six Sigma projects that can help the company meet its strategic business objectives.
| ||
 | ||
From lean to lasting: Making operational improvements stick
By focusing on the “soft” side of lean and Six Sigma initiatives, leading global companies gain substantial, scalable, and sustainable advantages.
NOVEMBER 2008 • David Fine, Maia A. Hansen, and Stefan Roggenhofer
For companies seeking large-scale operational improvements, all roads lead to Toyota. Each year, thousands of executives tour its facilities to learn how lean production—the operational and organizational innovations the automaker pioneered—might help their own companies. During the past 20 years, lean has become, along with Six Sigma, one of two kinds of prominent performance-improvement programs adopted by global manufacturing and, more recently, service companies. Recently, organizations as diverse as steelmakers, insurance companies, and public-sector agencies have benefited from “leaning” their operations with Toyota’s now-classic approach: eliminating waste, variability, and inflexibility.
Yet in our experience, organizations overlook up to half of the potential savings when they implement or expand operational-improvement programs inspired by lean, Six Sigma, or both.1 Some companies set their sights too low; others falter by implementing lean and other performance-enhancing tools without recognizing how existing performance-management systems or employee mind-sets might undermine them. Still others underestimate the level of senior-management involvement required; for example, they delegate responsibility for change programs to their lean experts or Six Sigma black belts—practitioners who are technically skilled but often lack the authority, capabilities, or numbers to make change stick.
The broader challenge underlying such problems is integrating the better-known “hard” operational tools and approaches—such as just-in-time production—with the “soft” side, including the development of leaders who can help teams to continuously identify and make efficiency improvements, link and align the boardroom with the shop floor, and build the technical and interpersonal skills that make efficiency benefits real. Mastering lean’s softer side is difficult because it forces all employees to commit themselves to new ways of thinking and working. Toyota remains the exemplar: while many companies can replicate its lean technology, success on the softer side often eludes them.
Some companies, however, overcome the challenges and get more from their operational-improvement programs. Against a backdrop of growing economic uncertainty, their success can be a source of inspiration and enlightenment for industrial and service companies and for public- and social-sector organizations looking to extract greater value from these efforts.
Soft is hard
Making operational change stick is difficult. Operations typically account for the largest number of a company’s employees and the widest variation in skill levels. Units often are scattered across dozens or even hundreds of sites throughout the world, function independently, and have distinct corporate cultures—particularly if M&A has fueled a company’s growth. Each facility may specialize in different products or services and face unique pressures from customers, competitors, and regulators. These factors complicate efforts to design, execute, and scale operational-improvement programs).
Consequently, many companies emphasize the technical aspects of their programs over the organizational ones. That approach is understandable. Technical solutions are objective and straightforward; analytical solutions to operational problems abound in lean and Six Sigma tool kits; and companies make significant investments to train experts who know how to apply them. What’s more, the tools and experts actually are invaluable in diagnosing and improving operational performance.
Overlooking the softer side, however, drastically lowers any initiative’s odds of success. Some companies, for example, rush to implement the tool kit without ensuring that their employees—including managers—are prepared to work and lead in new and different ways. In such cases, “initiative fatigue” and even distrust may set in, and efficiency gains fizzle out as the black belts move on to other projects.
At times, such an improvement initiative first appears to be successful but is later found to be insufficient to meet the company’s main objectives. An aerospace manufacturer, for example, wanted to increase managing of a product with rapidly growing sales. The company’s lean experts, assigned to plan and run the initiative, quickly identified productivity-enhancement opportunities and began conducting kaizen projects.2 On the surface, the program was working: the number of projects and employees trained in the new approaches—two indicators the company tracked—were increasing. But management’s inattention to the softer side created difficulties.
Since the program’s goals weren’t adequately defined or communicated by senior managers, the experts focused on what they could achieve—primarily easy wins, including technical changes to redesign assembly processes and to improve the effectiveness of certain machines. In retrospect, these changes, while broadly useful, did little to help meet growing demand for the product. Meanwhile, some of the company’s salespeople, long frustrated with what they saw as the shortcomings of the operations group, began circumventing the production-scheduling system in order to speed their own products through the queue. That undercut many of the efficiency gains the experts managed to create.
The result, in fact, was chaos: line workers later showed executives a schedule indicating that one machine, chosen at random, was to perform 250 hours of work during an 8-hour shift. This revelation spurred the executives to refocus the program, investigate the organizational factors behind the difficulties, and ultimately identify much more far-reaching solutions—starting with an effort to get sales and operations to collaborate in setting production priorities and to work together on a daily basis.
Getting started: Set high aspirations
Such examples show that neglecting the organizational components of an operational transformation can delay or even derail it. Top companies, by contrast, attend to the softer elements of an initiative throughout its whole course, starting with the earliest, aspiration-setting phases, when senior leaders identify the key goals and start to communicate them. That helps companies to establish a stronger foundation for change and to set more achievable, and often much higher, ambitions than they otherwise could. A better understanding of the cultural starting point enables top companies to determine where they should focus at the beginning of a program, when to implement its various elements, and how to achieve their goals.
Consider the experience of a North American power generator that used cultural insights to combat skepticism about the scope of the efficiency improvements attainable in a nascent initiative. This kind of doubt is common when companies lack a self-evident catalyst for change—say, a takeover or a looming bankruptcy. The power generator responded by sending its managers to visit a company, in another process-intensive industry, that had recently implemented a lean program. There the managers saw similar improvements in action and heard the enthusiasm that line managers and union leaders expressed for them. That experience was instrumental in helping the managers address their own employees’ uncertainties about how much improvement was possible.
Likewise, greater attention to corporate culture helped a global chemical company launch an efficiency-improvement program across its network of 300 plants. The company’s abiding respect for science and for highly educated experts at first biased managers in favor of solutions based on new technology rather than line-level process improvements. After conducting a pilot project, however, executives saw that about 60 percent of the value it generated came from new work processes, not new and more efficient machines. That realization changed the design of the program and raised its goals—in some cases, by a factor of three. The company now expects the program to have an annual impact of more than $1 billion.
By contrast, companies that misread employee mind-sets and other cultural elements squander time and resources. A large logistics group that tried to overhaul its transport network, for example, overlooked the way years of inadequate capital investment would affect the program’s ramp-up. Why did the company make this mistake? It turned out that the gradual decline in capital spending had, over time, led the company’s maintenance workers to assume that their skills weren’t valued, so the seriousness of many problems had gone unreported. The company’s executives found that the goals of the program were therefore initially unattainable.
Making change happen
After accounting for the way culture and other organizational factors will affect the goals of a program, leading companies put what they learn into action. They reap bigger, more sustainable benefits by balancing the program’s hard and soft elements and developing their line managers’ lean leadership skills.
Take a balanced approach
The experience of a North American distribution company that sought to address higher customer expectations and eroding margins in its network of 70 distribution centers shows the virtues of a more balanced approach. The company looked beyond technical changes, to the ways that organizational structures and processes—and even the mind-sets of employees—could affect its ability to meet the goals it set
Operations leaders identified labor balancing as an important technical improvement: they planned to create teams that would combine two roles—“pickers,” who located products to fill customer orders, and “packers,” who loaded orders onto trucks. The new system was supposed to increase productivity by redistributing labor more efficiently to meet shifting demand. The company didn’t stop at such technical fixes, however. In parallel, it revamped its performance-management system to encourage the new ways of working. Pickers had been measured quantitatively (primarily on speed, not accuracy), packers qualitatively or not at all, depending on the site. Executives now combined the existing metrics into a team-based system aimed at helping the company’s trucks depart on time. This change not only balanced speed and accuracy but also pushed workers to collaborate and to focus on a common goal. In addition, the company created a prominent visual tracking system to reinforce the new behavior by showing employees, in real time, when shifting workloads required their immediate attention.
Changing the mind-sets of workers proved critical as well. Many workers in both groups, which had viewed each other as rivals, were company veterans who strongly identified with their roles. Pickers had traditionally felt superior, since they typically worked alone and could be quite successful with individualized approaches, whereas packing was more standardized. Recognizing that such factors would breed resentment if ignored, the company provided supervisors with on-the-job training in interpersonal skills—including coaching and the art of having difficult conversations—in the weeks before making the technical changes. The supervisors later reported that the integration and timing of these elements helped the program succeed by instilling in them the influencing skills needed to highlight the new system’s benefits (both to their teams and to individual workers) and to convince doubters that the changes were important. (Often, companies undermine their performance-improvement programs by introducing otherwise useful training elements at inappropriate times—for instance, several months before the implementation of the program, when its goals may not be clear to the trainees.)
Within six months, the distribution centers that had adopted the new system were 10 to 15 percent more productive, on-time deliveries were up 5 to 10 percent, and errors reported by customers were down by as much as one-third. Moreover, a survey of workers found that their satisfaction levels had risen by 10 percent. Subsequent analysis suggested that about half of the productivity gains were attributable to the softer elements and about half to technical changes, such as more efficient warehouse layouts.
Lead through the line
At the heart of most big operational-improvement efforts are a company’s black belts, lean sensei, and other change agents brought in to lead programs, spur new ideas and practices, and champion the mind-set of continuous improvement. Companies typically follow this template because it appears easier than significantly involving their line leadership. Shop floor deadlines are fierce, line leaders are busy, and many of them lack the skills to direct large initiatives. Some executives therefore argue that line managers should focus instead on day-to-day concerns.
Yet that is a mistake. Large-scale change requires all employees—from the C-suite to the shop floor—to think and work differently. Companies that use only experts to orchestrate change programs may be fairly successful. Still, by outsourcing the responsibility for initiatives (and, by extension, the underlying ideas) to experts, even their own, these companies often miss significant opportunities. Moreover, once the low-hanging fruit is gone, such efforts often lose steam as employees slip into old habits; experts may convey the new language or technical tools but rarely the desire to change behavior permanently, nor can these experts build the organizational capabilities that permanent change requires.
By contrast, when a company shifts the attention of its line managers away from firefighting, develops their leadership capabilities, and expects more from them, the gains are bigger and longer lasting. Experts still play a vital catalyzing role, of course, but now as teachers, coaches, and counselors. Line managers are better placed to lead change efforts and to serve as long-term role models—and should be held accountable for doing so.
The North American power generator mentioned previously learned this lesson several months into its improvement initiative as executives sought to fire up the program’s momentum. This company had sent its operations experts into field offices, so they could work closely with employees at individual plants, where they had enjoyed significant success. Senior executives, however, observed that enthusiasm and engagement soon started fading among the line workers. In the words of one executive, “They were still coming to work from the neck down.”
Senior executives therefore vowed to move the effort “out of the office and into the line.” The company created a “lean leader” profile—a list of desirable characteristics, such as problem-solving, coaching, and analytical skills. Management then created a curriculum to build them through the “forum and field” approach: hands-on training and coaching forums (on topics such as performance management, time management, and problem solving) followed by practice in real-world applications.
To ensure that everyone understood the permanence of the changes, the company made weekly one-on-one training and coaching sessions a part of its line managers’ jobs. Shift schedules were adjusted to incorporate coaching into the workers’ routines. (While most executives recognize the value of coaching, many fail to institutionalize it, thus unintentionally making it seem less important.) These brief sessions allowed workers to celebrate successes, share ideas, and measure progress in achieving the program’s goals. Soon, employees began carrying index cards listing the improvement priorities they had spotted during the previous week.
The cards and related conversations generated creative ideas—including a new way to keep coal dry when it was shipped to the company’s power plants. These and other line-led improvements helped significantly to raise the plant’s output and, subsequently, to cut its fuel costs. More important, the training efforts enhanced the skills of managers, enabling them to become the foundation for a host of additional improvements.
To get the most from large operational-improvement programs, top companies look beyond the technical aspects of lean and Six Sigma and embrace the softer side. Complementing the development of technical skills with a focus on the organizational capabilities that make efficiency benefits real can help companies to achieve more substantial, sustainable, and scalable results.
Notes
1. While lean and Six Sigma are distinct methodologies, many companies combine elements of the two. In this article, we outline best practices that are equally fruitful in lean, Six Sigma, and related hybrid environments rather than advocate one approach over the other.
2. Rapid, concentrated projects aimed at making continuous, incremental, small-scale process improvements at the line level.
About the Authors
David Fine is a director in McKinsey’s Johannesburg office, Maia Hansen is a principal in the Cleveland office, and Stefan Roggenhofer is a principal in the Munich office.
The authors wish to acknowledge the contributions of Mallory Caldwell, Stephen Corbett, Aaron DeSmet, Amanda Hansen, Tom Janssens, Jeff Moore, Mikael Robertson, Sarah Wilson, and Carter Wood.
Sharpening Your Skills: Operations Management
Questions to be answered:
Can "lean" productions methods improve service industries?
How can a company's order management cycle impact costs and margins?
How does resource allocation lead to strategy failures?
Can operations become a competitive advantage?
Can "lean" productions methods improve service industries?
Bringing 'Lean' Principles to Service Industries
Toyota and other top manufacturing companies have embraced, improved, and profited by lean production methods. But the payoffs have not been nearly as dramatic for service industries applying lean principles. HBS professor David Upton and doctoral student Bradley Staats look at the experience of Indian software services provider Wipro for answers.
Key concepts include:
In terms of operations and improvements, the service industries in general are a long way behind manufacturing.
Not all lean manufacturing ideas translate from factory floor to office cubicle.
A lean operating system alters the way a company learns through changes in problem solving, coordination through connections, and pathways and standardization.
Successful lean operations at Wipro involved a small rollout, reducing hierarchies, continuous improvement, sharing mistakes, and specialized tools.
How can a company's order management cycle impact costs and margins?
How an Order Views Your Company
HBS professors Benson Shapiro and Kash Rangan bring us up to date on their pioneering research that helped ignite today's intense focus on the customer. The key? Know your order cycle management.
Key concepts include:
The order cycle provides a window through which to observe the intricate details of revenue management, cross-functional coordination, and profitability management.
Current product-tracking technology makes problem diagnosis much easier than the time of the original study.
By and large, companies using this methodology see lowered costs and improved gross margins.
How does resource allocation lead to strategy failures?
What Really Drives Your Strategy?
Why do so many companies veer off their strategic plan? Look for a disconnect between corporate strategy and how resources are allocated, say Harvard Business School's Joseph L. Bower and Clark G. Gilbert.
Key concepts include:
Company strategy is more than the statement presented in company documents; it's the actual aggregation of commitments and their relationship to the realized strategy of the firm.
Operating level decisions can change the de facto strategy of the firm.
Strategic resource allocation involves planning from the bottom up and involves all levels of the organization.
How can operations become a competitive advantage?
Operations and the Competitive Edge
Many managers expect operations organizations to fulfill only a support role. But an effective operations strategy can give you a competitive advantage. An interview with professor Robert Hayes.
Key concepts include:
Managers must rethink many of the basic principles of good operations management that worked in the past.
Companies must adopt a strategy for improvement that fits the specific needs of the organization at that point in its life.
Assigning a team to carry out a job may not always be the best idea. Sometimes it's more effective to let a gifted individual do the task.
Defining conditions as problematic
We concluded that within Toyota Production System-managed organizations three sets of conditions are considered problematic and prompt problem-solving efforts. These are summarized here and are discussed more fully in a separate paper titled "Pursuing the IDEAL: Conditions that Prompt Problem Solving in Toyota Production System-Managed Organizations."
Failure to meet a customer need
It was typically recognized as a problem if someone was unable to provide the good, service, or information needed by an immediate or external customer.
Failure to do work as designed
Even if someone was able to meet the need of his or her customers without fail (agreed upon mix, volume, and timing of goods and services), it was typically recognized as a problem if a person was unable to do his or her own individual work or convey requests (i.e., "Please send me this good or service that I need to do my work.") and responses (i.e., "Here is the good or service that you requested, in the quantity you requested.").
Failure to do work in an IDEAL fashion
Even if someone could meet customer needs and do his or her work as designed, it was typically recognized as a problem if that person's work was not IDEAL. IDEAL production and delivery is that which is defect-free, done on demand, in batches of one, immediate, without waste, and in an environment that is physically, emotionally, and professionally safe. The improvement activities detailed in the cases that follow, the reader will see, were motivated not so much by a failure to meet customer needs or do work as designed. Rather, they were motivated by costs that were too high (i.e., Taiheiyo robotic welding operation), batch sizes that were too great (i.e., the TSSC improvement activity evaluated by Mr. Ohba), lead-times that were too long, processes that were defect-causing (i.e., NHK cold-forming process), and by compromises to safety (i.e., Taiheiyo).
Recap
Our field research suggests that Toyota and those of its suppliers that are especially adroit at the Toyota Production System make a deliberate effort to develop the problem-solving skills of workers—even those engaged in the most routine production and delivery. We saw evidence of this in the Taiheiyo, NHK, and Aisin quality circle examples.
Forums are created in which problem solving can be learned in a learn-by-doing fashion. This point was evident in the quality circle examples. It was also evident to us in the role played by Aisin's Operations Management Consulting Division (OMCD), Toyota's OMCD unit in Japan, and Toyota's Toyota Supplier Support Center (TSSC) in North America. All of these organizations support the improvement efforts of the companies' factories and those of the companies' suppliers. In doing so, these organizations give operating managers opportunities to hone their problem-solving and teaching skills, relieved temporarily of day to day responsibility for managing, production and delivery of goods and services to external customers.
Learning occurs with the guidance of a capable teacher. This was evident in that each of the quality circles had a specific group leader who acted as coach for the quality circle's team leader. We also saw how Mr. Seto at NHK defined his role as, in part, as developing the problem-solving and teaching skills of the team leader whom he supervised.
Problem solving occurs as bona fide experiments. We saw this evident in the experience of the quality circles who learned to organize their efforts as bona fide experiments rather than as ad hoc attempts to find a feasible, sufficient solution. The documentation prepared by the senior team at Aisin is organized precisely to capture improvement ideas as refutable hypotheses.
Broadly dispersed scientific problem solving as a dynamic capability
Problem solving, as illustrated in this paper, is a classic example of a dynamic capability highlighted in the "resource-based" view of the firm literature.
Scientific problem solving—as a broadly dispersed skill—is time consuming to develop and difficult to imitate. Emulation would require a similar investment in time, and, more importantly, in managerial resources available to teach, coach, assist, and direct. For organizations currently operating with a more traditional command and control approach, allocating such managerial resources would require more than a reallocation of time across a differing set of priorities. It would also require an adjustment of values and the processes through which those processes are expressed. Christensen would argue that existing organizations are particularly handicapped in making such adjustments.
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