"Chicago By Design" October 25-28, 1998 We know that many of you would have liked to attend the recent conference - Chicago By Design -hosted by AMOD. We're sorry if you missed it - there were very lively discussions generated by participants, keeping the presenters on their toes! Here is a recap of conference highlights. First, the setting.... The Sutton Place Hotel in Chicago is tucked into an elegant corner of Chicago, one block from the famous Lake Shore Drive on Lake Michigan and surrounded by excellent and affordable restaurants and pubs. The hotel does not look like a typical conference hotel and it didn't act like one either. Rooms were spacious, service was prompt and friendly and the food was fantastic. It was the perfect setting for a different kind of conference. The Conference was launched on Sunday evening with a reception for participants, with actual conference activities beginning on Monday morning. Conference Chair Dennis Reber from FedEx made opening remarks and laid out the program for the next two days. The conference was structured to roll out seven steps of organization design identified by AMOD, interspersed with learning labs, debriefings and lunchtime speakers. Vince Bozzone, past president of AMOD and President of Delta Dynamics, Inc, began the morning session with an explanation of how this conference was born, and AMOD's philosophy about organization design: AMOD recognizes that there are many useful, valid and challenging models being used to describe the dynamics of organizations and their structures. This point was emphasized by the display of a large number of different and equally effective models on the conference room walls! Organization design is not limited to structure, but requires a systematic approach involving many organizational components in the context of their environment. Organization design must be measured by its business impact. We need to ask ourselves at all times: "How does this design meet the strategic demands of the business?" And "How will design impact the bottom-fine, short- and long-term?" Vince went on to describe the seven step model that AMOD uses, which formed the basis for the design of the conference itself This approach, which merged from the combined knowledge and experience of Board members, consists of the following: Contracting for a designed organization Understanding the organization in the context of its environment Developing die organization concept and design alternatives Detailed design process Ensure alignment of design elements Implement design changes Follow-up/keeping the design on track Vince likened the process of designing and implementing organizations to "a bowl of pudding, to which new ingredients are added, forming swirls that mix and change as the design emerges". Vince's apt and colorful metaphor made us all hungry before first session even started! But it also reminded us that the organization design process is not always linear and logical, and that's what contributes to its richness and its success. Step One: Contracting for a Designed Organization Craig McGee, AMOD's President-elect, led the first session. He stood in for BJ Holdnak, the AMOD Board Secretary and consultant with Somerville, Inc in Denver, who was called away at the last minute and unable to attend the conference. This session emphasized the importance of this critical first step of the design process, and was referred to again and again during other sessions. It included discussion of contract components, roles of the players, contracting steps, and a diagnostic questions for assessing the effectiveness of a contracting agreement. Key elements of the contracting process include: Who is the client? What is the presenting problem? What is the diagnosed problem? What are the defined roles? How will success be defined? Who will be involved? What is the period of time? BJ/Craig provided a useful matrix for clarifying roles during an engagement, that participants found to be quite useful: Picture not Available Critical steps in the contracting process include outlining the roles of the consultant, client and other stakeholders, agreeing on performance measures, and finalizing the contract, preferably in writing. Step Two: Understanding the Organization in the Context of Its Environment This session was an in-depth look at the analysis performed by JCPenney as part of the planning process for a total company redesign. JCPenney is a 100-year-old retail institution in North America with significant U.S. businesses that supplement the retail stores. JCPenney can state that it: Is the largest catalog retailer owns the fourth largest drug store is the largest direct marketer of insurance. During the last few years, JCPenney has confronted a highly turbulent and competitive marketplace. It found itself lagging behind its competitors in the cost of doing business and in speed to market. At the same time, JCPenney had a vision "to be the retailer of choice for our customers and our stakeholders in each category of goods and services in which we choose to compete." In order to achieve that vision, it needed a significant redesign and culture change to order to compete on price, speed and customer satisfaction. Howard Kimpel, AMOD Board member and head of Organizational Design at JCPenney and his associate Dan Zechmeister, were charged with leading the redesign. They looked at the following elements in understanding environmental context of JCPenney: Identify vision and mission strategies Identify gaps between vision, mission and performance Identify internal and external factors impacting the organization Understand products and services Understand core processes and competencies Determine opportunities Howard and Dan walked us through the complexities of an environmental scan in a colorful and logical way, including videos of the company's operations and the announcement of the redesign to employees. While their presentation was quite detailed, here we some key points: Thorough environmental understanding is essential to an effective redesign, regardless of the size and complexity of the business Detailed analysis of the following elements is essential: performance measures cost/expense data stock analyst reports stock price customer feedback employee attitude surveys audit reports efficiency studies They summarized this analysis as looking at anything that tells you where you are in relation to where you want to be. After describing their findings in each of these areas, it was determined that JCPenney wanted to improve its competitive standing in these areas: financial, structure and organization, dedicated supplier production time, speed to market. They went on to describe the following design initiatives in significant detail: institute new expense control and cost management measures and processes incorporate EVA measurement into the JCPenney culture revamp the entire merchandising process and organization enhance the commitment to customer service While we cannot do justice to this Step in our short summary here, the in-depth look that we had at JCPenney's plans for addressing each of these initiatives and the positive results that emerged, was a unique and fascinating experience. It spoke to the necessity of knowing your company, industry and competitors inside and out in order to develop necessary competitive advantage. Step Three: Developing the Organization Concept Design Alternatives This session was delivered by Jerry Dibble, Partner in Inovus Consulting in Atlanta. He outline three objectives for this step: Use analysis of client resources and systems to select a design concept Understand organizational culture and its impact on design outcomes Know how many eggs to break and when to get out of the kitchen! In the process of achieving these objectives, Jerry led us through some novel consulting experiences in a very witty and outrageous way, making his presentation highly effective and entertaining. For example, he walked us through some organization design issues for a potential client Paul Bunyon, president of Blue Ox Homes and Neighborhoods (fictional name?) that underscored the need for systemic understanding and design with the client. Jerry took us through Step Three in greater detail in his description of die work he and Roy Autry, Inovus partner and AMOD Board member, did with the Delaware Department of Social Services. 'Ibis organization needed to redesign its services away from a focus on funding sources toward key stakeholders -outward versus inward. He described the following steps as necessary to effective design: Assess the fit between the organization, its environment and its outcomes Evaluate the existing organizational culture and its core processes Select a design methodology Z Analyze existing decision-making processes Develop a design concept Test drive the concept He emphasized the importance of this organization's culture in developing the right design, and how important it is to fit design to culture and to understand how my design changes will impact existing culture. For example, Jerry described an "affiliative" or collaborative culture at Delaware Department of Social Services where relationships within the department are more critical than efficiency. An extreme example of this involved no reduction in staff while accommodating some existing seating arrangements in making the right design changes, in order to get the needed support for the change from the organization! In this way, they were able to balance improved customer service and operational effectiveness with an affiliative culture in the proposed design for this State of Delaware department. Jerry went into some depth describing the rationale behind the redesign, including the need to incorporate cost accountability with improved customer access and service. Essentially the design refocused department roles and resources away from the Wag agencies as the primary organizer, to one which organizes wound customer-driven processes. The conclusions that Jerry and Roy drew from this project are: Organizations do not always exist to make money; they exist to sustain their culture If changes in the environment threaten an organization, managers will do whatever is necessary to protect the organizational culture Culture changes more slowly than strategy; thus the success of a design is more heavily determined by culture rather than strategy Often the conventional approach to organization design will not produce the desired outcome- partly because organization designers tend to pay more attention to strategy than to culture Get between the dog and the hydrant early! (i.e. address the tough culture issues with the client early on or you'll get "wet" later in the process) Step Four: Detailed Design Process This session was delivered jointly by Craig McGee, of Meriturs Consulting, and his former client Janice Barringer of Sybase Incorporated. Craig outlined the theoretical and methodological approach to design that he uses, while Janice walked us through an application of that design in the Information Connect Division of Sybase. Craig walked us through a detailed model for organization design that incorporates the range of elements in an organizational system: strategy, structure, process, systems, shared values, staffing, etc. (the McKinsey 7-S model). His approach is based on Socio-technical design principles. Craig described three key design objectives: Create a conscious design for the organization Identify the supporting systems and processes to support the new organization Develop changes to these systems and processes to align with the new organization and its strategy He outlined these steps in the design process: Picture not Available Craig went on to describe each of these steps in depth, including design tools that he uses in his work, such as processing mapping, variance control analysis, CAIRO (role) charting, and a graph for determining the right type of intervention needed for various steps in the design process. He concluded that the keys to effective organization design involve addressing these challenges: Defining the appropriate scope of the design Clarifying boundaries and expectations up front Adopting and maintaining a whole-systems view Aligning the different systems Sacred cows Resources Appropriate involvement of all stakeholders Bottom-line, Craig described a highly structured yet flexible model for a detailed design process that offered conference participants a hands-on methodology for organization design. Janice Barringer presented next, with her session titled "The Real World: Creating a Designed Organization". She described the specifies of the design process that Craig had done with company a few years ago. Specifically, she described the redesign of the software product development organization. The problem Janice was facing is as follows: the company was losing revenue opportunities because the cycle time was too long from product conception to market release. Sybase was not facing a quality problem as much as a speed to market problem. Janice was brought in to fix the speed problem while maintaining - and improving - quality. She described the key steps in the re-design, from the "inside out": In-depth interviews with a cross-section of Sybase management and designers to assess organizational strengths and weaknesses. These revealed strong talent, commitment and clew values. At the same time, they revealed changing product design priorities, unavailable or unstable product requirements, no product design phase in the development process and lack of consistency in methods and standards. The process mapping revealed poor coordination across functions and breakdowns in product development, particularly in the area of customer requirements Roles in the product development process were unclear J anice worked with Craig to put cross-functional teams in place, incorporating the marketing function so that customer requirements would be accessible and used effectively by software designers. She led the development of new roles design, new goals and metrics and rewards for product development, and designed the range of supporting systems and processes necessary for implementation: Made her own management style explicit, and her expectations clear Created centers of excellence for software design Built competencies for the redesigned roles and staffing Assessed training needs for teams Put information flow requirements and processes in place Overall, the design changes at Sybase resulted in reduced cycle time with the same staff and same basic process, but with a new reporting structure and organization. This session was a great example of successful organization design in action. Step Five: Ensure Alignment of Design Elements In Step 5, the model that was used at Lucent Technologies to ensure a well-aligned organization re-design was presented by Don Utter, an AMOD Board member and consultant at Lucent, and Theresa Hudak, Manager of the Customer Training and Information Products (CTIP) Organization at Lucent. The presenters describe organizational alignment as the process of creating a culture up, down and across the organization, in which there is common understanding and agreement on: The organization's vision, mission, strategy and values How work is done at all levels and how it is connected to other work What it means to be individually successful The case study used here was the creation of the CTIP organization from components of the old Bell Labs. The business problem was the need to merge three very different entities from Bell Labs, including the Bell Labs Advanced Technologies consulting group, which was led by Theresa. The mission of this group is to provide customers of Lucent with the knowledge and skills - the capability - to use their highly complex technology products to best effect, at a profit. The task was to create a design that would enable CTIP to attain its breakthrough goals thereby contributing to the growth of Lucent. These goals included: significant performance improvements in CTIP products and services create global, performance centered designs that are fully integrated front to back generate revenue for Lucent shift from being documenters/trainers to being "customer enablers" through Performance Centered Design The redesign started with a cultural readiness assessment, which helped identify the gaps between the current organization and the requirements for CTIP. An Invention Team was formed, in which Theresa Hudak was a team player. The Invention team used a reengineering process that had been developed by Theresa's former unit at Bell Labs. This process is similar to the design process outlined above for Sybase; like all the models presented here, it is holistic. The reengineering process resulted in an organization design that: moves from a hierarchical to a flattened-team-based organization separates strategic and tactical decision-making is proms-centered with proms boundaries commonly understood moves decision-making as close as possible to the level where work is performed To achieve the necessary alignment among strategy, culture and work, The Invention Team used Ken MacKenzie's Model: Picture not Available MacKenzie's attributes for an aligned organization include several characteristics: Clarity of direction Clarity of structures Clarity of measurement Successful goal achievement Results-oriented problem solving Associates treated as assets and resources Using the MacKenzie model helped members of the design team and the new CTIP organization to do the following: Have a framework for gathering and assessing cultural assessment data Understand the tension between current results and expected future results Clarify the difference between strategic and tactical planning (Large ABC model vs. small ABC model) Assess the real work of the organization and consider work alignment issues in the new organization Share CTIP resources for the common good Develop a body of new associates who would lead the change into the future The macro-organization design that resulted from the integration of the reengineering process and the MacKenzie organizational alignment process looks like this: Picture not Available The organization design was described in much greater detail at different levels of the organization. Theresa went on to describe the impact of the new design on technology and process. While CTIP is in the process of implementing this design, the benefits of the new organization design are: Added value to Lucent products Faster response to changing customer needs Cost-effective generation of customized products arid services Continuous innovation and adaptation to rapidly changing business conditions The CTIP design story is a elegant example of blending a traditional reengineering approach with cultural change and alignment. Step Six: Implement Design Changes This step was presented by Kathy Molloy of ChangeWorks International and AMOD Board member. Her discussion on implementing design changes included the following: What drives successful implementation - costs and benefits A review of the major theories and perspectives on organization change by various experts Implementation process and methods Rather than provide one case study, Kathy used examples from a financial services consulting film and other organizations she has worked with. She underscored the importance of organizational culture, indicating the success of any implementation is made or broken by the culture of an organization. She defined organization culture as the "conscious and unconscious assumptions, values and norms that people who work together share", that endure beyond organizational structure, systems, processes, etc. Or, more simply put, culture can be described as "the way we do things around here". Choosing the right implementation method for any culture requires understanding both the explicit and implicit characteristics of the organization's culture. And, the extent to which culture is adequately addressed in the design and implementation will predict the depth of the usual "dive" in productivity that most organizations undergo when they implement a new design. There was some lively discussion on the "culture factor" among participants, where they raised several examples of failed implementation because culture was not factored in. This reinforced how frequently culture issues are not addressed and the impact on the success of organization design efforts. Key elements to leading a successful implementation include: understanding the implications of the new design for customers, employees, shareholders and other stakeholders process products and services clear understanding of the organization's culture positioning and reinforcing the new vision garnering sponsors and champions among various stakeholders aligning organization components - linking strategy, leadership and culture introducing change architecture in a coherent way building change capability in the organization paying respects to the old culture save what still works burying what doesn't work providing the necessary support for individuals, teams, and units as they work to synthesize the new design In her discussion on planning change, Kathy used an example from one of her clients, a financial services consulting firm, to demonstrate tools for displaying and tracking major initiatives, key players and measures, in order to effectively track and integrate multiple initiatives. Some important points about change initiatives: no more than three to five at any one time integrated across functions orchestrated and measured led by credible people In her discussion on garnering stakeholder support for a design implementation, she showed us a way to map stakeholder support: Picture not Available Like earlier presenters, Kathy stressed the need for alignment among key organizational components, along with the difficulty of doing so. Here is where leadership skills become critical. Leaders must have the following characteristics for successful, systematic,implementation: Firm, belief commitment to the change Systemic thinking Ability to articulate, on a continuing basis, a compelling vision Long-term commitment to the vision through personal involvement and teamwork Ability to act as a role model Courage Her model for aligning organizational components involves what she calls "common integrators;": the people, values, measures and information that must share common themes and connect the components of the organization for successful alignment. Picture not Available Implementation that "sticks!' requires that these integrators be coordinated at and managed at the enterprise, team/unit level and individual levels. Along with that, Kathy emphasized that change is personal and it is emotional - people need support on many levels. She has successfully used an implementation strategy introduced in a recent book -Intentional Revolutions (Nevis, Lancourt, Vassolo, Jossey-Bass, 1996) which incorporates seven strategic elements: persuasive communication participation cleat expectations role modeling extrinsic rewards structural rearrangements coercion These strategic elements are highly effective when incorporated into the implementation steps described earlier. Again, Kathy recommended measuring the success of the design implementation at three levels of learning and change: awareness, attitudes and beliefs, and performance within and between individuals, teams and organizations. Bottom-line, once the design is in place, implementation is about real people personalizing the design to create new ways of working and operating. In other words, implementation is not always an intellectual, rational process, but a creative and personal process. Step Seven: Follow-Up Keeping the Design Effort on Target This last session was presented jointly by Dennis Orr, President of AMOD and of Orr Consulting Group, and Roger Andrews, head of Human Resources for Homestake Mining Company in South Dakota. The Homestake Mine is one of the richest gold ore bodies in North America, faced with outdated mining methods and falling gold prices. We heard a fascinating and colorful story of the successful restructuring of the 120 year-old gold and silver mine, focusing on the follow-up phase of organization design. In fact, a highlight of the presentation was a video journey through the mine! Dennis Orr introduced the session with a summary of the six previous organization design steps at Homestake, with the process beginning in January 1998. The business case for redesign was as follows: The ore body could no longer support the production levels necessary to sustain the mine as currently structured The mine lost several million dollars in 1997 Operating costs and cash costs needed to be significantly reduced Reduction in labor costs would not achieve expense goals Roger described the actual mining process and methods along with the redesign plan, which incorporated the following strategy: Concentrate on fewer production levels Assess each ore body and how it will be mined Determine workforce requirements Eliminate the front-tine supervision Negotiate a new collective bargaining agreement Raise and enforce safety standards The redesign was charged with meeting the following measurement milestones: Meet or exceed budgeted tons Meet or exceed budgeted ounces Meet production requirements at or below budgeted manpower Environmental application and project promotion Sources of data for tracking to these milestones included weekly managers' reports on safety performance, ore grade, ounces produced and manpower, operations meetings; and action planning for the foremen. The goal was to significantly cut costs while producing more, higher grade ore - not an easy challenge! Dennis and Roger worked with Homestake management to implement that strategy and track milestones. One outcome of the redesign was a full-time workforce reduction of over 600 workers in a one-company town of a few thousand people! That needed to be handled carefully, with deep recognition of the mineworkers century old values and culture. Dennis and his partner worked around the clock providing mine employees with career counseling and job placement support. Almost all workers were placed. What were some of the other results within the last year? The number of gold ounces almost doubled The grade of the ore rose several points Overall cash costs dropped Safety results: no lost-time injuries and no restricted duties for one year Furthermore, the Homestake Mining Company received the coveted ABEX environmental award for excellent environmental awareness planning, new technologies, employee involvement, future planning for environmental awareness. This redesign proved to e a real success story; what could have been a heartbreaking story of lost jobs in a small town, instead ' provided a new lease on life to future generations there.
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