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Managing Barriers to Business Reengineering Success

by Wolf D. Schumacher

CHAPTER 6

CASE STUDY

Most corporations are like giant jellies.

You can force them briefly into a new shape.

But unless you can fundamentally reform the culture

that holds them together, they will swiftly

wobble back into their old form.

Jim Lodge, 1995

6.1. About IPN Corp.

IPN Corp. is an international special machinery manufacturer headquartered in Europe. As an organizational development and management consultant the author facilitated the Business Reengineering project at IPN during 1994 until its completion in late 1996. IPN employs more than 10.000 people with sales of approx. 0.8 billion US$. The company manufactures and sells custom made machinery to the wood-manufacturing sector worldwide. Typical customers are kitchen cabinet-makers. IPN is organized as a group of 15 companies, operating independently. Some of these are sales organizations only. The Business Reengineering project had been performed at the head company IPN Switzerland, with approx. 2.000 employees the largest outlet in the group. IPN Switzerland at the outset was organized functionally into sales and marketing, production and logistics, research and development, and administration (human resource management, information management).

6.2. The Triggers for Change

At the end of 1993 the IPN board of directors concluded that, despite the success of the company in the marketplace, there existed considerable drawbacks to key business processes of the organization. Delivery time-frames were not meeting the requirements of the world-wide market place, orders were not filled on time, the cost of quality was much too high and morale of the work-force in the supply chain was down.

The message was clear, the company`s position was challenged, if the operational problems would not be solved. IPN`s board of directors was determined, to do something about the business processes of order acquisition and order processing. Yet they did not know how to go about it. They decided to involve an outside consultant to help decide about the right way to go. The author of this report was selected based on his credentials and the presentation he gave to all members of the board. He proposed to undertake a Business Reengineering project for the key business process of order management.

6.3. The Project Plan

The scope of the project was interfunctional, in that the order management process span the functions of sales, production, materials management, and design engineering. The project plan called for two phases, subsequently to the initiation of the project (Figure 6.3./1).

Figure 6.3./1 Project Phases and Steps at IPN Corp.

The deliverable of the design phase was a common understanding between management and all affected IPN employees regarding the goals of the project and the implementation steps and methods (Table 6.3./1).

Table 6.3./1 Project Steps Within the Design Phase

The deliverable of the implementation phase was the implemented change or new order management process and related structural changes (Table 6.3./1).

Table 6.3./2 Project Steps Within the Implementation Phase

6.4. Project Responsibilities

The project was overseen by the board of directors, with the CEO himself getting heavily involved in the project, by bringing his visions forward. A group of twelve members from several departments involved in or impacting the order management process, as well as one member of the workers council joined the board, to form the "management".

The project team consisted of a full time project manager, the Human Resource manager (50% of his time), one project assistant and one external consultant (the author of this report).

As the consultant to IPN Corp. I was on site 40% of my time during the course of both project phases. My main task during the design phase was to develop a proposal for change to the order management process and to take this proposal to broad acceptance. During the implementation phase my main task was coaching the board of directors, the project team and provide training to people affected by the change. Two colleague consultants helped me to conduct and document interviews during step 1.1. One colleague consultant helped me to run motivational training classes during the implementation phase.

The change agent role was shared between the CEO, the project manager and the consultant.

Affected by this Business Reengineering project at IPN Corp. were management and members of the sales department, various technical departments, and all departments in production, related to final assembly. The project targeted approximately 420 people in the organization.

6.5. Design Step 1.1.: Assessment of the Current Situation

6.5.1. Executing Step 1.1.

Along with the help of two consulting colleagues the author analysed the existing order management process. Key people were interviewed, and order documents studied. Several computer programs were deployed for the analysis of throughput time, cost of quality and other facts and figures about the past and current performance of the existing order management process. Table 6.5.1./1 shows the identified problems.

• Many deliveries were not on time, some machines were even "forgotten" in the assembly shop.
• The quality of machine delivery was not on target. To meet deadline requirements of the customers, many machines were delivered not working to the customers sites.
• Technicians had to complete machines on-customer site; but because they did not have the resources readily available, in many cases, it took them weeks and months to take the machines to full productivity.
• Customer satisfaction was down;.
• Salesmen had severe problems to identify positive customer references for new prospects to talk to..
• Sales people sold machines without detailed specifications, only to find out, that the customers did not accept the machines during the final acceptance test.
• The motivation of assembly personnel was down. The felt themselves at the end of the chain, being made

responsible for errors of salesmen and design engineers.

• The research and development department was not developing anymore. The design engineers were kept busy with clearing customer orders.
• The order profitability was low, compared to industry standards.
• The single order was moving through a large number of departments, none of which showed much interest and commitment for fast throughput time.
• Nobody felt responsible for the order all the way through the organization.
• Not the customer delivery date, but the monthly sales budget, based on an annual forecast, drove priorities.
• Cost of failed quality was very high, amounting to 12% of sales. One of the main reasons was technical design flaws, which caused several subsequent assembly problems and long run-in cycles.

Table 6.5.1./1 Order Management Problems at IPN Corp.

The relatively large number of problems identified during the analysis of the order management process not only suggested process related issues, but additionally suggested underlying problems with the product structure, the organizational structure and leadership.

After a briefing with management at IPN, it was decided to briefly study the areas of product philosophy, as well as organizational structure and leadership practices along the order management process. Table 6.5.1./2 lists the findings.

• Each machine was a custom design, even that machines with similar functionalities are being sold. All past attempts to introduce low-cost machine series, failed.
• There were not enough people with broad skills. Technical specialists prevailed. This made decision making regarding complex order issues very complicated. Therefore many decisions were delegated to members of the board, resulting in low awareness for taking responsibility at the operational level.
• There were many holes in the information systems, people could work around.
• There was no performance measurement system. Senior salesmen received commission for sales in their regions even in cases, where they had not been instrumental for closing a sale.
• The culture of the company to some extent was (still is) autocratic, mainly for the reason, to get people on a daily basis to do what is needed. On the other hand, the CEO and co-founder of the company many years ago introduced a gain-sharing plan for the employees.
• The company provided very little training to people.

Table 6.5.1./2 Problems Regarding Products, Structure and Leadership

6.5.2. Presentation of the Results to Management

The results of the situational assessments were formally presented to management. Two thirds of the participants accepted the results as valid. One third would ask for more proof, since they believed, the consultants could have been biased by some interviewees or by incomplete files.

These proofs were delivered in subsequent meetings. Overall it was concluded to move on with the project and to prepare a proposal for the redesign of the order management process along with organizational changes to structure, leadership, and information systems.

6.5.3. Barriers Identified, Root Causes, and Interventions

As a result of the problems presented, the following barriers emerged. Almost immediately, possible root causes were analysed, interventions discussed and subsequently applied. In this step all interventions taken seemed to work.

Table 6.5.3./1 shows barriers identified, root causes analysed per barrier, and the interventions taken.

Table 6.5.3./1 Barrier Management During Step 1.1.

6.5.4. Intervention Success

Some of the barriers did not disappear and came back "to haunt the project team" during subsequent steps of the project. In particular, we had not been very successful in handling covert resistance in the early steps of this Business Reengineering project at IPN Corp. (Table 6.4.3./1).

6.6. Design Step 1.2.: Redesign

6.6.1. Executing Step 1.2.

The Redesign step started with two consecutive meetings between the board of directors and the project team. The objective of both meetings was to develop process visions. It was not easy to arrive at the process visions, since the board was action oriented, i.e. wanted to define specific actions to be taken, in the first place. Yet, after some collaborative thinking and dialogues, valid objectives had been defined.

Figure 6.6.1./1 indicates these common objectives, which were linked to the existing business strategy of IPN Corp.

Figure 6.6.1./1 IPN`s Objectives for the Redesign of the

Order Management Process

6.6.2. Criteria for the Process Redesign

Table 6.5.1./1 lists important criteria for the redesign of the order management process. These were based on the assessment of the current system and the new process objectives.

Table 6.6.2./1 Criteria for the Process Redesign at IPN Corp.

6.6.3. Preliminary Design

Figure 6.6.3./1 graphically displays the preliminary design for the new order management process along with changes to the structure of the organization at IPN Corp.

Figure 6.6.3./1 Preliminary Design for the New Order Management Process

Responsibility for the complete order was the key for the redesigned business process.

The first question was: Could one person, or one group be kept responsible for the whole process ? The answer was: "Yes".

Yet, double-checking the situation soon led to the insight, that no one person or group of persons could be made responsible for the whole process. Instead, it made sense to split the responsibility for a complete customer order among three interfacing self-directed work-teams:

The sales team, the product team, and the assembly team.

The sales team is responsible for sales and customer service in one defined geographical area. It would close a deal and forward all pertinent information regarding the customer order to the product team. The product team is responsible for the precise technical definition of the customer order, allowing the production team to build a machine to customer specs. The production team is responsible for building the machine to customer specification and taking that machine to production on customer premises. This latter was key, since the existing organization would let a machine half finished leave the factory and be completed on the customer`s site.

Together the teams are responsible for the execution of the whole order. The responsibility ends with the complete delivery on time. An incentive pay scheme serves to reinforce responsibility behavior by the teams.

6.6.4. Dialogue about the Proposed Design

The proposal to introduce work teams as a pivotal element of the order management redesign came as a surprise to some members of the board, since autocratically holding individuals responsible was part of the culture at IPN Corp. On the other hand, the idea of multiskilled teams was received positively. The board and the project team decided to take the authors draft to a next step, by producing a document, following the document standards at IPN Corp. This paper should be developed to a level, where it would be fully endorsed by the board and subsequently be brought forward to the rest of the organization. The board wanted to be fully aware of each sentence and single word in this design paper to be developed. It should serve as a clear message to everybody affected in the organization, what will be expected from him or her. The project team set off to develop this paper. It underwent uncountable changes, based on long hours of dialogue between the board, the project team and me, as the consultant. A final draft of the 30 pages design paper was endorsed by the board of directors in December 1994.

6.6.5. Barriers Identified, Root Causes, and Interventions

Table 6.6.5./1 Barrier Management During Step 1.2.

6.6.6. Intervention Success

The interventions used seemed to work through this and the following project steps. Partly, because high expectations were built up. Take barrier # 5 as an example. The change agents told workers to mirror supervisor`s and manager`s behaviors to them. If a supervisor would micromanage a worker, than she would tell him, that this was "old" behavior, she should be left alone with figuring out together with the team, what to do. This worked for a while.

But later "old" behaviors came back. Both at supervisor and worker levels. An analysis showed the strength of the engraved culture. What worked in the past, will work now, is a very powerful -often unconscious- , thinking, which comes back, when situations are difficult. So, each time, when problems with particular customer orders surfaced, managers would micromanage and not give enough support by providing resources, so that workers could live by their own decisions. This caused a lot of frustrations among workers. This in turn reinforced manager`s tendency to return to "old" behaviors.

6.7. Design Step 1.3.: Broad Agreement to the Change

6.7.1. Executing Step 1.3.

This final step in the design phase took seven months. In hindsight the CEO of IPN Corp. often told me, that this phase was far too time-consuming for the company as a whole, on the other hand he considered the time needed necessary, to get everybody on board in this change process. Still, barriers cropped up.

The approach taken in this project step, was to involve as many people as possible in the review of the new order management process, as laid out in the design paper, endorsed by the board of the company. During those talks with employees (including managers) on all levels of the organization, more than 500 questions were raised.

These questions about all aspects of the organizational change, in particular related to the team concept, were written up by me and the project team. Not only verbal answers, but also written answers were provided to people. These answers were distributed through the workers council. Table 6.7.2./1 contains a sample of questions posed by employees (including managers), and related answers by the project team (Schumacher, 1996/1).

6.7.2. Sample Questions and Answers

Table 6.7.2./1 Sample Questions Posed by Employees

and Answers by the Project Team

Right before the summer vacation season in 1995, step 1.3. could be finished. The design document had been finalized based on many interesting discussions and dialogues with many people within IPN Corp.

A revised document, describing the new order management process along with all changes to the organizational structure and Information Technology was issued, endorsed by the board of directors. The implementation phase was approaching.

6.7.3. Barriers Identified, Root Causes, and Interventions

Table 6.7.3./1 Barrier Management During Step 1.3.

6.7.4. Intervention Success

The interventions worked to the extent, that the barriers did not evolve further. The project team noted though, that there was a deep seated prejudice "teams don`t perform, individuals do" , which could explain some manager`s and employee`s negative behavior towards the project. Polarity management was extensively used to make this issue transparent to everybody. It could be demonstrated, that both individual and team management have their downsides and upsides. The solution was to reap the benefit of both; and that teamwork gives a performing individual a good environment to perform much better. These explanations were received positively; but were still too theoretical in nature. People did not work in teams yet.

6.8. Implementation Step 2.1.: Adapt Technically

6.8.1. Executing Step 2.1.

Right at the beginning of the implementation the board of directors sponsored a big party for as many people as wanted to come. This event was remembered by many participants months later in complex situations, and to some extent helped to keep negative emotions out. The celebration party also was a clear signal to everybody, that a new era had begun.

The endorsed design paper was technically implemented sentence for sentence. To some extent there was a competitive situation between the sales, the design and the production areas, about who was first to implement the teams and the required services. In hindsight, it was sales, having the most people problems to change. It was production and design, that had most problems with hard barriers.

Lots of meetings took place, to clear open questions regarding process details, in particular regarding procedural interfaces between the teams, as well as between the teams and the service functions. At the cutover to the new process, there was a lot of confusion. We told people, that confusion during the transition to the new process could be considered normal. Management had concerns about letting people go. Lots of training took place. People were mostly interested in how to handle procedural problems, whom they would be working with on the team, will manager X change his way of acting, etc. The training plan got into a turmoil, in that the training agendas had to be constantly revised according to the problems cropping up.

A number of changes to the design document had to be designed and documented. Many employees felt it was important, to see their concerns being taken seriously by the project team.

6.8.2. Noted Implementation Events

There were two particular events to be noted during the technical implementation step.

Team-Building

Teams were built in two ways. It has to admitted though, that the actual team-building process was to some extent chaotic. The plan called for a certain number of teams with a certain number of people with defined skills to be implemented within two weeks from a start date. The team leaders were to be elected.

For a period of two weeks the whole company went topsy-turvy. Some managers were watching this situation stunned, others tried to keep control, and a few including the CEO waited calmly, until the 342 people involved had found their team and the teams had elected their team leaders.

Subsequently some corrections occurred and the teams presented themselves to the management. The new organization chart was published at the walls of the factory with bubbles containing the teams and the team-members. For most workers, it was the first time their names appeared in an official document of the company.

Team Responsibility Started

Right after the teams were functionally set up, the orders in process had to be distributed to the teams. This was less of a problem in sales and design, but caused a big problem in production. Teams should take on responsibility for 124 machines in process, many of them in backlog. The assembly teams knew very well about their new power. Consequently several teams did not accept the assignment for "problem" machines. This was an issue for the board, that started to help the teams by giving them the resources needed (revamped design, personnel from outside), to take on responsibility.

Also, teams had to be trained again, in using the team information system for planning their own assembly operations, which computes the exact requirement and start dates for parts and design documents.

6.8.3. Barriers Identified, Root Causes, and Interventions

Table 6.8.3./1 Barrier Management During Step 2.1.

6.8.4. Intervention Success

The technical implementation was a success. The processes were put in place, so were the team related changes in the data processing system. The interventions, though, had not been a total success. In particular, barriers 2, 3, and 6 were not overcome. The culture of the organization was still in a Theory X, as opposed to a wanted Theory Y mode of managerial actions towards the teams. Douglas McGregor asserted, that behind every managerial decision are assumptions about human nature and human behavior. Theory X denoted, that the average person prefers to be directed, whereas Theory Y implies, that people`s performance is not only dependent on managerial control (McGregor, 1985). A number of IPN`s managers were still sold on Theory X, being reinforced by some low performing teams, not getting fast enough from the ground.

6.9. Implementation Step 2.2.: Adapt Socially

6.9.1. Executing Step 2.2.

There was a pause between the technical and the subsequent social implementation steps. Teams and their environment should have a chance to adapt themselves to the new processes and structural changes. In hindsight, this was a mistake, since deeply embedded Theory X made many managers and employees behave in "old" ways. This undermined the switch to Teamwork to some extent. It was a mistake, to not thoroughly enough train managers to become coaches to teams. Many managers carried the espoused theory of self-directed teams along, but acted according to another theory; their X-based theory-in-use.

After these problems had been identified by the project team, implementation step 2.2. was carried out earlier, than was originally planned. The consultant wrote a practical paper on team-based behavior, that addressed the Do`s and Don'ts both for managers and employees. This paper was endorsed by the same group, that earlier endorsed the organizational design paper. The behavioral paper lay the groundwork for the subsequent training sessions.

Each team had to undergo social training, which concentrated on three issues:

• As a team, which problems do we have today, which stop us from pursuing our goals ?
• Which actions can we as a team take, to overcome problems ?
• Which problems have to be addressed by others outside our team ?

Thus, the result of the training were detailed action plans, which would subsequently be pursued by the teams. Managers had to help the teams, by providing the resources, so that teams could solve their problems. Problems, which the teams could not solve by themselves, were brought to the attention of management. For example, had production management the task of providing electronic know-how, when it was needed. Consequently, an electronic help-force was set up. The project team held management responsible to provide solutions to the problems, which the teams could not solve by themselves. By practically helping the teams, to form their environment better, managers began to understand, what Theory Y was all about. Also teams began to acknowledge management`s help.

6.9.2. Barriers Identified, Root Causes, and Interventions

Table 6.9.2./1 Barrier Management During Step 2.2.

6.9.3. Intervention Success

Changing individual behavior and changing the culture is by far the most complex task within an organization. IPN`s social implementation of self-directed teamwork is a case in point. Deep-rooted Theory X behavior does not disappear, once that people try out new Theory Y based behaviors. Yet, most interventions will work in the long run.

6.10. Conclusion

IPN Corp. has undergone a major change effort to enhance operational effectiveness. The question remains, whether the outcomes of this project justified the investments taken, which are substantial ?

To that end, we compare the results of this particular Business Reengineering project to the checklist of indicators for cultural change, as presented in table 5.6./1. We argued, that cultural changes are mandatory for achieving lasting Business Reengineering change.

Table 6.10./1 displays the results.

Table 6.10./1 How IPN Measures Up to Cultural Change Requirements

IPN Corp. has not reached her goals yet. The necessary next step for the change agent is, to facilitate the organization`s move into the direction of a collaboration culture, including elements of the competence culture. This move will have to address "reengineering" the managers at IPN.

Related Reengineering Resources

Reengineering Best Practices
Reengineering Toolkits and Document Templates
Business Process Reengineering Implementation
Change Management Strategies and Action Planning
Process Management and Improvement

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