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John T. Mentzer, Carol C. Bienstock, and Kenneth B. Kahn; Business Horizons

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Change Management and Leadership: A Critical Factor for Sales and Operations Planning in Manufacturing

By Beth Montag Schmalz and David Williams, Senior Managers,
Hitachi Consulting

(Editors Note: This is the second in a series of three articles on management and leadership in conducting effective Sales and Operations Planning [S&OP] as a dynamic business process in manufacturing.)

Executive Summary

Only when leaders have taken ownership and responsibility for the needed changes can the organization assure meeting its objectives. Ultimately, the goal of involving leaders early, and throughout the course of the strategic change, is to mitigate the risk of not achieving ROI and long-term sustainable improvement. It takes effort from both the project team and the leaders themselves. The good news is it does not take extraordinary efforts to achieve extraordinary results if you just know how.

Part Two: The Challenge--Leadership Engagement in S&OP Initiatives

Executive leadership is not something that you can ignore or disregard and the following section is is not only applicable to most S&OP programs; but can be extended to cover most transformation initiatives. We cover the role that leadership plays in the success or failure of leading an organization through change. Our assertions are based on the work we have done with dozens of clients facing change and published case studies and analyst perspectives. While more and more organizations are starting to incorporate organizational change strategies into their initiatives, over and over the same theme emerges; failed projects are missing a similar, key ingredient: - active leadership engagement.

Table 1. The Effect of Leadership Commitment on Corporate Initiatives

The question we normally encounter at this time in the discussion is – can transformational change occur only with executive level agreement and buy-in? Executives approve the financial support needed to purchase software package or rethink key processes or change their supply chain configuration. So, if leaders are involved in the change from the very beginning, why are there so many failures?

Perhaps it is a question of involved versus actively engaged . Let's take a look at behaviors that differentiate the two to gain clarity:

Diving deeper, we uncover possible leadership root cause mistakes that help steer projects off their intended course:

•  Approving financial funding and resources = active engagement

•  Passive allocation of accountability and responsibility to the project team

•  Limited communications, typically at the beginning of a project; employees need to have constant information, even if it is,” We don't know yet .” or else they will spend their workdays making up rumors that are often far worse than the truth.

•  A decree from the executive suite is sufficient enough to motivate people

•  Communicating from the old paradigm on managing change, which actually creates more resistance:

“The train is leaving the station. Either get on or get left behind.”

“The bus is ready to roll. If you don't get on it, we will run you over.”

  •  Lack of understanding or formal training for leaders; until recently it has not been viewed as a skill that correlated to financial success.

If most leaders understood that ignoring change management would mean that their initiative would fail (not reap the projected financial gains), most would change the way they lead.

Best Practice: A Combination of Project Leadership and Change Leadership

In order to ensure your change initiative is successful, and sustainable, leaders need to work with the change, not against the change. Leaders also need to be actively engaged throughout the lifecycle of the project. We will discuss approaches that providing leaders with the skills, information and strategies to successfully execute transformational change and ultimately make it stick.

We view it as the responsibility first and foremost of the project team to reach out or push information out to leaders in order to bridge the gap between leaders and others involved with the project. This is especially true with executive leadership. Executives have many competing demands for their time and the project team has a responsibility to help the executive leadership be “effective leaders.” The team should not simply assume because someone has a leadership position they have all the skills and focus needed to be transformational leaders. Once the project leads have figured the best way to engage the leadership, it becomes the leaders' responsibility to become actively engaged and pull information from the project into their organization in order to lead the change effort.

The Plan of Project Leaders: How to Actively Engage Leaders

1. Assess Strategic Intent:

Project management must first ensure change management is properly integrated into the project approach and plan. Below is a checklist project management can use to assess whether change is properly valued on their projects. This checklist would be used in the same context and timing as the “change impact matrix” and early parts of process design / Define phases of a project.

1. Is change strategic in its importance? The change efforts must be part of the overall strategic effort and integrated into the project.

2. Is change holistic in its activities? The change efforts include more than the traditional focus of communications and training of the end-user population.

3. Is change a focus on the project?

1. The change efforts have the right amount of resources, with the right skills,
   on the project team.
   
2. Everyone on the project sees themselves and acts as an agent of change.
   
3. There is a plan in place to teach change management concepts and techniques to the project team and sponsors, leaders and middle management who will be impacted.

If the values above are not found on the project, then a discussion on the value of putting those in place is the next step. Getting agreement on embracing these values up front ensures that the right environment is in place for successful change.

2. Define Your Leaders

If the change efforts meet the above criteria, then the next step is to identify the leaders of the change initiative within the organization. Many times companies think that executives are the only leaders of an initiative. However, leaders in a change effort take on many forms. Leaders are as those individuals with the ability to influence and ultimately change behaviors of a team, department, business unit, division, and/or organization while going through the transition. Given that leaders exist on many levels within an organization, it is important to understand the ‘waterfall effect' or, generically speaking, know who has influence over whom. As a result, the waterfall effect means that leaders must include people in positions such as supervisors, team leaders, manager, directors, vice presidents, partners, presidents and C-level executives. Then, the next step is to question your leaders:

•  How will we/you maximize ROI?

•  How will we/you ensure the change “sticks” and minimize the natural instinct of returning to “the way we have always done things?”

•  How will we/you implement a holistic solution that includes process and organizational considerations, instead of simply automating the current environment?

•  What is your personal commitment to the success of this project?

These business questions need to have clear-cut answers for the change initiative to reap the financial gains promised. Most organizations don't know how to answer them. But when an organization has clearly defined change management strategy and plan, answers to these questions become crystal clear.

3. Push Information, Content and Change Concepts

The next step is to plan to actively engage and involved leaders during key stages in the project lifecycle. Table 3 is a simple guide to effectively integrating leaders and what they should do at every major phase of a large-scale project. This should be custom developed for each change initiative. We recommended starting this process with the Executive Team and trickle down the information -- in the form of workshops -- to different levels within the organization to avoid any bottlenecks in the ‘waterfall' approach. A workshop setting is considered best practice, as opposed to email, in order to discuss risks and issues, ensure leaders understand the changes coming and to be able to voice concerns in a safe environment.

Table 3. Leadership Engagement Plan for the Lifecycle of a Project

By following the above steps, the project team will be well on its way towards actively engaging leaders.

In December, Part Three: The Plan for Leaders—How to Effectively Lead Change includes: (1) Understanding How Change Works--The Three Phases of Personal Transitions and Their Productivity Impact; (2) Pursuing Transformational Leadership Skills--Organizational Transitions and How They Impact Productivity; and (3) Developing a Leadership Engagement Action Plan ( LEAP )

Beth Montag Schmaltz ( bmontag@hitachiconsulting.com ) is a Senior Manager and Organizational Change Competency Leader with
Hitachi Consulting.

David Williams ( dbwilliams@hitachiconsulting.com ) is a Senior Manager and Supply Chain Planning Competency Leader with Hitachi Consulting.

As Hitachi, Ltd.'s (NYSE: HIT) global consulting company, Hitachi
Consulting is a recognized leader in delivering proven business and
IT solutions. From business strategy development through application
deployment, we leverage decades of business process, vertical industry,
and technology experience to understand each company's unique needs
and to achieve sustainable ROI.

References

Sales and Operations Planning, A Cornerstone of DDSN Leadership, AMR Research, July 2005

The Heart of Change, John Kotter and Dan Cohen, Harvard Business School Publishing, 2002

 Articles

“Software disasters are often people problems”, CNN

“Crisis Leadership:  What Dr. Martin Luther King Can Teach Us About Business Change”, IBM Global Services

“Keith Yamashita Wants to Reinvent Your Company”, Fast Company

“ Helping Employees Embrace Change ”, The McKinsey Quarterly

Dr. Darrol Stanley, The Impact of Empowered Employees on Corporate Value

© 2005 Hitachi Consulting Corporation. All rights reserved. "Inspiring your next success", "Knowledge-Driven Consulting", "Information Velocity" and “Dove Consulting” are registered service marks of Hitachi Consulting Corporation.