Align Projects with Strategic Objectives

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1 GET MORE OUT OF YOUR BUSINESS IMPROVEMENT INITIATIVES Achieve annual and longer-term objectives by maintaining strong connections between LeanSigma improvement projects and business strategies. Executive Summary More and more companies are using policy deployment a management tactic that s also known as strategy deployment, hoshin kanri or hoshin planning to keep change and process improvement activities aligned with strategic objectives. Achieving business targets depends in large part on how well policy deployment itself is executed across multiple businesses, sites and teams. As this management briefing describes, companies that maintain a strong linkage between projects and objectives are more likely to make business changes that contribute to both cost savings and revenue growth year after year. The extent of that contribution depends on how well projects are executed at all levels. By Anand Sharma asharma@tbmcg.com Bill Remy bremy@tbmcg.com Ken Koenemann kkoenemann@tbmcg.com

2 1 Leadership, at its heart, is largely about recognizing the need for change, determining what kind of change is necessary, and pushing the organization in that direction. Strategic planning processes determine the direction. But as grueling as such planning sessions can be, that s the easy part. Execution requires a dayto-day and week-to-week focus that is difficult for any organization to maintain, which only becomes more difficult as business size and complexity increase. Effective execution boils down to three primary management roles: 1. Make sure the organization is working on projects and process improvements that will have the greatest impact realizing the strategic objectives. 2. Ensure that changes are implemented and institutionalized, with minimal backsliding. 3. Understand the leverage points and effectively convert process changes into financial results, for example, by closing facilities to reduce fixed costs, or using the newfound capacity to boost sales. Projects are the best reflection of management s true intent Cathleen Benko and F. Warren McFarlan argue in their book, Connecting the Dots 1, that most companies fail to capture the full value of their projects, and do a poor job of connecting projects to the organization s top priorities. Individually, each project may appear to be adding value to the organization, they write, But when projects are examined together, a different picture emerges. Some may be working at cross-purposes, others may be needlessly duplicating each other, still other projects may be aiming to meet outmoded objectives but all are competing for scarce resources. This unintended disorder in a company s project portfolio consumes valuable time and energy, leaves good money on the table, and fails to provision the organization for the future. 2 The solution and path to greater investment returns, Benko and McFarlan argue, is a stronger alignment between a company s objectives and its project portfolio. This portfolio is the truest measure of organizational intent. It s where strategy and plans become reality. It is the manifestation of what a company is doing and where it is going. It s where investments are made and resources are allocated. This management briefing describes how to align business improvement projects with strategic business objectives by using policy deployment, a strategy execution tactic also known as strategy deployment, hoshin kanri or hoshin planning. As companies have struggled to keep pace with globalization, non-stop market changes and new technology information technology especially the project management profession has exploded. For proof we need look no further than the number of project management professionals (PMP) certified by the Project Management Institute (PMI), which has grown from less than 10,000 in 1998 to more than 400,000 today.

3 But even if a company hires experienced project managers that doesn t mean that it will capture the maximum returns from its project-driven initiatives. That s because the connection between most projects and strategic objectives is not well articulated. According to a survey conducted by PMI, while most project managers believe the projects they re working on have some kind of strategic intent, only one out of four has seen or heard a clear strategic connection, either in writing or verbally. 3 Not only that, half of project managers report that projects are determined by individual stakeholders or other informal methods, or that they don t know exactly how their organization prioritizes projects. Maintaining a line-of-sight connection between projects and objectives 2 This is where policy deployment comes in. Policy deployment helps leadership team members create a detailed action plan for achieving the strategic objectives, agree on the key performance indicators and assign individual responsibility. It also establishes a process and disciplined set of checks for monitoring projects and progress. Leadership teams can take a lot of time discussing their five-year strategic plans and talking about the vision. But they don t get into the details on how to execute that vision, says Sheri Nemeth, a senior management consultant for TBM. As the

4 3 corporate director for the Danaher Business System, Nemeth led an internal consulting team focused on rapid integration of new acquisitions. People always walk away from those planning sessions with different perceptions on what it will take to achieve the vision. With everyone having their own thoughts on how to accomplish the plans, you quickly run into resource and timing issues. What one manager thinks is important isn t important to someone else, and vice versa. So you have a lot of conflict, she adds. After the strategic plan is established, the policy deployment process pulls all of the business leaders together to discuss and agree on the three to five key breakthrough processes that they re collectively going to work on and support during the next year. These tend to be cross-functional processes that require support on multiple levels. This consensus-building exercise makes the often difficult structural changes that will be required to realize the strategic vision clear to everyone. Everyone agrees that the breakthrough objectives are important. And everyone agrees to provide resources and make them a priority so there s no misunderstanding in the organization on exactly how to move forward. The power of policy deployment is in that alignment, Nemeth said. Policy deployment prioritizes projects and connects them to the strategic plan. Absent such an alignment process, projects tend to proliferate based on immediate issues, often with tenuous links to longer-term objectives. Embedded in the policy deployment process are a number of elements that help maintain and reinforce business alignment. These include an emphasis on breakthrough objectives, killing pet projects that divert resources away from more pressing priorities, identification and tracking of a limited number of key performance metrics, and monitoring progress so countermeasures can be taken as quickly as possible. A case in point Graphic Packaging International, a $4.1 billion manufacturer of product packaging, started its formal continuous improvement push in 2001 with the adoption of Six Sigma. The expert-led, projectbased methodology supported the vertically integrated company s efforts to continually reduce costs. That cost reduction mindset remains thoroughly embedded in the organization, according to Phil Geminder, V.P. of Graphic Business Systems. His CI team supports 58 company facilities. In 2006 they added lean methodologies to their portfolio of tools, primarily to engage more employees directly in the effort to improve business performance. We embraced LeanSigma after management determined that there was a need for cultural change and that we needed to get the entire organization aligned instead of operating in silos, recalls Geminder. Two years after introducing the lean tools, in conjunction with a major acquisition, Graphic Packaging began using policy deployment to more clearly articulate the company vision and values, and develop a more sustainable CI strategy. This includes an actively managed improvement project pool that maintains the links between corporate KPIs and plant level activity. Policy deployment supports Graphic s ability to execute at the plant and business unit level, he added. You can have a great strategy and plan, but if you don t execute you haven t gone anywhere.

5 Anand Sharma, the President and Chief Executive Officer at TBM Consulting Group and the company co-founder, has worked with hundreds of the leading businesses around the globe for more than 40 years to implement and leverage a lean business system as an effective strategy for achieving and sustaining profitable growth. He worked with many of the clients featured in Lean Thinking by James P. Womack and Daniel T. Jones (Free Press 1996) and is author of two industry leading books. He is regularly sought out by national media for his opinions on business and new economy and is a frequent speaker at key conferences. Bill Remy, a Senior Vice President at TBM Consulting Group, has over 25 years of leadership experience in business management and manufacturing operations. He specializes in operational performance improvement through LeanSigma deployment in manufacturing operations, supply chain, product development and project management across various industries. Today, he is responsible for developing and growing TBM s Asia-Pacific business and helps North American companies expand and build strong operations abroad. Ken Koenemann, a Vice President at TBM Consulting Group, has over 20 years of leadership experience in manufacturing and supply chain operations. He specializes in operational performance improvement through LeanSigma deployment in manufacturing, supply chain and project management across various industries. He also specializes in rapid deployment of improvement initiatives in private equity and public owned companies. He is frequently published, quoted in the national media and is a speaker at key industry and supply chain conferences. 4 Sources 1 Benko, Cathleen and McFarlan, F. Warren, Connecting the Dots: Aligning Projects With Objectives in Unpredictable Times (Harvard Business School Press, 2003). 2 Ibid, Preface, ix. 3 Unleashing Organizational Potential through People and Projects, Insights Learning & Development and Project Management Institute (2009).

6 Dploy Solutions Accelerated Policy Deployment Dploy Solutions by TBM Consulting Group is a web-based system for managing policy deployment. It helps managers focus, monitor, measure and sustain improvement results by providing a global, real-time view of progress across the entire organization. It drives visibility and accountability by helping leaders prioritize objectives, focus on projects that will make a meaningful impact, and quickly identify and initiate root-cause analysis and countermeasure actions when progress isn t being made. Dploy Solutions includes modules for translating strategy into projects, Dploy Strategy, managing metrics, Dploy KPI, and capturing and sharing best practices, Dploy Knowledge. The newest release, Dploy Alignment, simplifies the process of managing continuous improvement activities and clearly links projects to strategic objectives and KPIs. It helps standardize performance data across the organization; simplifies the management of daily, weekly or monthly results; and improves visibility and accountability at all organizational levels. 5 For more information and a demonstration of Dploy, contact TBM at TBM Consulting Group Headquartered in Durham, NC, TBM Consulting Group is the leading provider of LeanSigma Consulting and Training Services in North and South America, Europe and Asia. With more than 150 experienced consultants operating on five continents in seven languages across the globe, TBM has grown to be the worldwide leader in lean innovation and business improvement in the manufacturing and service sectors. The company s mission is to help manufacturers and service companies create a competitive advantage to generate significant growth in sales and earnings. The company provides strategic direction and hands-on implementation to guide cultural and organizational transformation. TBM Consulting Group s LeanSigma approach integrates lean principles for market agility and responsiveness and Six Sigma s focus on quality. For more information, visit TBM Consulting Group, Inc Ben Franklin Blvd. Durham, NC Find us on OUR BLOG The Dploy Solutions logo, LeanSigma, TBM and the TBM logo are registered trademarks of TBM Consulting Group, Inc.