CONGRESO DE EXCELENCIA EN LA GESTIÓN EN LAS ADMINISTRACIONES PÚBLICAS. Q EPEA (June 3 4, 2010) Business Excellence, The Philips Way

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1 Introduction: The Public Sector is not different from the Private Sector in the sense that for achieving success, leadership, the competence of people in the organization and their empowerment are the key factors in both types of organization. The elements that motivate people to be engaged, make them love what they are doing, feel good when they have success and are recognized, are similar in both sectors. Where the private industry is faced with ever changing, difficult to predict market conditions, the public sector is faced with political changes, and the challenge to continuously align the professional administration with the political priorities. The conclusion is that comparing between Public and Private sector organisations, how people are managed, which improvement approaches are used and how progress is achieved can be very interesting and a learning experience for both. Therefore it has been a great idea to arrange for input from a well known and successful private company like Philips in a congress for the Public Sector. This paper is a summary of my Philips presentation and is focused on the learning points as I see them. Philips Vision, Mission and people A key factor for success is that Philips is recognizing important trends in society, how it can contribute to the needs of that society, while utilizing its existing technological strengths and where needed by developing new competences. For any organization leadership needs to provided a sound vision, mission and goals, which are well disseminated to all employees of that organization. This is valid for Private as well as Public sector organisations. Pag.

2 Philips defined: we are a global company of leading businesses creating value with meaningful innovations that improve people s health and well-being. Health and well-being A commitment to healthy, fulfilled lives in our communities and societies our world Meaningful innovations Improving people s lives Going beyond technology Introduced at the right time III CONGRESO DE EXCELENCIA Hans van Beek The mission, as formulated, has to be recognized by all stakeholders, and in particular by the customers and the employees. Measuring employee engagement provides opportunities to check how well leadership is recognized as role models, and how clearly the strategic goals of the organization have been explained to employees and how well they understand how they can contribute to these goals in their own jobs. We feel that it s our customers who pay our salaries in the same way as the salaries in the Public sector are paid by the citizens as tax payers. The ultimate measure of customer satisfaction is to check if they recommend our products and services to others. This is called the Net Promotor Score (NPS). Close customer relationships Creating promoters of our brand Philips people Strong leadership, a highly engaged workforce III CONGRESO DE EXCELENCIA Hans van Beek Customer loyalty is fundamental to growth and profitability. We win the trust of customers and partners by understanding and anticipating their needs by sharing our insights by providing the right products and solutions We monitor our effectiveness with the Net Promoter Score based on a simple question: would you recommend us to a friend or colleague? Employee Engagement Index High performance benchmark III CONGRESO DE EXCELENCIA Hans van Beek (target) A strong leadership team 60 culturally diverse top leaders focus on driving our global businesses to reach their short and long term goals. A high performance workforce The annual employee engagement index polling over 90,000 of the Philips workforce is touching the high performance benchmark of the 3rd party agency managing the survey. Living the values Philips has four simple values which live within the company and drive the actions of our people. An eye on the leaders of tomorrow We structurally manage our talent, offering fasttrack, stretch opportunities for top performers to ensure a quality succession pipeline for our leadership team. The Philips Quality Journey It is interesting to look at the Philips quality journey in the last decades. The quality programs have been developing from rather internally oriented, product and service focused programs to an approach that includes all stakeholders and is visibly led by top leaders. The slide below can be very useful as a reference to check the maturity of anyone s quality program in the Private as well as in the Public Sector. Experience shows that an organization may be quite mature on some aspects in a Pag. 2

3 column but not on other items in the same column. This may guide organizations where to focus attention in its quality approach. Evolution of Quality Management in Philips Name CWQI Philips Quality BEST Our way to business excellence Focus Internal Customers All stakeholders Quality of Products & Processes & Competence Improvement teams Functional & cross-functional & total value chain Relation to strategy Separate Parallel Implementation Managers.. Delegate Support Lead 2 In Philips we noticed that it was important to brand the quality approach by using a consistent well designed styling in all communication materials regarding Business Excellence through Speed and Teamwork (BEST) as seen above. How to involve all employees In order not to keep the quality program on the management tables only, but to involve the entire population of employees we started the Business Improvement Competition (BIC). Employees from all disciplines are empowered to form teams and taken on improvement projects that support achieving the goals of their organization. Team leaders get trained in problem solving and LEAN concepts. Successful teams get recognized by senior management. No monetary awards, but recognition events are organized in attractive cities for the teams and include a leisure and sightseeing day. Pag. 3

4 Teamwork: Business Improvement Competition ) Engage people to start improvement projects 2) Share knowledge & encourage people to work in a structured way 3) Achieve great team results and make a difference 4) CL management in the jury 5) Make improvement fun 6) Recognition of great results 2 The BEST Management Process To help communicate what we wanted to achieve we introduced the Desired State concept. It is used to clarify what excellence means in terms of management processes. How well we do this is measured on basis of the EFQM Model. Business Excellence: our desired state The BEST Management Process Excellence maturity Excellence: Sustainable excellent performance for all stakeholders Based on the PBE Model Excellence Lead and Prioritize and Organize and Assess and Direct Deploy Execute Review BEST: How we improve business performance time How leaders set direction and objectives How we break objectives down into actionable pieces How teams execute the work using appropriate tools Supported by BEST quality tools How all of us evaluate and learn Different quality tools are used for each of the 4 phases of the management process to measure and improve. In the first phase, Lead and Direct it becomes apparent that having a vision, mission and setting goals is crucial to get started. The Process Concept The EFQM Model itself, although highly valuable for organizations with an already quite mature quality approach, is not how we run the business. We run the business and deliver to customers by Pag. 4

5 means of processes. At different levels in the company teams have listed their top 0 2 processes, process owners and the teams that run the process. Enabler map PBE criteria corresponding to business processes (Example) PBE Business Process Areas Ownership Team/Platform Enablers Results Management processes Primary processes Leadership / Governance CEO Exec.Committee (7a) 2 Strategy Planning & Review Business Strategist Exec.Committee 2 9a,b 3 Marketing CMO Marketing Board (2a,b) (6a,b) 4 Research & Development CTO Innovation Board 4d, 5c, (4e) (6a, 9a, b) 5 Purchasing & Supply Mgt. CPO Purchasing Board 6 Manufacturing Industrial Mgr Industrial Board 4a, c, 5d (6a, 9a, b) 7 Supply Chain Management SCM SCM Meeting 8 (International) Key Account Mgt. / Sales / Service CMO Marketing Board 5e 6a,b Supporting processes 9 Finance CFO Controllers Meeting 4b (9a,b) 0 Human Resource Mgt. HR Mgr HRM Meeting 3 Inform. & Comm. Techn. IT Mgr IT Meeting 4e (9b) 2 Business Exc Mgt. / Quality BE Mgr BEM Meeting 5a,b (6b) 3 Sustainability CSO Sustainability Board (4a,c,d) 8a,b These processes have sub processes that in a similar way have owners. A good example that also applies for the Public Sector would be the top level Human Resource Management Process. Owned by the HR Director in a management team. The HR director has a HR department in which sub processes like recruitment, hiring, training, remuneration etc can be seen as the sub processes. Each of the process has performance measures and targets, which are in the personal performance agreements of the process owners. Desired States Processes get benchmarked internally and externally. Yet we wanted to trigger the thought that to be real expert and leader in some of these processes, being as good as the best in class isn t good enough. We asked process owners to define together with their teams so called Desired Sates for their processes. Short statements (less that ½ A4 page) that would describe what they see as world class and how they measure progress towards the Desired Sate. Pag. 5

6 Desired State as basis for self assessment Desired States Our standards: Where are we relative to where we want to be as a business? Desired State concept triggers, management to express their ambition for the business in the language of the business Business Targets On plan performance Basic requirement Defines what is understood by business excellence in the context of the particular business environment Facilitates use and deployment of the PBE model Facilitates identification of Business Drivers Triggers the need for outward looking and customer insight Challenges a critical view on existing KPI s Time horizon 2-4 years Benchmark Industry Leader, Best in Class Used to learn & set goals & targets Desired State Our definition of Excellence Our on-going ambition 3 3 Philips has made it s Process Survey Tools (PST s) available to EFQM for use by members. These tools help teams to self assess the maturity of their process and provide guidance how to achieve worldclass processes. Link Processes to Strategy Most organizations have strategy reviews where strategic objectives for the business, but perhaps also for the Public office are defined. The trouble comes with execution of the objectives. Is the strategy going to be delivered? The process approach must be linked with the outcome of the strategic reviews by asking the question: Are our processes fit enough to deliver on the strategic challenges? An example: when some of our electronics businesses had to make the transition from analog technology to the digital era. To make this happen, special efforts were needed in the training and development processes. Pag. 6

7 Business strategy drives process excellence Strategic review Strategic objectives Objective A Objective B Objective C Deliver strategy Process-DS PBE-SA Improvement initiatives _ 2 Self and Peer assessments The approaches as mentioned above have been subject to self assessments in business units but also in the administrative organizations. The standardization of the approaches has facilitated to set up Peer Assessments. Business and Quality managers from business unit A may visit business unit B for a peer assessment. As both groups applied the same approaches they kind of speak the same language and learn both from these events. When we abandoned the scoring as part of these peer assessments the value became even more significant. If a business wants to get a score we recommend arranging an EFQM assessment. The sequence is that organizations prepare and list the top level processes (sometimes also called Process Areas ), and define the Desired States and performance indicators. This is done only once with slight updates every year. After several self assessments are performed during 2 years supported by some simple formats, peer teams are brought in to provide new ideas and constructive feedback. Ultimately some of the business applied for the European Excellence Award at EFQM. Pag. 7

8 PBE workflow Preparation Process Areas 2 Desired States & KPI s Self Assessment 3 Process Area Self Assessments 4 Holistic View Peer Review 5 Organization & Documentation 6 Review Day Building ownership and operational fit to your business A process of defining and agreeing 2. Policy & Strategy How the organization implements its mission and vision via a clear stakeholder focused strategy, supported by relevant policies, plans, objectives, targets and processes. Criterion Part Desired State Approaches-Key Processes Process Perf. measure 2a 2b Policy and Strategy are based on the present and future needs and expectations of stakeholders. Policy and Strategy are based on information from performance measurements, research, learning and creativity related activities We understand the needs & expectations of our stakeholders. Our Policies & Strategies are designed to exceed customer, employee, partner & shareholder expectations We are a learning organization. Systematic review of our Business performance combined with analysis of the environments in which we operate, shapes & focuses the content of our Policies & Strategies Business Planning & Review Process Market Analysis Customer requirement/satisfaction research EMS Barrel meetings SBM process Business Planning & Review Process PBE self-assessments & Peer Audits PST self-assessment & calibration SWOT analysis in strategic plan explicitly refers to expectations of stakeholders. Ambition is formulated to exceed them. BBSC guides agenda of Business performance review meetings. Issues & Strategies are checked with history and based on SWOT Learning from PBE is part of strategic plan and bus. reviews III CONGRESO DE EXCELENCIA Hans van Beek Done at successive layers in the organization to fit their specific processes 3 In-process measures to monitor progress Peer assessments are conducted in one day. In preparation the hosting business team to be assessed indicates their 3 strongest points which they are very proud of, and the 3 point they struggle with. This way a peer assessment team can be arranged that brings with it the necessary expertise to further maximize the value of the discussions. They don t assess the entire Model, but the Results critera and critirea and 2 are mandatory. In the morning parallel interviews are conducted by the Pag. 8

9 assessors whereby at the end of each interview the assessor summarizes his/her conclusions from the interview already with the interviewees. At lunchtime the interviewed people and the management get together to exchange information, and the assessing team gets together in another room to prepare the agenda for the afternoon with the entire management team. At the end of the day the general manager gives a presentation about his/her learning and takeaways from the day for the assessors and his own team. Key characteristics of the Peer Review Details for one assessment day Used to provide an external view on the business. Focus is on specific themes, the level of excellence and the improvement process. Intro parallel session parallel session 2 C C Review Team shapes key questions Workshop with MT and Review Team MT P Host organization determines the specific themes (also derived from PD or higher management) parallel s. 3 C parallel s. 4 C Carefully selected peer reviewers based on managerial experience, knowledge of the key themes, the PBE model and RADAR. 8:00 2:00 3:00 7:00 One day, owned by the assessed team, no scoring! The spirit of the review process is joint learning and business improvement. C MT P Consolidation Presentation by MT 2 2 Relation with ISO Already since the early 990 ies Philips had all its units ISO 900 certified. Often the question was asked: How do the ISO 900, ISO 4000 and other certification standards relate to the Philips Business Excellence approach? As example the specifics for ISO 900 with the areas that overlap are reflected below. I often got the question if Business Excellence and ISO audits can be integrated. In my view it is not practical to do this because of the difference in characteristics and purpose. ISO requires compliance auditing, while Business Excellence assesses a level of maturity. The qualifications of the auditors/ assessors are also different. Pag. 9

10 Focus of ISO9000 audits PBE ISO A C B - Stakeholders other than customers - Leadership / management commitment - Documentation - Public responsibility - Results orientation towards specific - People development and involvement - Management by processes and data (facts) - Continuous improvement and learning - Management of resources - Development of suppliers and other partnerships - Control of documents and records - Management Review - Internal Audits - Corrective / preventive targets and positive trends actions - Mandatory procedures PBE is leading Quality Management System There is overlap between PBE and ISO9000 With mature PBE: ISO9000 will focus on B area and will accept PBE results of C area 39 Philips Learning Over the years of managing the BEST program and deployment of the EFQM Model in all our organizations worldwide we have taken care that senior managers have stayed involved all the time e.g. by having them to participate in peer assessments. The pitfall in larger organisations is that the quality approach becomes a program of the Quality Managers themselves and looses its connection with the real business. Keeping the program as lean and simple as possible, assuring that it is perceived by the business managers as a program that is not bureaucratic, requires little resource and visibly supports them in achieving their business objectives are key conditions to sustain it. For this reason, and as the experience with the quality approaches in the organization grew we were able to simplify the program. We moved from 3 day assessments and the 75 page Application Documents as were used in EFQM assessments in the past too, to one day assessments based on information that already exists in the organizations to be assessed. Managing change Pag. 0

11 I see a changing role for the Quality Managers in which they much more than in the past are involved in the managment of change. Not by managing all change projects by themselves, but by providing transparency for the MT which projects are running, how they are linked to the strategic goals, and what the progress status is in a uniform way. (Cockpit type of reporting). Quality Managers help the project managers in the reporting and prepare proposals for priorities and solutions in case of too many projects and resource issues. These approaches fit very well with the overall Philips promise of Sense and Simplicity. Colleagues in the company continuously challenge each other with the question if solutions, for technical, process, procedural and other issues can be made simpler all the time. 40 Hans van Beek Former Global Business Excellence Leader Royal Philips Electronics. Pag.