Organizational Assessment Processes for Enterprise Transformation. Leyla Abdimomunova, Presenter LAI Web Knowledge Exchange Event December 2, 2010
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1 Organizational Processes for Enterprise Transformation Leyla Abdimomunova, Presenter LAI Web Knowledge Exchange Event December 2, 2010
2 We Share A Goal: Enterprise Excellence AMCOM
3 Outline Research Question & Key Findings Why Organizational Processes Case Studies Recommended Process
4 Research Question and Key Findings
5 Research Question Research Question How can enterprises do organizational assessment to better support enterprise transformation? Hypothesis If enterprises follow a consistent process, organizational assessment will be more effective to ultimately support enterprise transformation
6 Key Findings Improvements in Process process adjustments Gap between Actual and Desired Process Actual Process Actual Organizational Behavior process drives behavior Gap between Desired and Actual Organizational Behavior Improvements in Organizational behavior Behavior adjustments In studied enterprises, organizational assessment processes are not fully effective and efficient Desired Process goal setting Desired Organizational Behavior Main reasons Effect of organizational culture and behavior Characteristics of the tool itself Shortcomings of the prescribed implementation methodology Source: Adapted from Leonard-Barton, 1988
7 Why Organizational Processes
8 Organizational of an enterprise s current capabilities as well as for identification and prioritization of improvements needed to drive the enterprise transformation process Evolved from being based on financial (internally-focused, backward-looking) measures to multi-dimensional (external, future-looking) frameworks Includes performance measurement Deals with quantitative and qualitative measures
9 Role of Organizational Monitoring: Measuring and recording actual performance Control: Identifying and attempting to close the gap between expected performance and actual performance Improvement: Identifying critical improvement opportunities Coordination: Providing information for decision making and enabling internal communication across processes as well as external communication with stakeholders Motivation: Encouraging behavior and continuous improvemen Source: Mahidhar, 2005
10 Role of Organizational Processes is an Organizational Process Direction Get organizations moving in the right directions, align interests of diverse groups of people and harmonize goals Source of competitive advantage Arises either from a skill or capability or process design Enable organizational learning Disseminate tacit knowledge and capabilities through interactions Make resources useful Mobilize resources and bring into relationship with other resources in order to fulfill a specific function Source: Garvin, 1998; Lorino & Tarondeau, 2002
11 Impediments to 70% of attempts to implement performance measurement systems fail Two main reasons: Poor design of the measurement system Difficulties in implementation Political difficulties misuse of results Lack of infrastructure inability of collect data Loss of focus failure to complete Common mistake no follow-up action is taken on the performance data produced Source: Bourne, Neely, Mills, & Platts, 2003; Neely & Bourne, 2000
12 Existing Process Models Framework for Organizational Practical Software Measurement Phase 1 EVALUATION PREREQUISITES Objectives and Issues Technical and Management Processes User Feedback Analysis Results Phase 2 GOALS EXPLORATION Phase 3 CRITERIA DEVELOPMENT Establish and Sustain Commitment Plan Measurement Core Measurement Activities Measurement Plan New Issues Perform Measurement Phase 4 EVALUATION DESIGN Phase 5 Improvement Actions Evaluate Measurement Analysis of Results and Performance Measures EVALUATION IMPLEMENTATION Phase 6 DATA ANALYSIS, FEEDBACK AND EVALUATION Source: Van de Van & Ferry, 1980 Source: McGarry et al., 2002
13 General Process Model Prerequisites Plan Perform Act on Evaluate
14 Iterative Nature of Performing assessment periodically over time allows: Identifying trends and examining how changes in organizational and environmental conditions affect changes in performance Developing and implementing actions in areas where improvements were identified as needed Understanding impact of actions taken previously Adapting assessment to changing environment Capturing previous experience with assessment Source: McGarry et al., 2002; Van de Van & Ferry, 1980
15 Case Studies
16 Research Question Research Question How can enterprises do organizational assessment to better support enterprise transformation? Hypothesis If enterprises follow a consistent process, organizational assessment will be more effective to ultimately support enterprise transformation
17 LESAT Overview Section I. Lean Transformation/ Leadership Processes and leadership attributes nurturing the transformation to lean principles and practices Assesses current capabilities in applying enterprise principles and practices (current state) Identifies the extent to which enterprise principles and practices to be applied (desired state) Section III. Enabling Infrastructure Processes that provide and manage the resources enabling enterprise operations Section II. Life Cycle Processes Processes responsible for the product from conception through post delivery support Five capability levels starting from some awareness (Level 1) to fully deployed (Level 5) 54 practices serving as leading indicators Source: Nightingale & Mize, 2002
18 LESAT Prescribed Process Self-assessment by enterprise leadership A part of Enterprise Transformation Roadmap Continuous assessment cycle Steps: Pre-assessment preparation Performing assessment Post-assessment analysis and action planning STRATEGIC CYCLE Determine Articulate Business Case for Transformation Strategic Focus on Stakeholder Value Imperative Leverage Transformation Gains Strategic Implications of Transformation Nurture Process & Embed Enterprise Thinking Implement & Coordinate Transformation Plan Monitor & Measure the Outcomes Nurture Process, & Embed Enterprise Culture Capture & Diffuse Lessons Learned Synchronize Strategic Long-Term & Short-Term Cycles Implementation Results Develop Detailed Project Implementation Plans Synchronize Detailed Plans Provide Education & Training Implement Projects and Track Progress Commit Resources EXECUTION CYCLE Create Transformation Plan Identify Improvement for Focus Areas Determine Impact On Enterprise Performance Prioritize, Select and Sequence Project Areas Publish Communication Plan Lean Enterprise Transformation Roadmap Long-Term Corrective Action Short-Term Corrective Action Source: Nightingale, Srinivasan and Mize Updated 2/10/10 Version 004 Pursue & Sustain Enterprise Transformation Alignment Requirements Identified Convey Urgency Engage Foster Enterprise Thinking Leadership in Obtain Executive Buy-In Transformation Establish Executive Transformation Council Understand Current State PLANNING CYCLE Perform Stakeholders Analysis Analyze Processes & Interactions Perform Enterprise Maturity Assess Current Performance Measurement System Capabilities & Deficiencies Identified Envision & Design Future Enterprise A Committed Leadership Team Enterprise Vision Align Enterprise Structure and Behaviors Create Vision of Future State Architect To-Be Enterprise Value Stream Perform Gap Analysis Between Current and Future States Rationalize Systems & Policies Align Performance Measurement System Align Incentives Empower Change Agents 2010 Massachusetts Institute of Technology 1 Source: LESAT Facilitator s Guide, 2001
19 Overview of Case Studies Goal Understand how LESAT is being used and make recommendations on how to improve the process Four case studies Former or current members of LAI consortium Each enterprise used LESAT at least once Methodology Semi-structured interviews with LESAT facilitators Review of company documents Statistical analysis of LESAT scores (in one case)
20 Summary of Case Studies Case Study A Case Study B Case Study C Case Study D Enterprise Autonomous business units Autonomous business units Cross-unit functional area Multiorganizational program Mode of LESAT use On regular basis; continuing Single time; discontinued Single time; possibly continuing On regular basis; discontinued Motivation for assessment Continuous improvement Trial; cross-unit comparison Continuous improvement Customer requirement Type of assessment Managed (external) assessment Self-assessment Self-assessment Self-assessment Role of facilitator Enabler/Consultant Process facilitator Change agent Process facilitator Use of LESAT scores Input to transformation plan Analysis of scores; no follow up Input to transformation plan Tracing overall score year to year
21 Case Studies in Process View Case Study A Case Study B Case Study C Case Study D Prerequisites Performed Not performed Performed Not performed Plan Performed Performed Performed Performed, but not in full Perform Performed Performed, but not in full Performed Performed, but not in full Act on Performed Not performed Performed Performed, but not in full Evaluate Performed Not performed Performed Not performed
22 Factors Impacting Organization motivation Leadership buy-in Commitment at all levels within the organization Choice of participants Respondents bias Role of the assessment facilitator Education and training of participants
23 Recommended Process
24 Guiding Principles Shared understanding of objectives and benefits Same-level knowledge of underlying principles Frequent communication Open discussion
25 Stakeholders Respondents Scoring, discussion and analysis of assessment results Leadership Oversight, communication and continued commitment Facilitator process owner Users beneficiaries; owners of transformation plans Facilitator s responsibilities: Ensure continued leadership commitment Plan assessment process Provide training to respondents and users Organize and facilitate meetings Ensure timeliness of assessment Collate results and ensure firstlevel analysis Facilitate discussions of results and follow-up actions Carry out assessment and process Maintain contact with LAI for necessary training, advice and to ensure proper feedback and adjustments to the tool
26 Recommended Process Develop Action Plan and Prioritize Resources Action Plan Implementation Prerequisites Evaluate Results and Process Improvement Actions Plan Analyzed Results Perform Plan
27 1. Prerequisites Obtain organizational commitment Define enterprise and its boundaries Define timing of assessment Define participants' roles and responsibilities Allocate resources Review progress in implementation of action plans Develop Action Plan and Prioritize Resources Evaluate Results and Process Prerequisites Plan Perform
28 2. Plan Identify participants Determine timeline for assessment Introduce tool, assessment process and intended utilization of results Ensure understanding of LESAT practices and scoring system Develop Action Plan and Prioritize Resources Prerequisites Evaluate Results and Process Plan Perform Plan
29 3. Perform Conduct individual assessment By filling out score sheets and providing examples and commentary Collect and process results Collate results Calculate average scores, variances and gaps for each practice, section and overall Rank practices Discuss and analyze results Identify reasons for high/low scores, high variance and any outliers Develop Action Plan and Prioritize Resources Evaluate Results and Process Prerequisites Plan Analyzed Results Perform
30 4. Evaluate Results and Process Evaluate results to identify areas for improvement Select and agree on decision criteria Apply decision criteria to the assessment results Evaluate assessment process Effectiveness Timeliness Develop Action Plan and Prioritize Resources Prerequisites Efficiency Choice of participants Obstacles Evaluate Results and Process Improvement Actions Plan Perform
31 Source: Perkins et al., 2010 Example 1: Decision criteria based on current state scores and gaps
32 Source: Montoya et al., 2009; Perkins et al., 2010 Example 2: Decision criteria based on variances and gaps
33 5. Develop Action Plan and Prioritize Resources Based on the areas for improvement identified in previous stage Prioritize improvement areas and focus on select few that align strongly with enterprise strategic objectives Identify tasks and resources needed to implement improvements Prioritize tasks and resources Develop Action Plan and Prioritize Resources Action Plan Implementation Prerequisites Evaluate Results and Process Plan Perform
34 Conclusion process spans beyond performing the assessment itself Organizations must create an environment that: ensures consistent understanding of the role of the assessment in the enterprise transformation process promotes open and frequent discussion about the current state of the enterprise and future goals process must be carefully planned to ensure: its effectiveness and efficiency accuracy and reliability of the assessment results results must be analyzed and turned into specific recommendations and action plans process must be evaluated and adjusted for the next cycle of assessment
35 Recommended Process Prerequisites Obtain organizational commitment Define enterprise and its boundaries Define timing of assessment Define participants' roles and responsibilities Allocate resources Review progress in implementation of action plans Plan Plan Identify participants Determine timeline for assessment Introduce tool, assessment process and intended utilization of results Ensure understanding of LESAT practices and scoring system Perform Analyzed Results Conduct individual assessment Collect and process results Discuss and analyze results Improvement Actions Evaluate Results and Process Evaluate results to identify areas for improvement Evaluate assessment process Action Plan Implementation Develop Action Plan and Prioritize Resources Develop action plan Prioritize resources
36 Leyla Abdimomunova
37 References Bossidy, L., & Charan, R. (2002). Execution: The discipline of getting things done. Crown Business. Bourne, M., Neely, A., Mills, J., & Platts, K. (2003). Implementing performance measurement systems: a literature review. Int. J. Business Performance Management, 5 (1), Burton, R. M., & Obel, B. (2004). Strategic Organizational Diagnosis and Design: The Dynamics of Fit (3rd ed.). Kluwer Academic Publishers. Garvin, D. A. (1998). The Processes of Organization and Management. Sloan Management Review, 39 (4), Leonard-Barton, D. (1988). Implementation as mutual adaptation of technology and organization. Research Policy, 17 (5), Lorino, P., & Tarondeau, J.-C. (2002). From resources to processes in competence-based strategic management. In J. Morecroft, R. Sanchez, & A. Heene, Systems perspectives on resources, capabilities and management processes (pp ). Pergamon. Mahidhar, V. (2005). Designing the lean enterprise performance measurement system. S.M. Thesis, MIT. McGarry, J., Card, D., Jones, C., Layman, B., Clark, E., Dean, J., et al. (2002). Practical Software Measurement: Objective Information for Decision Makers. Addison-Wesley. Montoya, M., Schofield, D., Chowdhury, A., & Lehman, R. J. (2009). Lean Analysis for a Stratup Health Care Engineering Firm (Report). Cambridge, MA. Neely, A., & Bourne, M. (2000). Why Measurement Initiatives Fail. Measuring Business Excellence, 4 (4), p. 3. Nightingale, D. J., & Mize, J. H. (2002). Development of a lean enterprise transformation maturity model. Information, Knowledge, Systems Management, 3 (1), Niven, P. R. (2005). Balanced scorecard diagnostics: Maintaining maximum performance. John Wiley & Sons, Inc. Perkins, N., Abdimomunova, L., Valerdi, N., Shields, T., Nightingale, D. (2010). Insights from Organizational. Valerdi, R., Nightingale, D., Blackburn, C. (2008). Enterprises as systems: Context, boundaries, and practical implications. Information, Knowledge, Systems Management, 7 (4), Van de Ven, A. H., & Ferry, D. L. (1980). Measuring and Assessing Organizations. New York: John Wiley & Sons.
38 Back-up
39 Obtain organizational commitment Understand objectives of assessment, its benefits and intended use of results Communicate this understanding to wider enterprise leadership Gain support from wider enterprise leadership Identify and remove potential biases Benefits of LESAT Track enterprise-level progress in implementation of transformation plans Prioritize transformation tasks Track consistent view of enterprise among participants Track Lean knowledge Drive enterprise behavior Communicate assessment results to personnel as rational for behavior Enable better decision-making Motivate transformation Source: Perkins et al., 2010
40 Define enterprise boundaries Levels of enterprise: Program enterprise Multi-program enterprise International enterprise Core enterprise Seamlessly integrated entities with well articulated collaboration and partnership Extended enterprise Loosely coupled customers, suppliers, government, and entities that might have indirect influence Customers Suppliers Partners Corporation Has profit-loss or other performance accountability CORE ENTERPRISE Includes enabling processes Includes life cycle core processes EXTENDED ENTERPRISE Shareholders Unions Society Academia Source: Valerdi, Nightingale, Blackburn, 2008
41 Define timing of assessment Within planning cycle of the Enterprise Transformation Roadmap, if applicable Within strategic planning cycle, if used autonomously In any case, use iteratively STRATEGIC CYCLE Determine Articulate Business Case for Transformation Strategic Focus on Stakeholder Value Imperative Leverage Transformation Gains Strategic Implications of Transformation Monitor & Measure the Outcomes Nurture Nurture Process, & Embed Enterprise Culture Process & Embed Capture & Diffuse Lessons Enterprise Learned Thinking Synchronize Strategic Long-Term & Short-Term Cycles Implement & Coordinate Transformation Plan Lean Enterprise Transformation Roadmap Implementation Results Develop Detailed Project Implementation Plans Synchronize Detailed Plans Provide Education & Training Implement Projects and Track Progress Commit Resources EXECUTION CYCLE Create Transformation Plan Identify Improvement for Focus Areas Determine Impact On Enterprise Performance Prioritize, Select and Sequence Project Areas Publish Communication Plan Long-Term Corrective Action Short-Term Corrective Action Pursue & Sustain Enterprise Transformation Alignment Requirements Identified Convey Urgency Engage Foster Enterprise Thinking Leadership in Obtain Executive Buy-In Transformation Establish Executive Transformation Council Understand Current State PLANNING CYCLE Perform Stakeholders Analysis Analyze Processes & Interactions Perform Enterprise Maturity Assess Current Performance Measurement System Capabilities & Deficiencies Identified Envision & Design Future Enterprise A Committed Leadership Team Enterprise Vision Align Enterprise Structure and Behaviors Create Vision of Future State Architect To-Be Enterprise Value Stream Perform Gap Analysis Between Current and Future States Rationalize Systems & Policies Align Performance Measurement System Align Incentives Empower Change Agents Source: Nightingale, Srinivasan and Mize Updated 2/10/10 Version Massachusetts Institute of Technology 1
42 Allocate resources Time Staff Financial Automated assessment Review progress For the second and subsequent assessment cycles Progress in implementation of actions plans developed as result of previous cycle Progress in improvement of assessment and process as result of evaluation in previous cycle
43 Identify participants Characteristics: Enterprise-level responsibility Covering variety of life-cycle processes and functions Number of participants: Minimum 5 to allow statistical analysis (minimize statistical error) More participants will decrease error further and allow intergroup comparison If inter-group comparison is used, then minimum 5 participants in each group Maybe beneficial to use the same participants or participants with similar profiles (same responsibility, same functional role) during each assessment cycle to ensure comparability of results
44 Determine timeline Value of process = deliver timely result Establish clear deadlines and deliverables Lay out required commitment (number and length of meetings) Obtain time commitment from participants Introduction and training For users and participants Aspects of training Lean concepts and principles Role and place of assessment in transformation process LESAT practices and scoring system process Scope of assessment (enterprise boundaries) Analysis and use of results
45 Perform Analyzed Results Conduct individual assessment Collect and process results Discuss and analyze results Conduct individual assessment and discuss results within group can be performed by each participant Individually, or With a group of direct reports Ultimately, one score sheet per participant/group In case of group assessment, ultimate scores reflect consensus opinion within the group Consensus to be formed on basis of discussion Facilitator may facilitate the discussion, answer questions or provide clarification
46 Perform Analyzed Results Conduct individual assessment Collect and process results Discuss and analyze results Collect and process results Facilitator collects results from participant and collates them Initial analysis of results Average score and variance for current and desired states for each practice Gaps between current and desired state for each practice Ranking of practices based on high/low score, variance and/or gap Discuss results Facilitator presents initial analysis of results to participants For more detailed analysis, participants discuss results to identify reasons for high/ low scores, high variance and any outliers
47 Evaluate assessment results Participants agree on decision criteria based on relative distribution of scores, e.g. Current strengths: current state score > 2.5 or top 5% of current state scores Current weakness: current state score < 1.5 or bottom 5% of current state scores Take action: gap > 1.75 Need training/education: variance > 1.25 Participants discuss results based on decision criteria to identify areas for improvement Evaluate assessment process Criteria Timeliness Effectiveness Efficiency Choice of participants Obstacles Areas for improvement Any other issues
48 Develop action plan and prioritize resources Based on the areas for improvement identified in previous stage Prioritize and focus on select few that align strongly with enterprise strategic objectives Identify tasks and needed resources Prioritize tasks and resources
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