Who can answer this post for me? MGMT313 "Complex Change"

Most corporate change programs mistake means for ends, process for outcome. The solution: focus on results, not activities.

Successful Change Programs Begin with Resuits by Robert H. Schaffer and Harvey A. Thomson

The performance improve- ment efforts of many eompanies have as much impact on opera- tional and financial results as a ceremonial rain dance has on the weather. While some companies constantly im- prove measurable performance, in many others, managers eontinue to dance round and round the campfire - exuding faith and dissipating energy.

This "rain danee" is the ardent pursuit of activi- ties that sound good, look good, and allow managers to feel good-hut in fact contribute little or nothing to bottom-line performance. These activities, many of whieh parade under the banner of "total quality" or "continuous improvement," typically advance a managerial philosophy or style such as interfunc- tional collaboration, middle management empow- erment, or employee involvement. Some focus on measurement of performance such as competitive benehmarking, assessment of customer satisfae- tion, or statistical process controls. Still other aetivi- ties aim at training employees in problem solving or other techniques.

Companies introduce these programs under the false assumption that if they carry out enough of the "right" improvement aetivities, actual performance improvements will inevitably materialize. At the heart of these programs, which we call "aetivity cen- tered, " is a fundamentally flawed logic that confuses

ends with means, proeesses with outcomes. This logic is based on the belief that once managers henehmark their eompany's performance against competition, assess their customers' expectations, and train their employees in seven-step problem solving, sales will increase, inventory will shrink, and quality will improve. Staff experts and consul- tants tell management that it need not - in fact should not - focus directly on improving results be- cause eventually results will take eare of themselves.

The momentum for activity-centered programs continues to accelerate even though there is virtual- ly no evidenee to justify the flood of investment. Just the opposite: there is plenty of evidence that the re- wards from these activities are illusory.

Robert H. Schaffer and Harvey A. Tbom.son are principals of the management consulting firm, Robert H. Schaffer o) Associates in Stamford, Connecticut and Toronto, On- tario, respectively. This is Mr. Schaffer's fifth HBR article. In 1988, Harper Business published his book. The Break- through Strategy: Using Short-Term Successes to Build the High-Performance Organization. Mr. Thomson was previously associate professor of management at McGill University in Montreal.

80 DRAWINGS BY MICHAEL WITTE

Most improvement efforts have as much impact on company performance as a rain dance has on the weather.

In 1988, for example, one of the largest U.S. finan- cial institutions committed itself to a "total quality" program to improve operational performance and win customer loyalty. The company trained hun- dreds of people and communicated the program's in- tent to thousands more. At the end of two years of costly effort, the program's consultants summarized progress: "Forty-eight teams up and running. Two eompleted Quality Improvement Stories. Morale of employees regarding the process is very positive to date." They did not report any hottom-line perfor- mance improvements - hecause there were none.

The exeeutive vice president of a large mineral- extracting corporation deserihed the results of his company's three-year-old total quality program by stating, "We have accomplished about 50% of our training goals and about 50% of our employee par- ticipation goals hut only about 5% of our results goals." And he considered those results meritorious.

Tbese are not isolated examples. In a 1991 survey of more than 300 eleetronies eompanies, sponsored by the American Eleetronies Assoeiation, 73% of the companies reported having a total quality pro- gram under way,- but of these, 63% had failed to im-

HARVARD BUSINESS REVIEW lanuary-Fcbruary i992

prove quality defects hy even as much as 10%. We believe this survey understates the magnitude of the failure of activity-centered programs not only in the quality-conscious electronics industry hut across all businesses.

A1991 survey of over 300 " electronics companies found 63% had failed to innprove

K quality defects by 10%.

These signs suggest a tragedy in the making: pursuing the present course, companies will not achieve significant progress in their overall competi- tiveness. They will continue to spend vast resources on a variety of activities, only to wateh cynicism grow in the ranks. And eventually, management will discard many potentially useful improvement pro- cesses because it expected the impossible of them and came up empty-handed.

If activity-centered programs bave yielded such paltry returns on the investment, why are so many

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companies continuing to pour money and energy into them? For the same reason that previous gen- erations of management invested in zero-based hudgeting, Theory Z, and quality circles. Years of

Results-driven programs bypass lengthy preparations and aim for quiok, measurable gains within a few months.

frustrating attempts to keep pace with fast-moving competitors make managers prey to almost any plausible approaeh. And the faet that hundreds of membership associations, professional societies, and consulting firms all promote activity-centered processes lends them an aura of popularity and legit- imacy. As a consequence, many senior managers have become convinced that all of these preparatory activities really will pay off some day and that there isn't a viable alternative.

They are wrong on hoth counts. Any payoffs from the infusion of activities will be meager at best. And there is in fact an alternative: results-driven im- provement processes that focus on achieving specif- ic, measurable operational improvements within a few months. This means increased yields, reduced delivery time, increased inventory turns, improved customer satisfaction, reduced product development time. With results-driven improvements, a company introduces only those innovations in management methods and business processes tbat can belp achieve specific goals. (See the insert, "Comparing Improvement Efforts.")

An automotive-parts plant, whose customers were turning away from it because of poor quali- ty and late deliveries, illustrates the difference he- twcen the two approaches. To solve the company's prohlems, management launched weekly employee- involvement team meetings focused on improving quality. By the end of six months, the teams had gen- erated hundreds of suggestions and abundant good- will in the plant but virtually no improvement in quality or delivery.

In a switch to a results-driven approach, man- agement concentrated on one production line. The plant superintendent asked the manager of that line to work with his employees and with plant engineer- ing to reduce by 30% the frequency of their most prevalent defect within two months. This sharply fo- cused goal was reached on time. The manager and his team next agreed to cut the occurrence of that

same defect by an additional 50%. They also broad- ened the effort to encompass other kinds of defects on the line. Plant management later extended the process to other production lines, and within about four months the plant's scrap rate was within bud- geted limits.

Both activity-centered and re suits-driven strate- gies aim to strengthen fundamental corporate com- petitiveness. But as the automotive-parts plant il- lustrates, the approaches differ dramatically. The activities path is littered with the remains of endless preparatory investments that failed to yield the de- sired outcomes. The results-driven path stakes out specific targets and matches resources, tools, and ac- tion plans to the requirements of reaching those tar- gets. As a consequence, managers know what they are trying to achieve, how and when it should be done, and how it can be evaluated.

The Activity-Centered Faiiacy

Tbere are six reasons wby the cards are stacked against activity-centered improvement programs:

1. Not Keyed to Specific Results. In activity-cen- tered programs, managers reform the way they work with each other and with employees; they train peo- ple,- they develop new measurement schemes; they increase employee awareness of customer attitudes, quality, and more. The expectation is that these steps will lead to hetter husiness performance. But managers rarely make explicit how the activity is supposed to lead to the result.

Seeking to improve quality, senior management at a large telecommunications equipment corporation sent a number of unit managers to quality training workshops. When they returned, the unit heads or- dered orientation sessions for middle management. They also selected and trained facilitators who, in tum, trained hundreds of supervisors and operators in statistical process control. But senior manage- ment never specified which performance parameters it wanted to improve-costs, reject rates, delivery timeliness. During the following year, some units improved perfonnance along some dimensions, oth- er units improved along others, and still other units saw no improvement at all. There was no way for management to assess whether there was any con- nection between tbe investment in training and specific, tangible results.

2. Too Large Scale and Diffused. The difficulty of connecting activities to the bottom line is compli- cated by the fact that most companies choose to launch a vast array of activities simultaneously

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Comparing Improvement Efforts while activity-centered programs and resxilts-driven programs share some common methodologies for initiating change, they differ in very dramatic ways.

Activity-Centered Programs 1. The improvement effort is defined mainly in long-

term, global terms. ("We are going to be viewed as num- ber one in quality in our industry.")

Results-Driven Programs 1. There are measurable short-term performance im-

provement goals, even though the effort is a long-term, sustaining one. ("Within 60 days, we will be paying 95% of claims within 10 days.") I

2. Management takes action steps because they are "correct" and fit the program's philosophy. ("I want every manager in the division involved in an action.")

2. Management takes action steps because they ap- pear to lead directly toward some improved results. |"Let's put together a small group to work with you to solve this machine downtime problem.")

3. The program's champion(s) counsels patience and fortitude. ["Don't be looking for results this year or next year. This is a long-term process, not a quick fix.")

3. The mood is one of impatience. Management wants to see results now, even though the change pro- cess is a long-term commitment. ("Ii we can't elimi- nate at least half of the cost disadvantage within the next three months, we should consider closing the plant.")

4. Staff experts and consultants indoctrinate every- one into the mystique and vocabulary of the program. ("It will be a Tower of Babel if we try to work on these problems before everyone, managers and employees alike, has heen through the quality training and has a common vocabulary and a common tool kit.")

4. Staff experts and consultants help managers achieve results, ("We could probably work up a way to measure customer attitudes on delivery service within a week or two so that you can start improving it.")

5. Staff experts and consultants urge managere and employees to have faith in the approach and to sup- port it. ("True employee involvement will take a lot of time and a lot oE effort, and though it may be a real struggle for managers, they need to understand that it is essential to become a total quality company.")

5. Managers and employees are encouraged to make certain for themselves that the approach actually yields results. ("Why don't you send a few of your people to the quality course to test out whether it really helps them achieve their improvement goals in the next month or two.")

6. The process requires management to make big in- vestments up front-before results have been demon- strated. ("During tbe first year, we expect to concen- trate on awareness building and skill training. Then, while managers begin to diagnose problems and oppor- tunities in their areas, a consultant will be surveying all of our customers to get their views on the 14 critical dimensions of service. And then..."]

6. Relatively little investment is needed to get the process started; conviction builds as results material- ize. ("Let's see if this approach can belp us increase sales of high-end products in a couple of hranches. If it does, we can take the method to tbe otber branches.")

across the entire organization. This is like research- ing a cure for a disease by giving a group of patients ten different new drugs at the same time.

In one case, a large international manufacturer identified almost 50 different activities that it want- ed built into its total quality effort. The company's list involved so many programs introduced in so

HARVARD BUSINESS REVIEW January-February 1992 ,

many places that just to describe them all required a complex chart. Once top managers had made the investment and the public commitment, however, they "proved" their wisdom hy crediting the pro- grams for virtually any competitive gain the compa- ny made. But in fact, no one knew for sure which, if any, of the 50 activities were actually working.

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One company identified so many activities in so many places, it required a complex chart just to describe them.

3. Results Is a Four-Letter Word. When activity- centered programs fail to produce improvement in financial and operational performance, managers seldom complain lest they he accused of preoccupa- tion with the short term at the expense of the long term - the very sin that has supposedly caused com- panies to defer investment in capital and human re- sources and thus to lose their competitive edge. It is a brave manager who will insist on seeing a demon- strable link between the proposed investment and tangible payoffs in the short term.

When one company had little to show for the mil- lions of dollars it invested in improvement activities, the ehief operations officer rationalized, "You can't expect to overturn 50 years of culture in just a eouple of years." And he urged his management team to persevere in its pursuit of the aetivities.

He is not alone in his faith that, given enough time, aetivlty-centered efforts will pay off. The eompany cited ahove, with almost 50 improvement aetivities going at once, published with pride its program's t i m e t a b l e calling for three years of preparations and reformations, with major results expected only in the fourth year. And at a large electronics company, the manual explaining its management-empowerment process warned that implementation could he "painful" and that man- agement should not expect to see results for a "longtime."

4. Delusional Measurements. Having conveyed the false message that activities will inevitahly pro- duce results, the activities promoters compound the crime hy equating measures of activities with actual improvements in performance. Companies proclaim their quality programs with the same pride with whieh they would proclaim real performance im- provements-ignoring or perhaps even unaware of the significance of the differenee.

In a leading U.S. corporation, we found that a group of quality facilitators could not enumerate the critical business goals of their units. Surprised, we asked how they eould possibly assess whether or not they were successful. Their answer: success consisted of getting 100% of eaeh unit's managers and employees to attend the prescribed quality training-a centerpiece of the corporation's total quality program.

The Malcolm Baldrige National Quality Award encourages such practices hy devoting only 180 points out of a possible 1,000 points to quality re- sults. The award gives high marks to companies that demonstrate outstanding quality processes without always demanding that the current products and services he equally outstanding.

5. Staff- and Consultant-Driven. The focus on ac- tivities as ends in themselves is exacerbated hy the fact that improvement programs are usually de- signed hy staff specialists, external consultants, or other experts, rather than hy operating managers. In many cases, managers seek this outside help he- cause they have exhausted their own ideas ahout im- provement. So when staff experts and improvement gurus show up with their evangelistic enthusiasm and bright promises of total quality and continuous improvement, asking only for faith and funds, man- agers greet them with open arms.

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But the capability of most of these improvement experts is limited to installing discrete, often generic packages of activities that are rarely aimed directly at specific results. They design training eourses; they launch self-direeted teams; they create new quality-measurement systems; they organize cam- paigns to win the Baldrige Award. Senior managers plunge wholeheartedly into these activities, reliev- ing themselves, momentarily at least, of the burden of actually having to improve performance.

The automotive-parts plant described earlier il- lustrates the pattern. Senior managers had hecome very frustrated after a numher of teehnical solutions failed to cure the plant's ills. When a staff group then asserted that employee involvement could produce results, management quickly accepted the staff group's suggestion to initiate employee- involvement team meetings - meetings that failed to deliver results.

The futility of expecting staff-driven programs to yield performance improvement was highlighted in a study conducted by a Harvard Business School team headed by Michael Beer. It analyzed a number of large-scale corporate change programs, some of wbich had succeeded, others of which had failed. The study found that companywide ehange pro-

"Success" at one company consisted of getting 100% of each unit's ennployees to attend a quaiity training progrann.

grams installed by staff groups did not lead to suc- cessful transformation. As the authors colorfully put it, "Wave after wave of programs rolled across the landscape with little positive impact."

6. Bias to Orthodoxy, Not Empiricism. Because of the absence of clear-cut beginnings and ends and an inability to link cause and effect, there is virtually no opportunity in aetivity-centered improvement programs to leam useful lessons and apply them to future programs. Instead, as in any approach hased on faith rather than evidenee, the advocates-con- vinced they already know all the answers - merely urge more dedieation to the "right" steps.

One m a n u f a c t u r i n g company, for example, launched almost 100 quality iniprovement teams as a way to "get people involved." These teams produced scores of recommendations for process

1. See Michael Beet, Russell A. Eisenstat, and Bert Spector, "Why Change Programs Don't Produce Change," HBR November-December 1990, p. 1.S8.

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changes. The result was stacks of work orders piling up in maintenance, production engineering, and sys- tems departments - more than any of these groups were capable of responding to. Senior managers, however, believed the outpouring of suggestions re- inforced their original conviction that participation would succeed. Ignoring mounting evidence that the process was actually counterproductive, they de- termined to get even more teams established.

Results-Driven Transformation

In stark contrast to activity-centered programs, results-driven improvements bypass lengthy prepa- ration rituals and aim at accomplishing measur- able gains rapidly. Consider the case of the Morgan Bank. When told that his units would have to com- pete on an equal footing with outside vendors, the senior vice president of the bank's administrative services (responsible for 20 serviee functions in- cluding printing, food services, and purchasing) re- alized that the keys to survival were better service and lower eosts. To launch a response, he asked the head of each of the service functions to select one or two service-improvement goals that were important to internal "customers" and could be aehieved quickly. Unit heads participated in several work- shops and worked with consultants but always maintained a clear focus on launching the improve- ment processes that would enable tbem to achieve their goals.

In the bank's microfilm department, for example, the first goal was to meet consistently a 24-bour turnaround deadline for the work of a stock-transfer department. The microfilm department had fre- quently missed this deadline, sometimes hy several days. The three shift supervisors and their manager laid out a five-week plan to accomplish the goal. They introduced a numher of work-proeess inno- vations, each selected on the basis of its capacity to help aehieve tbe 24-hour turnaround goal, and tracked performance improvements daily.

This project, together with similar results-driven projects simultaneously carried out in the otber 19 units, yielded signifieant serviee improvements and several million dollars of cost savings within the first year of the initiative-just about the time it usually takes to design the training programs and get all employees trained in a typical activity- centered effort. The experience of the Morgan Bank illustrates four key benefits of a results-driven approach that activity-centered programs general- ly miss:

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1. Companies introduce managerial and process innovations only as they are needed. Results-driven projects require managers to prioritize carefully the innovations they want to employ to achieve targeted goals. Managers introduce modifications in manage- ment style, work methods, goal setting, information systems, and customer relationships in a just-in- time mode when the change appears capable of speeding progress toward measurable goals. Con- trast this with activity-eentered programs, where all employees may be ritualistieally sent off for training because it is the "right" thing to do.

In tbe Morgan Bank's microfilm department proj- eet, tbe three shift supervisors worked together as a unified team - not to enhance teamwork hut to fig- ure out how to reduce eustomer delivery time. For the first time ever, they jointly created a detailed im- provement work plan and week-by-week subgoals. They posted this work plan next to a chart showing daily performance. Employees on all three shifts actively participated in the project, offering sugges- tions for process changes, receiving essential train- ing that was immediately applied, and taking re- sponsibility for implementation.

Thus instead of making massive investments to infuse the organization with a hodgepodge of im- provement activities, the microfilm department and each of the other administrative services introduced innovations incrementally, in support of specific performanee goals.

2. Empirical testing reveals what works. Because management introduces each managerial and pro- cess innovation sequentially and links them to short-term goals, it ean discover fairly quiekly the extent to which eacb approach yields results. In the Morgan Bank's mierofilm department, for example, the creation of a detailed improvement work plan and week-by-week suhgoals - whieh were introduced during the first two weeks of tbe program-enabled

Employees need to experienoe success in their improvennent progronns - it buiids confidence and sl<iiis tor continued incrementai innprovennents.L

management to assess accurately and quickly the impact of its actions in meeting the 24-hour turn- around goal.

New procedures for communicating between shifts allowed management to anticipate workload

peaks and to reassign personnel from one shift to an- other. That innovation contributed to meeting dead- lines. A new numbering system to identify the con- tainers of work from different departments did not contribute, and management quickly abandoned the innovation. By constantly assessing how eaeh im- provement step contrihuted to meeting deadlines, management made performance improvement less an act of faith and more an act of rational decision making based on evidence.

3. Frequent reinforcement energizes the improve- ment process. There is no motivator more powerful than frequent suecesses. By replacing large-scale, amorphous improvement objectives witb short- term, incremental projects that quickly yield tangi- ble results, managers and employees can enjoy tbe psychological fruits of success. Demonstrating to themselves their capaeity to succeed not only pro- vides necessary reinforcement but also builds man- agement's eonfidence and skill for continued incre- mental improvements.

The manager of the bank's microfilm department, for example, had never had the experience of leading a significant upgrading of performance. It was not easy for her to launch the process in tbe faee of em- ployee skeptieism. Within a few weeks, however, when the chart on the wall showed the number of missed deadlines going down, everyone took plea- sure in seeing it, and work went forward with re- newed vigor. The manager's eonfidence grew and so did employee support for the subsequent changes she implemented.

In another example, a division of Motorola wanted to accelerate new product development. To get start- ed, a management team selected two mucb-delayed mobile two-way radios and focused on bringing these produets to the market within 90 days. R)r each prod- uct, the team created a unified, multifunction work plan; appointed a single manager to oversee the entire development proeess as the product moved from de- partment to department; and designated an interfunc- tional team to monitor progress. Witb these and other innovations, botb radios were launched on time. This success encouraged management to extend the inno- vations to other new product projects and eventually to the entire product development process.

4. Management creates a continuous learning pro- cess by building on the lessons of previous phases in designing the next phase of the program. Both activity-centered and results-driven programs are ultimately aimed at producing fundamental shifts in the performance of tbe organization. But unlike activity-centered programs that focus on sweeping cultural changes, large-scale training programs, and massive proeess irmovation, results-driven pro-

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grams begin by identifying the most urgently needed performance improvements and carving off incremental goals to achieve quickly.

By using each incremental project as a testing ground for new ways of managing, measuring, and organizing for results, management gradually cre- ates a foundation of experience on whicb to build an organization-wide performance improvement. Once the manager of Morgan's microfilm department suc- ceeded in meeting the 24-hour turnaround goal for one internal customer department, she extended the process to other customer departments.

In each of the otber 19 service units, the same ex- pansion was taking place. Unit managers shared their experiences in formal review conferences so that everyone could henefit from the best practices. Witbin six months, every manager and supervisor in administrative services was actively leading one or more improvement projects. From a hase of real re- sults, managers were able to encourage a eontinuous improvement process to spread, and they introduced dozens of managerial innovations in tbe course of achieving sizable performance gains.

Putting the ideas into Practice

Taking advantage of the power of results-driven improvements calls for a subtle but profound shift in mind-set: management begins by identifying the performance improvements that are most urgently needed and then, instead of studying and preparing and gearing up and delaying, sets about at once to acbieve some measurable progress in a sbort time.

The Eddystone Generating Station of Philadelphia Electric, once the world's most efficient fossil-fuel plant, illustrates the successful shift from aetivity- centered to results-driven improvement. As Eddy- stone approached its thirtieth anniversary, its ther- mal efficieney - the amount of electricity produced from each ton of coal humed - had declined signifi- cantly. Tbe problem was serious enough that top management was beginning to question the plant's eontinued operation.

The station's engineers bad initiated many correc- tive actions, including installing a state-of-the-art computerized system to monitor furnaee efficieney, upgrading plant equipment and materials, and devel- oping written proeedures for helping operating staff run the plant more effieiently. But because the inno- vations were not built into the day-to-day operating routine of tbe plant, thermal efficiency tended to de- teriorate when the engineers tumed their attention elsewhere.

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In September 1990, tbe superintendent of opera- tions decided to take a results-driven approacb to improve thermal efficiency. He and his management team eommitted to aehieve a speeifie incremental improvement of thermal effieieney worth about $500,000 annually-without any additional plant investment. To get started, they identified a few improvements that they could accomplish with- in three months and established teams to tackle eacb one.

A five-person team of operators and maintenance employees and one supervisor took responsibility for redueing steam loss from hundreds of steam valves throughout the plant. The team members started by eliminating all the leaks in one area of tbe plant. Then they moved on to other areas. In the proeess, tbey invented improvements in valve- packing practices and devised new methods for re- porting leaks.

Anotber employee team was assigned the task of reducing heat that escaped through openings in the huge furnaces. For its first subprojeet, tbe group en- sured tbat ail 96 inspeetion doors on the furnace walls were operable and were closed when not in use. Still another team, tbis one committed to re- ducing the amount of unbumed earbon that passed through the fumace, began by improving the operat- ing effectiveness of the station's eoal-pulverizer mills in order to improve the carhon burn rate.

Management charged each of these cross-func- tional teams not merely with studying and rec- ommending but also with producing measurable results in a methodical, step-by-step fashion. A steering committee of station managers met every two weeks to review progress and help overcome ob- stacles. A variety of communication mechanisms built awareness of the projeet and its progress. For example, to launeb the process, the steering com- mittee piled two tons of coal in the station manag- er's parking space to dramatize the hourly cost of poor thermal effieieney. In a series of "town meet- ings" with all employees, managers explained the reason for the effort and how it would work. Newsletters reviewed progress on the projects-in- cluding the savings realized-and credited employ- ees who bad eontributed to the effort.

As eacb team reached its goal, the steering com- mittee, in eonsultation with supervisors and em- ployees, identified the next series of performance improvement goals, such as the reduction of the plant's own energy eonsumption, and commis- sioned a number of teams and individuals to imple- ment a new round of projeets. By the end of the first year, efficiency improvements were saving the com- pany over $1 million a year, double the original goal.

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At a power station, two tons of coal dntnpred in the manager's parking space dramatized poor thermal efficiency.

Beyond the monetary gains-gains achieved witb negligible investment-Eddystone's organizational structure began to change in profound ways. What had been a hierarchical, tradition-bound organiza- tion became more flexible and open to change. Set- ting and aehieving amhitious short-term goals be- came part of tbe plant's regular routine as managers pushed decisions further and further down into the organization. Eventually, the station manager dis- banded the steering committee, and now everyone who manages improvement projects reports direetly to the senior management team.

Eddystone managers and workers at all levels con- tinue to experiment and have invented a number of highly creative efficiency-improving processes. A change so profound could never have happened by sending all employees to team training classes and then tolling them, "Now you are empowered; go to it."

In the course of accomplishing its results, Eddy- stone management introduced many of the tech- niques that promoters of activity-centered programs insist must be drilled into the organization for months or years hefore gains can he expeeted: em- ployees received training in various analytical tech- niques; team-building exereises helped teams achieve their goals more quickly; teams introduced new performance measurements as they were need- ed; and managers analyzed and redesigned work pro- cesses. But unlike activity-centered programs, the results-driven work teams introduced innovations only if tbey eould contribute to the realization of short-term goals. They did not inject innovations wholesale in the hope that they would somehow generate better results. There was never any douht that responsibility for results was in the hands of ac- countable managers.

Philadelphia Electric-and many other companies as well - launebed its results-driven improvement process with a few modest pilot projects. Companies

that want to launch large-scale change, however, can employ a results-driven approach across a broad front, ln 1988, chairman John F. Weleb, Jr. launched General Electric's "Work-Out" proeess across the entire corporation. The purpose was to overcome bu- reaueracy and eliminate business procedures that interfered with customer responsiveness. The re- sponse of GE's $3 billion Lighting Business illus- trates how such a large-scale improvement process can follow a results-driven pathway.

Working sessions attended by a large cross-section of Lighting einployees, a key feature of Work-Out, identified a number of "quick wins" in target areas. These were initiatives that employees could take right away to generate measurable improvement in a short time. To speed new product development, for example, Work-Out participants recommend- ed that five separate functional review sessions be combined into one, a suggestion that was eagerly adopted. To get products to customers more quickly, a team tested the idea of working with customers and a trucking company to schedule, in advance, regular delivery days for eertain eustomers. The re- sults of the initial pilot were so successful that GE Lighting has extended the scheduling system to hundreds of customers.

Another team worked to reduce the breakage of fragile products during shipment-costly both in direct dollars and in eustomer dissatisfaction. Sub- teams, created to investigate package design and shipping-pallet construction, followed sample ship- ments from beginning to end and asked eustomers for their ideas. Within weeks, the team members had enough information to shift to remedial action. They tried many innovations in the packaging design; they modified work processes in high-risk areas; they re- duced the number of times eaeh product is handled; they eoUaborated with their shippers, suppliers, and customers. The payoff was a significant reduction in breakage within a few months. '

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CHANGE PROGRAMS

The Lighting Business has launched dozens of such results-oriented projects quickly - and as each project achieves results, management has launched additional projeets and has even extended the pro- cess to its European operations.

Opportunities for Change

There is no reason for senior-level managers to acquiesce when their people plead that they are al- ready accomplishing just about all that ean be ac- complished or tbat faetors beyond their control- company policy, missing technology, or lack of re- sources-are blocking accelerated performance im- provement. Such self-limiting ideas are universal. Instead, management needs to recognize that there is an abundance of both underexploited eapability and dissipated resources in the organization.

This orientation frees managers to set about trans- lating potential into results and to avoid the cul-de- sac of fixing up and reforming the organization in preparation for future progress. Here is how manage- ment can get started in re suits-driven programs:

1. Ask each unit to set and achieve a few ambitious short-term performance goals. There is no organiza- tion where management could not start to improve performanee quickly with the resources at hand - even in the face of attitudinal and skill deficiencies, personnel and other resource limitations, unstable market conditions, and every other conceivable ob- stacle. To begin with, managers can ask unit heads to commit to achieve in a short time some improve- ment targets, sueh as faster turnaround time in re- sponding to customers, lower costs, increased sales, or improved cash flow. They sbould also be asked to test some managerial, process, or teehnical innova- tions that can help them reach their goals.

2. Periodically review progress, capture the essen- tial learning, and reformulate strategy. Results-driv- en improvement is an empirical process in which managers use the experience of each phase as data for shaping tbe next phase. In scheduled work ses- sions, senior management should review and evalu- ate progress on the current array of results-focused projects and learn what is and what isn't working.

Fresh insights flood in from these early experi- ments: how rapidly project teams ean make gains; what kind of support they need; what cbanges in work methods they can implement quiekly; what kinds of ohstacles need to be addressed at higher lev- els in the organization. Managers and employees de- velop confidence in their capacity to get things done and to challenge and overturn obsolete practices.

HARVARD BUSINESS REVIEW January-February 1991

Armed with this learning, senior management ean refine strategies and timetables and, in consulta- tion with their people, can carve out the next round of business goals. The cyele repeats and expands as confidence and momentum grow.

3. Institutionalize the changes that work-and discard the rest. As management gains experience, it can take steps to institutionalize the practices and technologies that contrihute most to performance improvement and build those into the infrastructure of the company. In Motorola's Mobile Division, for example, in its new product development project, a single manager was assigned responsibility for mov- ing eacb new product from engineering to produc- tion and to delivery, as opposed to having this re- sponsibility handed off from function to function. This worked so well it became standard practice.

Sueh ehange can also take place at the policy level. A petroleum company, for example, experimented with incentive compensation in two sales districts. When the trials produced higher sales growth, senior management decided to install throughout the mar- keting function a performanee-based compensation plan that refleeted wbat it had learned in the experi- ments. In this way, a company can gradually build successful innovations into its operations and dis- card unsuccessful ones before they do much harm.

4. Create the context and identify the crucial business challenges. Senior management must es- tablish the broader framework to guide eontinuing performance improvement in the form of strategic directions for tbe business and a "vision" of how it will operate in the future. A creative vision can be a source of inspiration and motivation for managers and employees who are heing asked to belp bring about change. But no matter how imaginative the vision might be, for it to contribute to aecelerated progress, managers must translate it into sharp and eompelling expectations for short-term performance achievements. At Philadelphia Electric, for example, the Eddystone improvement work responded to top management's insistent call for performance im- provement and cost reduction.

A results-driven improvement process does not relieve senior management of the responsibility to make tbe difficult strategic decisions necessary for the company's survival and prosperity. General Elec- tric's Work-Out process augmented but could never substitute for Jack Welch's dramatic restructuring and downsizing moves. By marrying long-term strate- gic objectives with sbort-term improvement projects, however, management can translate strategie direc- tion into reality and resist the temptation to incul- cate the rain dance of activity-centered programs. ^ Reprint 92rO8