Leading change management requires sticking to the PLOT - PLOT: A framework for implementing change
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
PLOT: A framework for
implementing change
Leading change management
requires sticking to the PLOT
By Todd Senturia, Lori Flees, and Manny MacedaTodd Senturia and Lori Flees are partners at Bain & Company in Los Angeles. Manny Maceda is a Bain partner in San Francisco and manages the firm’s Asia-Pacific region. Copyright © 2008 Bain & Company, Inc. All rights reserved. Editorial team: John Case, David Diamond, Elaine Cummings Layout: Global Design
PLOT: A framework for implementing change
Leading change Trouble is, not enough do. People have been
writing about change management for decades
management requires and still the statistics haven’t improved. With
sticking to the PLOT each survey, 70 percent of change initiatives
still fail—and the world is getting more com-
plicated. By analyzing in great detail more
When Idris Jala was hired as CEO to turn-
than a dozen major change programs across
around Malaysia Airlines (MAS) in December
industries and geographies, we’ve identified
2005, the troubled carrier had about three
the common principles and core elements
months’ worth of cash left in its coffers. In the
that leaders use to mobilize successful change
26 months since he joined MAS, the carrier
programs, keep them on track, and ultimate-
has reported four consecutive profitable quar-
ly deliver fully against their financial and
ters and earned almost $265 billion in 2007—
strategic goals.
five times what it originally projected.
There’s no single, perfect answer for leaders
In leading the dramatic turnaround of Malaysia’s
pursuing such results from change initiatives.
national airline, Jala implemented a change
Instead, success requires taking some very
management program with all of the elements
commonsensical steps. But leaders typically
we’ve identified as critical for quickly deliver-
trip up by not applying a systematic, rigorous,
ing sustainable change. It is the same method-
self-reinforcing approach to taking those
ology that Sol Trujillo is deploying in a far more
obvious steps. We’ve codified the required
complex endeavor, the transformation of Telstra,
steps within the four basic elements of an
Australia’s huge telecommunications company.
approach we call PLOT: Plan, Lead, Operate,
We have found that when executives master
and Track. (See figure 1.)
change, they can do it again and again, and they
can do it in almost any company or industry.
Figure 1: Some of the best managers PLOT their own story for successful change
PLAN LEAD
• Define point of departure • Fire up the troops
and arrival • Find your champions
• Spell out key action imperatives • Build a culture that supports change
and initiatives
TRACK OPERATE
• Measure performance • Launch initiatives, rack up quick
• Act on the results wins, celebrate
• Raise the bar • Hold people accountable, make
tough decisions
• Put explicit cues in place
1PLOT: A framework for implementing change
In a nutshell, the PLOT framework calls for half the airline’s routes to Europe and Latin
leaders to identify the sources of value and America were profitable. The point of arrival:
then focus on a few areas for improvement: financial survival in 2006, profit generation
get the right people in place quickly and rally in 2007, and profitable growth in 2008.
the troops around milestones; make sure the
tough calls are made; and rigorously track Many CEOs and change leaders give short
progress. This might sound obvious, but it’s shrift to the Plan stage, perhaps because it
not easy—the change program statistics rein- can be difficult. To truly assess their starting
force how hard it is. While failing to address point, they must peer into the depths of the
any of the individual components within the organization to identify bottlenecks and other
four elements of the PLOT system can be sources of underperformance. They must
problematic, there are a few especially dam- quantify in detail the value that they think
aging mistakes that management teams are they can realize through specific initiatives—
prone to make in addressing complex change. so much from improvements in the sales
Getting off track has particularly negative process, so much from production efficien-
consequences, because not only does it create cies, so much from IT platform consolida-
a tangible problem (impairing program results) tion, and on and on. Then they must step
but also a signaling problem (impairing pro- back and assess the company’s position in
gram credibility). In many cases, the combi- the marketplace, so that they can map out a
nation of the two problems creates a negative strategy for taking on competitors. Planning
cycle that builds upon itself and ultimately at this level essentially involves taking
derails even the most carefully designed hard stock of where you are financially and
change program. competitively and “following the money:”
mapping the value chain from start to finish
Plan: Zeroing in on the drivers and assessing points where revenue or profits
of change are leaking to the competition.
In the PLOT approach, planning is the first
It’s not magic to predict that a plan based on
stage. It involves cutting through the com-
faulty underlying assumptions will likely fail.
plexity to identify only the most important
Yet too many leaders, aware that they are
drivers of change. It involves determining
underperforming in some way, don’t ade-
the company’s point of departure, defining
quately understand why. They struggle to set
its point of arrival—what constitutes success,
direction for change because their true point
in other words—and mapping the journey
of departure is unclear. In our recent assess-
from one to the other. The airline Jala inher-
ment of over 100 strategy and performance
ited was plagued with high fuel and labor
improvement projects at companies spanning
costs and mounting regional competition. It
a variety of industries, more than 80 percent
had lost RM 1.3 billion (US$35 million) in the
on average had failed to adequately under-
last nine months of 2005. As part of the Plan
stand what was hindering their performance.
phase, Jala diagnosed the starting point. He
Even among industry market share leaders,
found—among other ills—that the airline
more than three quarters lacked critical data
was losing money by discounting prices, not
around the gaps in their strategic and opera-
charging for excess baggage, and holding
tional capabilities.
onto unprofitable routes. In fact, less than
2PLOT: A framework for implementing change
The most frequently cited knowledge gaps initiatives. The reasons for this oversight:
related to leaders misunderstanding their leaders often underestimate the true magni-
companies’ true cost position, underestimat- tude of people involvement and financial
ing the cycle times required for competitive investment required to get traction in a
product development, and lacking customer major change initiative, and, as funding typi-
insight. To make good strategic decisions, cally comes out of current budgets and earn-
leaders need a clear diagnosis of their “point ing targets, they try to get by with limited
of departure”—a detailed, executable fact spending or partial staff allocations. By not
base related to each of these areas. “over-investing” in what has been identified
as a critical priority, management signals to
Another common root cause of failure at this all that change may not be that important
stage occurs when leaders resist providing after all. The under-allocation of resources
adequate resources for the most critical change then causes the tangible problem—initiatives
When change occurs, so does failure to tackle such issues could derail the
the need to escalate decisions bestlaid change management plans. To avoid
such a fate, the company established a detailed
The effort to reorganize a large European procedure for quickly escalating decisions to
insurance group involved a radical organiza a higher authority. Instead of allowing account
tional redesign that tightened management, ability conflicts over such things as changeof
combined operations and product offers, and address authority to slowly filter up to senior
put in place new accountabilities designed to management, the project team opted to send
make the most of the company’s scale and them first to the steering committee for the
knowledge. But like many organizations in reorganization, and then, if they could not be
transition, the company faced a lingering resolved, they would quickly be sent to the
challenge. Because one cannot predict every executive board for a swift and final call. That
possible conflict among managers attempt meant committing critical boardmember time.
ing to clarify redefined roles in a new regime, At the same time, the executive team estab
the company found it also needed a system lished tight timeframes for decisions, aiming to
for escalating decisions as conflicts emerged. finalize decisions within a week to keep the
A single example of an unexpected conflict: momentum for change high.
managers competed over who held respons
ibility for policyholders’ change of address. For the most part, decisions that were escalat
It sounds insignificant, but the building insur ed to the board during the change process
ance side of the business needed it for under were decisions where it was unclear who had
writing risks, whereas the customer service the authority—the result of implementing a
center saw potential to reduce costs by tak new way of working. As the transition pro
ing over the function. gressed, such decisions became fewer in num
ber. Once decisionmaking authority was clear
When organizations attempt dramatic change, ly established for those lower down in the
tensions are high, and the decisions being organization, fewer conflicts needed to be
made often run counter to the fabric of the elevated to the top.
existing institution. The company realized that
3PLOT: A framework for implementing change
make less progress than desired. Visible lack pressure and a high degree of public visibili-
of progress in turn signals to all that the pro- ty, he made the right level of resources avail-
gram is, in fact, failing, and the negative able to meet such aggressive milestones as
cycle builds upon itself. the rollout of national 3G+ service—a move
that took competitors by surprise.
A major industrial conglomerate’s change
effort involved pursuing synergies in pur- Lead: Putting the right people
chasing across its business units. In the in charge
hopes of transforming purchasing, the com-
The Lead stage of the PLOT approach
pany created a centralized sourcing function.
brings people into the equation: putting the
But management failed to adequately supply
right people in the right roles with the right
people and capabilities. Rather than going
accountabilities, creating a structure that will
outside for talent, the company borrowed
make change happen, communicating the
people from various business units on a part-
roadmap clearly and simply, and then rally-
time basis, and it failed to invest in the scale
ing the troops around milestones. Too often,
required for an effective centralized sourcing
companies put the wrong people in critical
team. It also didn’t fully transfer sourcing
change management leadership roles. As
decision power over to the centralized team.
companies are typically reluctant to pluck
This not only impeded the change effort but
strong general managers from their day jobs,
signaled that the initiative was not serious
they will often delegate change program lead-
enough to merit a competitive outside search
ership to an HR or Finance functional expert.
and a scale team with full decision-making
CEOs justify the choice because they mistak-
authority. It was not until the CEO opted to
enly view the role solely as one of “communi-
fully resource the center and give it ultimate
cation” or of “scorekeeping and administra-
decision power that the central group was
tion” rather than recognizing the true gener-
able to communicate its importance and
al management challenge of mobilizing and
deliver the benefits at an acceptable pace
leading a transformation. Again, these deci-
and magnitude.
sions have compounding negative effects:
negative signaling because the nominated
Sol Trujillo avoided such a temporary derail-
leader is not viewed as sufficiently senior,
ment when he took over Telstra. Australia’s
much less a peer, by the line managers run-
leading telecommunications company couldn’t
ning the business; and then insufficient
seem to deal effectively with its legacy land-
progress because the leader is, in fact, inef-
line business, let alone take on nimble new
fective in driving the complex change through
competitors. A 30-year veteran of the indus-
the organization. The lack of progress—again
try, Trujillo had been CEO of US West (now
obvious to all—once again compounds the
part of Qwest Communications) and the big
negative cycle.
French telecommunications company Orange,
and had led massive change efforts at both.
We saw this oversight at a leading Asia-Pacific
In Australia, he launched a program that has
consumer goods manufacturer. The firm’s
put Telstra on a path to dramatically improve
CEO chose as its change program leader an
market performance and financial results
end-of-career senior finance executive who
within three years. As in his previous turn-
was not viewed by the business unit heads as
arounds, Trujillo laid out his vision and
a general manager peer. Not only was he not
despite tremendous financial performance
respected as a peer, but the individual lacked
4PLOT: A framework for implementing change
the people skills to navigate conflicts between establishes detailed milestones on the way
business unit heads trying to run their day-to- to the point of arrival. The Lead phase focuses
day business and business unit initiative on communicating these milestones to the
leads trying to make changes. In this case, the troops and motivating them to achieve each one.
change plan was right, the initiatives were
right, the program design was right—but the To create milestones and mobilize the troops
individual leading the charge was wrong. As a around them, Jala held so-called “laborato-
result, the program ground to a halt until the ries”—intense, prolonged think sessions
CEO realized he made a people error and involving key managers and (when neces-
brought in a replacement—a GM from one sary) outsiders. Here the objective was to
of the growth businesses in the portfolio. come up with plans to achieve critical inter-
im goals. For example, one of the company’s
For his part, Trujillo began the Lead phase of chief objectives was to improve its cash posi-
his transformation of Telstra by appointing tion. The laboratory team broke down the
as Chief Operations Officer Greg Winn, a projected improvement by activity—sales of
trusted right-hand man from previous turn- specific assets, better borrowing terms, so
arounds who would head the transformation. much more revenue per passenger, and so
Winn had the clout and resources to ensure on—and assigned responsibility for each one.
the right moves were made. Trujillo also estab-
lished a Program Office to guide the change Trujillo was just as aggressive about commu-
effort and to keep it on track, just as he had nicating Telstra’s milestones and rallying his
done at the two other companies he had re- teams. In fact, “Telstra’s Transformation,” as
suscitated. A program office, he says, is “a the company dubbed the three- to five-year
key discipline and tool for me and the sen- process, was an elaborate series of mile-
ior leadership team,” a way of ensuring stones, both big and small. Telstra would roll
that senior management remains focused out national 3G+ service. It would expand
on the big picture. He installed Stuart Lee, a broadband coverage and broaden products,
high-impact senior executive into the Program applications, and service available. It would
Office leadership role. Lee reports to Greg create a new wireline network offering better
Winn. Trujillo also created change teams value and better service. All these big-picture
to lead individual initiatives, staffing them initiatives were tied to precise timetables.
with up-and-coming leaders ready for new Internally, the company mapped out plans
challenges. He brought in new executives for simplifying the IT systems, reducing its
from outside Telstra, moving only two exec- operational platforms by 75 percent in three
utives out of the prior senior team. He also years and 80 percent in five years. It would
pulled managers up from two or three lev- sell off a specific portion of Telstra’s property
els below in the organization and moved portfolio. It would increase ADSL capacity,
people within his management team to expand its mobile coverage, and establish a
positions better matched to their capabilities. “learning academy” to train people in next-
generation technologies. These milestones
With the right people in the right places, the gave people a context for understanding the
other major challenge in the Lead phase of a pace of change. When things began to hap-
change initiative is rallying the organization pen, they knew where each new development
around milestones. Note the way the ele- fit in the bigger picture.
ments reinforce each other. The Plan phase
5PLOT: A framework for implementing change
The creation of milestones was critically tions are what people most often overlook,
important for Telstra because of the compa- and, once again, the signaling problem is
ny’s political and economic visibility, and reinforced by the tangible problem—a lack
because the turnaround necessarily entailed of progress in the areas influenced by the non-
taking financial hits—with predictable effects contributor. Once the leadership has “blinked”
on the stock price—along the way. Trujillo on a key conflict, others opposed to the change
was able to predict the financial impact of become more likely to obstruct as well, put-
each program milestone so that the public, ting the entire effort at risk.
employees, and shareholders could follow
the progress. In August 2006, for instance, Consider the case of a large consumer prod-
when the company announced a 26 percent ucts company trying to implement a major
drop in net profit, one news report said that productivity improvement program. The co-
“calls are growing for the company’s chief heads of new product development and R&D
executive officer Sol Trujillo to be sacked.” In consistently blocked efforts to get project-
response, Trujillo could point to the fact that level productivity metrics in place. As a result,
he had predicted a profit decline and that the the company fell dramatically short of achiev-
investments the company was making in the ing the benefits identified in the perform-
turnaround were on track, as evidenced by ance improvement diagnostic. When the
the achievement of specific milestones. CEO finally realized the two executives were
failing to follow the change program, he
Operate: Making the moved one of the individuals out of his role
tough choices and gave the survivor such clear direction
on expectations that the productivity efforts
The Operate step revolves around decision-
finally gained traction.
making. Leaders need to make difficult, often
unpopular decisions based on what we call
Making tough choices is at the heart of the
the discipline of data, with objective, verifi-
Operate step. For Telstra, the task is made
able information. And for a change effort to
more challenging because of the intense
stay on track, people must hold one another
public scrutiny. Fortunately, the company has
rigorously accountable, not so that wrong
been able to make the right decisions backed
decisions can be punished but so that every-
by strong Program Office leadership, regular
one can learn from mistakes. But here too,
communication from Trujillo, and the deci-
leaders often fail to make the tough people
sion to link incentives to the achievement of
calls. The reason: a basic failure to realize the
specific milestones.
signaling impact of allowing exceptions and
not “backing the play.” For example, they’ll The Operate phase of the PLOT method-
hesitate to over-rule or remove a leader who ology requires a systematic approach to
is resistant to change, because he’s popular or keeping people accountable—not so that
perhaps because he has 25 years of institu- wrong decisions can be punished but so that
tional knowledge in a critical area. But if that everyone can learn from mistakes. At MAS’s
maverick impedes progress, the act of keep- monthly management meetings, managers
ing him in place signals to people that must describe what they have done to improve
management is not truly serious about the the P&Ls they are responsible for. “You don’t
change. As in the three other elements of have one guy saying, ‘You know, I haven’t
implementing change, the signaling implica- done anything.’ His colleagues will ask him
6PLOT: A framework for implementing change
why,” explained Jala. His plan spelled out in Track: The need to monitor
detail the anticipated effect of every move on progress—and adjust
the profit-and-loss statement. But he pushed
A change program will wither unless man-
the logic beyond the ordinary. Every single
agement implements a means of tracking
route has a profit-and-loss statement, and a
progress and adjusting the plan as necessary.
manager responsible for overseeing that
In the track step, organizations measure a
P&L. “Once you start to personalize the
small number of key indicators, reward
P&L,” says Jala, “you transfer accountabilities
relentlessly, and celebrate success. And if
down the line. You get many, many people
progress hasn’t materialized, the company
who act like CEOs in the company. So it’s
needs a system for making adjustments at
not just the fellow at the top who doesn’t
regular intervals. Typically, there needs to
sleep at night.”
be a systematic review of progress every two
By monitoring progress, MAS was able to weeks to two months.
see the tactical moves that were needed to
Here one common way leaders go off track is
engineer the turnaround. The airline cut its
by not taking the final steps required to cap-
routes, slashed in-flight and maintenance
ture the benefits of a major change effort.
costs, and improved its revenue picture for
For example, if you take out cost you have to
both passengers and cargo. It began a volun-
shrink budgets accordingly, and you have to
tary severance program aimed at reducing its
ratchet up key performance indicator targets.
headcount by approximately 3,000. “We only
Leaders hesitate in taking this final step for a
focus on activities that have big financial
range of reasons, from “it’s too hard or will
impact. If an activity doesn’t improve the
take too much effort to measure” to “reduc-
P&L, we don’t do it,” he said.
ing the budget will cause other groups to
Figure 2: Your point of departure may not be what you think
Companies surveyed that have an inadequate understanding of their key gaps (by percent)
Market share leaders 78%
Other companies 86%
Average 82%
Most frequently cited gap areas at companies surveyed (by percent)
High Slow to Limited Missing
cost market customer products
insight or features
Market share leaders 53% 45% 45% 47%
Other companies 56% 42% 44% 49%
Average 55% 44% 44% 48%
Source: Bain study of 100 strategy and performance improvment projects
7PLOT: A framework for implementing change
hide their progress so that they don’t risk working. In the 22 months since Jala joined
losing budgets in the future.” Ultimately, MAS, the carrier has reported four consecu-
when leaders fail to insist on measuring and tive profitable quarters—and has earned
capturing the benefit in a transparent and nearly five times its original profit projec-
consistent manner—even when it is diffi- tions for the entire year of 2007.
cult—they signal a lack of confidence in the
results, and a willingness to compromise At Telstra, each department or unit tracks
the pursuit of lasting change. progress on its milestones. Trujillo and the
senior team watch the company’s perform-
Once the Asia-Pacific consumer goods com- ance relative to competitors, particularly
pany installed a competent program office where new businesses such as 3G+ are con-
leader it was finally able to generate savings cerned. Trujillo also watches the overall cost
through centralized procurement and other picture to see if costs as a percentage of rev-
cross-business productivity initiatives. But enue were on track relative to plan.
the company found that the business unit
heads—traditionally the most powerful Asked last fall for evidence that his strategy
“barons” in the system—didn’t believe those was working, Trujillo said, “Number one,
projected savings would flow through to their we’re taking market share. Number two,
profit-and-loss statements. So they refused to we’re winning on the businesses where we
reduce their budget submissions accordingly. know we have to win.” Indeed, at its November
As a result, there was no overall P&L benefit. 2007 investor meeting Telstra listed the
Ultimately, corporate finance had to adopt an many achievements of its turnaround effort,
aggressive stance in support of the program— starting with building the world’s fastest
both by investing the effort required to add national 3G+ wireless network in just ten
additional line-item granularity to relevant months and becoming Australia’s 3G+ mar-
budget categories, and then by simply sub- ket leader, raising 3G+ share from zero per-
tracting what they believed were the savings cent to 44 percent in two years in a four-play-
from each business unit, and publishing er market. Another major accomplishment:
revised budgets as the new goal. bucking the global trend of rapid declines in
fixed lines by actually delivering retail-line
Tracking performance became an obsession growth in the financial quarter that ended in
that kept MAS sharply focused on its jour- September 2007. Also, Telstra outperformed
ney. For example, to stay on top of the goal its global peers in the broadband market,
to improve the airline’s cash position, Jala increasing its share in DSL, cable, and wire-
receives a report at 5.30 PM every day that less technologies to 45 percent while also
details exactly how much cash the airline has increasing average revenue per user (ARPU).
in every bank account around the world. He
also gets a daily report of the company’s P&L So the Track phase of a change initiative or
statement, as well as sales and passenger turnaround is partly a matter of watching a
loads on all flights every single day. Like carefully constructed dashboard and taking
other CEOs leading successful change efforts, swift corrective action as necessary. But there
Jala closely follows a small number of per- are other critical elements as well. Tracking
formance indicators that align with his initia- change requires as much management atten-
tive’s overall goals. The approach clearly is tion and involvement as the three other phases.
8PLOT: A framework for implementing change
Beyond establishing metrics, change leaders
need to reward people for keeping things on
track and hitting milestones—for example,
by aligning financial incentives with achieve-
ment. “We need to create a performance-
based culture,” Trujillo told us. “That means
if you perform really well you can make a lot
more money, and if you don’t perform well
you get paid less. We’re putting that in place
at both the executive level and the front-line
level.” For example, call-center and field-force
employees now receive variable compensa-
tion based on results such as sales outcomes
or jobs done per day. For senior managers,
Trujillo has implemented a short-term incen-
tive program in which bonuses are now
linked directly not just to personal perform-
ance and company financial outcomes but
also to specific operational milestones within
the transformation program.
A second task is to raise the bar. Change is
an ongoing process and change leaders have
new months, new quarters, and new years in
which to maintain the momentum—and
results. They must update budgets and tar-
gets to ensure that savings don’t leak away.
They must focus people on the next mile-
stone even as they celebrate achieving the
previous one.
Making change stick means taking the right
steps again and again—sticking to the PLOT—
by recognizing and acting on the tangible ini-
tiative and infrastructure investments as well
as the signaling support required to deliver
and sustain complex change.
9Bain’s business is helping make companies more valuable. Founded in 1973 on the principle that consultants must measure their success in terms of their clients’ financial results, Bain works with top management teams to beat competitors and generate substantial, lasting financial impact. Our clients have historically outperformed the stock market by 4:1. Who we work with Our clients are typically bold, ambitious business leaders. They have the talent, the will and the open-mindedness required to succeed. They are not satisfied with the status quo. What we do We help companies find where to make their money, make more of it faster and sustain its growth longer. We help management make the big decisions: on strategy, operations, technology, mergers and acquisitions, and organization. Where appropriate, we work with them to make it happen. How we do it We realize that helping an organization change requires more than just a recommendation. So we try to put ourselves in our clients’ shoes and focus on practical actions.
For more information, please visit www.bain.com Amsterdam • Atlanta • Beijing • Boston • Brussels • Chicago • Copenhagen • Dallas • Dubai • Düsseldorf • Frankfurt • Helsinki • Hong Kong Johannesburg • Kyiv • London • Los Angeles • Madrid • Melbourne • Mexico City • Milan • Moscow • Munich • New Delhi • New York Palo Alto • Paris • Rome • San Francisco • São Paulo • Seoul • Shanghai • Singapore • Stockholm • Sydney • Tokyo • Toronto • Zurich
You can also read
