READING

1.

A quick history of project management

It is tempting to think of project management as a modern discipline, but its major concepts have their roots in the late nineteenth century. Read this article to learn the story of how modern management theory was influenced by over a century's worth of scientific, social, and business methodologies.

OverviewProject management, in its modern form, began to take root only a few decades ago. Starting in the early 1960s, businesses and other organizations began to see the benefit of organizing work around projects. This project-centric view of the organization evolved further as organizations began to understand the critical need for their employees to communicate and collaborate while integrating their work across multiple departments and professions and, in some cases, whole industries.

Today, the basic precepts of project management are represented by the project triangle, a symbol popularized by Harold Kerzner in his landmark work,Project Management: A Systems Approach to Planning, Scheduling, and Controlling.

The early years: Late nineteenth centuryWe can travel back even further, to the latter half of the nineteenth century, when the business world was becoming increasingly complex, to see how project management evolved from basic management principles. Large-scale government projects were the impetus for making important decisions that became the basis for project management methodology. In the United States, for example, the first truly large government project was the transcontinental railroad, which began construction in the 1860s. Suddenly, business leaders found themselves faced with the daunting task of organizing the manual labor of thousands of workers and the processing and assembly of unprecedented quantities of raw material.

Early twentieth centuryNear the turn of the century, Frederick Taylor (1856–1915) began his detailed studies of work. He applied scientific reasoning to work by showing that labor can be analyzed and improved by

1

focusing on its elementary parts. He applied his thinking to tasks found in steel mills, such as shoveling sand and lifting and moving parts. Before then, the only way to improve productivity was to demand harder work and longer hours from workers. Taylor introduced the concept of working more efficiently, rather than working harder and longer. The inscription on Taylor's tomb in Philadelphia attests to his place in the history of management: "The father of scientific management."

Taylor's associate, Henry Gantt (1861–1919), studied in great detail the order of operations in work. His studies of management focused on navy ship construction during World War I. His Gantt Charts, complete with task bars and milestone markers, outline the sequence and duration of all tasks in a process. Gantt Chart diagrams proved to be such a powerful analytical tool for managers that they remained virtually unchanged for almost a hundred years. It wasn't until the early 1990s that Microsoft Office Project first added link lines to these task bars, depicting more precise dependencies between tasks.

Over the years, Microsoft Office Project packed even more information into the lines, such as progress lines against a baseline, variances, and lines depicting status progress at a particular point in time.Today, Henry Gantt's legacy is remembered by a medal given out in his name by the American Society of Mechanical Engineers.

Taylor, Gantt, and others helped make project management a distinct business function that requires study and discipline. In the decades leading up to World War II, marketing approaches, industrial psychology, and human relations began to take hold as integral parts of project management.

Mid-twentieth centuryDuring World War II, complex government and military projects and a shrinking war-time labor supply demanded new organizational structures. Complex network diagrams, called PERT charts and the critical path method were introduced, giving managers more control over massively engineered and very complex projects (such as military weapon systems with their huge variety of tasks and numerous interactions at many points in time).Soon, these techniques spread to all kinds of industries as business leaders sought new management strategies and tools to handle their growth in a quickly changing and competitive world. In the early 1960s, businesses began to apply general system theories to business interactions. In their book, The Theory and Management of Systems, Richard Johnson, Fremont Kast, and James Rosenzweig described how a modern business is like a human organism, with a skeletal system, a muscular system, circulatory system, nervous system, and so on.

Today

2

This view of business as a human organism implies that for a business to survive and prosper, all its functional parts must work in concert toward specific goals, or projects. In decades since the 1960s, this approach toward project management began to take root in its modern forms. While various business models evolved during this period, they all shared a common underlying structure: a project manager manages the project, puts together a team, and ensures the integration and communication of the workflow horizontally across different departments.

Within the last ten years, project management has continued to evolve. Two significant trends are emerging:

Bottom-up planning     This trend emphasizes simpler project designs, shorter project cycles, efficient collaboration among team members, stronger team member involvement and decision making. This trend is broadly known as agile project management, and includes a number or related methodologies, such as Scrum, Crystal, Extreme Programming, Unified Process, and many others.

Top-down planning and reviewing     This trend is characterized by enterprise-wide decision making about the portfolio of projects that an organization should have, as well as by enabling data-mining technologies to make information in the portfolio more transparent.

Gantt Chart view A predefined view that displays project tasks on the left side of the view, and graphical bars corresponding to the task's durations on the right side of the view.

Gantt bar A graphical element on the chart portion of the Gantt Chart view representing the duration of a task.

milestone A reference point marking a major event in a project and used to monitor the project's progress. Any task with zero duration is automatically displayed as a milestone; you can also mark any other task of any duration as a milestone.

progress lines Visually represent the progress of your project, displayed in the Gantt Chart view.Progress lines connect in-progress tasks, creating a graph on the Gantt Chart indicating work that is behind and peaks indicating work that is ahead.

variance The difference between baseline and scheduled task or resource information, they usually occur when you set a baseline plan and begin entering actual information into your schedule. Variances can occur in work, costs, and schedule.

3

PERT analysis PERT [Program, Evaluation, and Review Technique] analysis is a process by which you evaluate a probable outcome based on three scenarios: best-case, expected-case, and worst-case.

Network Diagram A diagram that shows dependencies between project tasks. Tasks are represented by boxes, or nodes, and task dependencies are represented by lines that connect the boxes. In Project, the Network Diagram view is a network diagram.

critical path The series of tasks that must be completed on schedule for a project to finish on schedule. Each task on the critical path is a critical task.

agile project management A project management method that uses short iterations of up to four weeks, adaptive strategies, and collaboration among team members. Types of agile project management include Scrum, Critical Chain, and Extreme Programming.

http://office.microsoft.com/en-us/project-help/a-quick-history-of-project-management-HA010351563.aspx

4

2. ORGANIZATION THEORY

Organization theory is a broad field with roots in sociology. Anthropologists, philosophists, and political scientists have contributed greatly to the field. Organization theory as a topic for managers, as opposed to scholars, has come about fairly recently. For example, political scientists trace many ideas back to Ancient Rome or even before. Philosophers reach even farther back in time, and anthropologists have been interested in organization in terms of how groups arrange social systems and status systems as long as there has been a field of anthropology.

Although it is difficult to pinpoint when managers became interested in theories of organization, some suggest it was around the 1940s, when the writings of the German sociologist and engineer, Max Weber, were translated into English. Although Weber's life-work was spent trying to understand why capitalism arose first in Western Europe rather than in Asia, American managers lifted Weber's notion of bureaucracy out of these studies to explain then-modern forms of organizations that coincided with what Weber had described among Western European organizations. These organizations had reduced the influence of patriarchal styles of management to systems in which job positions, rather than the people in those positions, provided the source of authority.

Phillip Selznick became well known for studying goal conflict and power struggles during the U.S. government's subsidy of the Tennessee Valley Authority, which was an effort to put unemployed Americans to work producing electricity for the Tennessee Valley area. In the 1950s Herbert Simon studied how managers make decisions when information is complex but incomplete. The 1960s brought about research elaborating why the closed-system mentality of organizations—the idea that organizations have little reciprocal interaction with their environments—was not accurate. The result was a shift to viewing organizations as open systems that are intertwined with their environments in such a way that reciprocal interdependence is created. Managers began to realize that society has a profound effect on organizations, as organizations also have a profound effect on society.

5

Taken in total, then, organization theory as a management topic of interest was born out of non-management research. Bureaucracy, authority, goal conflict, power, managerial decision-making, and interaction between organizations and their environments are all topics of concern among today's organization theorists, but none of these ideas arose from management research.

Management research has borrowed from these various fields to attempt to answer two questions that are of specific interest to managers: Why do organizations exist and how do they function? With respect to the first question, it seems reasonable to argue that organizations exist to provide society with a level of goods and services that would otherwise be unattainable. With respect to the second, how organizations function, organizations combine human skills, knowledge, technology, and material resources to produce goods and services.

The broadest variant of organization theory looks at the relationship between organizations and their social and natural environments, as originated by open-system theorists. One branch of Western moral philosophy conceives of organizations as having a social contract with society, whereby they are granted legitimacy for the purpose of serving the social good. This constructive purpose includes the production of goods and services and their fair allocation. Yet organizations can also cause negative social outcomes. Negative externalities include the social problems associated with monopolies, unsafe products, and the unfair treatment of employees, as well as the ecological problems posed by industrial accidents and industry-related pollution of the natural environment.

Because of the existence of negative externalities, organization theory is influenced by the concept of social control that can be found in political science, economics, and sociology. Social control refers to the laws, regulations, and social customs that are meant to minimize the negative impacts of organizational activities. Because organization theorists address social control, they also examine the nature of the relationship between organizations and their regulatory agencies.

The anthropological view derives from the knowledge that standards of social control reflect the underlying assumptions, values, and beliefs of cultures. The restraints or expectations placed on organizations, therefore, can vary across societies. The stakeholder model of

6

organizations is useful for demonstrating this form of cultural relativism. The stakeholder model depicts an organization as surrounded by a variety of constituent groups, such as customers, social activists, regulators, the media, stockholders, and regulatory agencies.

Stakeholder expectations, in turn, can depend upon cultural affiliations. For example, employees in the United States tend to expect more active participation in the work contract than do employees in Japan. Thus, a Japanese firm with operations in the United States may face employment laws and employee views of justice and fairness that differ from those of the home country. When the scope of organization theory is widened to include international issues such as the activities of multinational corporations in host environments, the impact of cultural relativism must be acknowledged.

Although organization theory never loses sight of the importance of the organizational-societal interface (and this is one distinguishing feature between organization theory and organization behavior), it also deals with what goes on inside organizations. Weber's classical theory of bureaucracy, for example, was followed by research on the more informal aspects of organizational life. This line of inquiry is strongly influenced by the insight that organizational activity can involve less-than-rational processes that yield unexpected consequences, including the negative externalities mentioned above. Hence, although organizations ideally exist as tools for constructive social purposes, these purposes can be subverted by the constraints on rational decision processes within organizations.

Contemporary theorists use many metaphors to guide their investigations into the suboptimal and even non-rational decisions enacted in organizations. These metaphors include those that suggest organizations are systems of power and political intrigue, miniature cultures, chaos, temples, theaters, machines, families, and jungles. These metaphors arise through shared meaning that has been socially constructed and generally agreed upon, thus subconsciously institutionalizing the specific, agreed-upon metaphor for certain organizations.

Organization theorists are interested in why organizations exist and how these social systems function. This interest has yielded a body of research on the organizational-societal relationship and the formal and informal

7

aspects of organizational life, yet there is no single answer to either of these root issues.

http://www.referenceforbusiness.com/management/Ob-Or/Organization-Theory.html

8

3. ORGANIZATIONAL DEVELOPMENT

Organizational development is an ongoing, systematic process to implement effective change in an organization. Organizational development is known as both a field of applied behavioral science focused on understanding and managing organizational change and as a field of scientific study and inquiry. It is interdisciplinary in nature and draws on sociology, psychology, and theories of motivation, learning, and personality.

HISTORY OF ORGANIZATIONAL DEVELOPMENT

In the late 1960s organizational development was implemented in organizations via consultants, but was relatively unknown as a theory of practice and had no common definition among its practitioners. Richard Beckhard, an authority on organizational development and change management, defined organizational development as "an effort, planned, organization-wide, and managed from the top, to increase organization effectiveness and health through planned interventions in the organization's processes, using behavioral-science knowledge" (Beckhard 1969).

Throughout the 1970s and 1980s organizational development became a more established field with courses and programs being offered in business, education, and administration curricula. In the 1990s and 2000s organizational development continued to grow and evolve and its influences could be seen in theories and strategies such as total quality management (TQM), team building, job enrichment, and reengineering.

RATIONALE AND IMPLEMENTATION

Organizational development takes into consideration how the organization and its constituents or employees function together. Does the organization meet the needs of its employees? Do the employees work effectively to make the organization a success? How can the symbiotic relationship between employee satisfaction and organizational success be optimized? Organizational development places emphasis on the human

9

factors and data inherent in the organization-employee relationship. Organizational development strategies can be used to help employees become more committed and more adaptable, which ultimately improves the organization as a whole.

The organizational development process is initiated when there is a need, gap, or dissatisfaction within the organization, either at the upper management level or within the employee body. Ideally, the process involves the organization in its entirety, with evidenced support from upper management and engagement in the effort by all members from each level of the organization.

To launch the process, consultants with experience in organizational development and change management are often utilized. These consultants may be internal to the company or external, with the cautionary understanding that internal consultants might be too entrenched in the existing company environment to effectively coordinate and enforce the action plans and solutions required for successful change.

Data analysis through task forces, interviews, and questionnaires can illuminate likely causes for disconnects throughout an organization. These gaps can then be analyzed, an action plan formed, and solutions employed. This is by no means a linear process, nor is it a brief one. Feedback from all constituents should be elicited throughout the process and used to make adjustments to the action plan as necessary. Constant monitoring during the entire implementation effort is important for its success and acceptance.

THE FUTURE OF ORGANIZATIONAL DEVELOPMENT

There are contradictory opinions about the status and future prospects of organizational development. Is it a theory whose time has come and gone? Does its basis in behavioral science, a "soft" science, make it unappealing? What are the challenges for the future?

An article by Bunker, Alban, and Lewicki proposes six areas that could revitalize the field of organizational development in the future: virtual teams, conflict resolution, work group effectiveness, social network analysis, trust, and intractable conflict. These authors suggest that focusing on these areas will help bridge the gap between research theory (i.e., academics) and practice (i.e., consultants). Getting these two groups

10

to communicate with each other will benefit both groups and promote organizational development efforts.

In a survey conducted by Church, Waclawski, and Berr, twenty individuals involved in the study and practice of organizational development were questioned about their perspectives and predictions on the future of the field. The most in-demand services, according to those polled, are:

— executive coaching and development— team building and team effectiveness— facilitating strategic organizational change— systemic integration— diversity and multiculturalism.

They list the daily challenges in the field as the need for speed, resistance to change, interpersonal skills and awareness, and differentiating organizational development, which refers to the variety of definitions of organizational development among practitioners and how this impacts consultants, clients, and the clients' needs.

The opinions on the future direction of the field vary among its practitioners. Nevertheless, the continuing interest in and value of optimizing an organization's needs and goals with the needs, wants, and personal satisfaction of its employees indicate that organizational development will continue to be relevant to and vital for organizational reform in the future, either in its present form or through evolution into other theories and practices.

http://www.referenceforbusiness.com/management/Ob-Or/Organizational-Development.html#b

11

4. Change Management

Making organization change happen effectivelyhttp://www.mindtools.com/pages/article/newPPM_87.htm

Change management is a term that is bandied about freely. Sometimes it's a scapegoat for less than stellar results: "That initiative failed because we didn't focus enough on change management." And it's often used as a catch-all for project activities that might otherwise get overlooked: "When we implement that new process, let's not forget about the change management."It's a noun: "Change management is key to the project." It's a verb: "We really need to change manage that process." It's an adjective: "My change management skills are improving." It's an expletive: "Change management!"But what exactly is it?Change management is a structured approach for ensuring that changes are thoroughly and smoothly implemented, and that the lasting benefits of change are achieved.The focus is on the wider impacts of change, particularly on people and how they, as individuals and teams, move from the current situation to the new one. The change in question could range from a simple process change, to major changes in policy or strategy needed if the organization is to achieve its potential.Understanding Change ManagementTheories about how organizations change draw on many disciplines, from psychology and behavioral science, through to engineering and systems thinking. The underlying principle is that change does not happen in isolation – it impacts the whole organization (system) around it, and all the people touched by it.In order to manage change successfully, it is therefore necessary to attend to the wider impacts of the changes. As well as considering the

12

tangible impacts of change, it's important to consider the personal impact on those affected, and their journey towards working and behaving in new ways to support the change. TheChange Curve is a useful model that describes the personal and organizational process of change in more detail.Change management is, therefore, a very broad field, and change management approaches vary widely, from organization to organization and from project to project. Many organizations and consultants subscribe to formal change management methodologies. These provide toolkits, checklists and outline plans of what needs to be done to manage changes successfully.When you are tasked with "managing change" (irrespective of whether or not you subscribe to a particular change management approach), the first question to consider is what change management actually means in your situation. Change management focuses on people, and is about ensuring change is thoroughly, smoothly and lastingly implemented. And to know what that means exactly in your situation, you must dig down further to define your specific change management objectives.Typically, these will cover:1. Sponsorship: Ensuring there is active sponsorship for the

change at a senior executive level within the organization, and engaging this sponsorship to achieve the desired results.

2. Buy-in: Gaining buy-in for the changes from those involved and affected, directly or indirectly.

3. Involvement: Involving the right people in the design and implementation of changes, to make sure the right changes are made.

4. Impact: Assessing and addressing how the changes will affect people.

5. Communication: Telling everyone who's affected about the changes.

6. Readiness: Getting people ready to adapt to the changes, by ensuring they have the right information, training and help.

Who's Responsible?When you are defining your change management objectives and activities, it's very important to coordinate closely with others: project managers, managers in the business, and the HR department. Ask "who's responsible?" For example, who's responsible for identifying change agents? Defining the re-training plan? Changing job descriptions and employment contracts? And so on.As every change is different, responsibilities will vary depending on how the change activities and project are organized. Only when you know who's responsible and how things are organized in your situation

13

will you know what's within your change management scope, and how you'll be working with other people to bring about the change.

Change Management ActivitiesOnce you have considered the change management objectives and scope, you'll also need to consider the specific tasks. Again, the range of possible change management activities is broad. It's a question of working out what will best help you meet the change management challenge in hand, as you have defined it in your objectives and scope, and how to work along side other people's and projects' activities and responsibilities.The essence of this is to identify the tasks that are necessary if you're going to give change the greatest chance of success.Coming from this, the activities involved in managing change can include: Ensuring there is clear expression of the reasons for change,

and helping the sponsor communicate this. Identifying "change agents" and other people who need to be

involved in specific change activities, such as design, testing, and problem solving, and who can then act as ambassadors for change.

Assessing all the stakeholders and defining the nature of sponsorship, involvement and communication that will be required.

Planning the involvement and project activities of the change sponsor(s).

Planning how and when the changes will be communicated, and organizing and/or delivering the communications messages.

Assessing the impact of the changes on people and the organization's structure.

Planning activities needed to address the impacts of the change.

Ensuring that people involved and affected by the change understand the process change.

Making sure those involved or affected have help and support during times of uncertainty and upheaval.

Assessing training needs driven by the change, and planning when and how this will be implemented.

Identifying and agreeing the success indicators for change, and ensure they are regularly measured and reported on.

Remember, these are just some typical change management activities. Others may be required in your specific situation. Equally, some of the

14

above may not be within your remit, so plan carefully, and coordinate with other people involved.Your Change Management Tool-KitSo where do you start?Here are some tools and techniques from Mind Tools that can help:Understanding ChangeThe Change Curve – This powerful model describes the stages of personal transition involved in most organizational change. It will help you understand how people will react to the changes, and so you can better plan how to support them through the process.Lewin's Change Management Model – This describes how you generally have to "break up" the current state of things in order to make improvements, using the concept of "unfreeze – change – refreeze". Our article shows the different things you need to do at each stage to support those impacted.Beckhard and Harris's Change Model – Giving another perspective on change, this describes how change initiatives require the pre-requisites of real dissatisfaction with the current state, a vision of why the new state will be better, and clear first steps towards getting there, to be successful.Planning ChangeImpact Analysis – This is a useful technique for uncovering the "unexpected" consequences of change.Burke-Litwin Change Model – This complex model helps you to work through the effects of change between 12 elements of organizational design.McKinsey 7S Framework – Somewhat similar to the Burke-Litwin Model, this well-known tool helps you to understand the relationship between seven "hard" and "soft" aspects of organizations.Leavitt's Diamond – In the same vein as the McKinsey 7S and Burke-Litwin models, this tool allows you to work through the impacts of a proposed change oni the interrelated elements of tasks, people, structure and technology in any organization.Organization Design – Although every organization is unique, there are a several common structures. This article describes these, and discusses the things you need to consider when choosing the best design for your situation.SIPOC Diagrams – A comprehensive tool for checking the impact of a proposed change on your suppliers, inputs, processes, outputs and customers,Implementing ChangeKotter's 8-Step Change Model – The core set of change management activities that need to be done to effect change, and make it stick in the long term.Training Needs Assessment – Change projects almost always need people to learn new skills. A training needs assessment is a structured

15

way of ensuring that the right people are given the right training at the right time.Why Change Can Fail – Change is complex, and knowing what NOT to do is just as important as knowing what TO do!Communicating ChangeStakeholder Analysis – A formal method for identifying, prioritizing and understanding your project's stakeholders.Stakeholder Management – A process for planning your stakeholder communications to ensure that you give the right people the right message at the right time to get the support you need for your project.Mission Statements and Visions Statements – Mission and vision statements are a well-structured way of helping you to communicate what the change is intended to achieve, and to motivate your stakeholders with an inspiring, shared vision of the future.And to explore various aspects of change management in more depth, take our Bite-Sized Training lesson on Managing Change.

Key Points:Change management is a broad discipline that involves ensuring change is implemented smoothly and with lasting benefits, by considering its wider impact on the organization and people within it. Each change initiative you manage or encounter will have its own unique set of objectives and activities, all of which must be coordinated.As a change manager, your role is to ease the journey towards new ways of working, and you'll need a set of tools to help you along the way: There's a wide range of change management tools here at Mind Tools – this a great place to start!

16

5. Peter Drucker On Leadership Rich Karlgaard, 11.19.04, 6:00 AM ET http://www.forbes.com/2004/11/19/cz_rk_1119drucker.html

NEW YORK - Peter F. Drucker was born 95 years ago today--can it be possible?--in Vienna. The universally known writer, thinker and lecturer now is nearly deaf and doesn't get around like he used to. He stopped giving media interviews about a year ago. But in late October, Drucker granted an exception to Forbes.com at the urging of Dr. Rick Warren, the founder and head of the Christian evangelical Saddleback Community Church in Lake Forest, Calif. 

The Drucker-Warren relationship may surprise many readers, but it goes back two decades, to when the young minister came to Drucker for advice. Under Drucker's tutelage, Warren's own success as a spiritual entrepreneur has been considerable. Saddleback has grown to 15,000 members and has helped start another 60 churches throughout the world. Warren's 2001 book, The Purpose-Driven Life, is this decade's best seller with 19.5 million copies sold so far and compiling at the rate of 500,000 per month. 

Warren and I met at Drucker's surprisingly spartan home in Claremont, Calif., on a cloudy Tuesday morning. We were greeted

by Drucker's wife, Doris, and ushered into the den for what developed into a two-hour conversation. During the first 30 minutes, Drucker--a religious man himself, albeit of a more muted Episcopalian type as compared to Warren's exuberant brand of Southern Baptist--advised Warren on the challenges of ministry and church building. This consultation is one Drucker and Warren have engaged in twice yearly for two decades. For the last 90 minutes we moved to broader topics. Below are Drucker's thoughts on leadership.

What Needs to Be DoneSuccessful leaders don't start out asking, "What do I want to do?" They ask, "What needs to be done?" Then they ask, "Of those things that would make a difference, which are right for me?" They don't tackle things they aren't good at. They make sure other necessities get done, but not by them. Successful leaders make sure that they succeed! They are not afraid of strength in others. Andrew Carnegie wanted to

 

Peter F. Drucker at his home in California 

17

put on his gravestone, "Here lies a man who knew how to put into his service more able men than he was himself." 

Check Your PerformanceEffective leaders check their performance. They write down, "What do I hope to achieve if I take on this assignment?" They put away their goals for six months and then come back and check their performance against goals. This way, they find out what they do well and what they do poorly. They also find out whether they picked the truly important things to do. I've seen a great many people who are exceedingly good at execution, but exceedingly poor at picking the important things. They are magnificent at getting the unimportant things done. They have an impressive record of achievement on trivial matters. 

Mission DrivenLeaders communicate in the sense that people around them know what they are trying to do. They are purpose driven--yes, mission driven. They know how to establish a mission. And another thing, they know how to say no. The pressure on leaders to do 984 different things is unbearable, so the effective ones learn how to say no and stick with it. They don't suffocate themselves as a result. Too many leaders try to do a little bit of 25 things and get nothing done. They are very popular because they always say yes. But they get nothing done. 

Creative AbandonmentA critical question for leaders is, "When do you stop pouring resources into things that have achieved their purpose?" The most dangerous traps for a leader are those near-successes where everybody says that if you just give it another big push it will go over the top. One tries it once. One tries it twice. One tries it a third time. But, by then it should be obvious this will be very hard to do. So, I always advise my friend Rick Warren, "Don't tell me what you're doing, Rick. Tell me what you stopped doing." 

The Rise of the Modern MultinationalThe modern multinational corporation was invented in 1859. Siemens invented it because the English Siemens company had grown faster than the German parent. Before the Second World War, IBM was a small maker, not of computers, but of adding machines. They had one branch in England, which was very typical for the era. In the 1920s, General Motors bought a German and English and then Australian

18

automobile manufacturer. The first time somebody from Detroit actually visited the European subsidiaries was in 1950. A trip to Europe was a big trip. You were gone three months. I still remember the excitement when the then head of GM went to Europe in the 1920s to buy the European properties. He never went back. 

21st Century OrganizationsLet me give you one example. This happens to be a consulting firm headquartered in Boston. Each morning, between 8 A.M. and 9 A.M. Boston time, which is 5 A.M. in the morning here in California and 11 P.M. in Tokyo, the firm conducts a one-hour management meeting on the Internet. That would have been inconceivable a few years back when you couldn't have done it physically. And for a few years, I worked with this firm closely and I had rented a room in a nearby motel and put in a videoconferencing screen. Once a week, I participated in this Internet meeting and we could do it quite easily, successfully. As a result of which, that consulting firm is not organized around localities but around clients. 

How To Lead a 21st Century OrganizationDon't travel so much. Organize your travel. It is important that you see people and that you are seen by people maybe once or twice a year. Otherwise, don't travel. Make them come to see you. Use technology--it is cheaper than traveling. I don't know anybody who can work while traveling. Do you? The second thing to say is make sure that your subsidiaries and foreign offices take up the responsibility to keep you informed. So, ask them twice a year, "What activities do you need to report to me?" Also ask them, "What about my activity and my plans do you need to know from me?" The second question is just as important. 

Prisoner of Your Own OrganizationWhen you are the chief executive, you're the prisoner of your organization. The moment you're in the office, everybody comes to you and wants something, and it is useless to lock the door. They'll break in. So, you have to get outside the office. But still, that isn't traveling. That's being at home or having a secret office elsewhere. When you're alone, in your secret office, ask the question, "What needs to be done?" Develop your priorities and don't have more than two. I don't know anybody who can do three things at the same time and do them well. Do one task at a time or two tasks at a time. That's it. OK, two works better for most. Most people need the change of pace. But, when you are finished with two jobs or reach the point where it's futile,

19

make the list again. Don't go back to priority three. At that point, it's obsolete. 

How Organizations Fall DownMake sure the people with whom you work understand your priorities. Where organizations fall down is when they have to guess at what the boss is working at, and they invariably guess wrong. So the CEO needs to say, "This is what I am focusing on." Then the CEO needs to ask of his associates, "What are you focusing on?" Ask your associates, "You put this on top of your priority list--why?" The reason may be the right one, but it may also be that this associate of yours is a salesman who persuades you that his priorities are correct when they are not. So, make sure that you understand your associates' priorities and make sure that after you have that conversation, you sit down and drop them a two-page note--"This is what I think we discussed. This is what I think we decided. This is what I think you committed yourself to within what time frame." Finally, ask them, "What do you expect from me as you seek to achieve your goals?" 

The Transition from Entrepreneur to Large Company CEOAgain, let's start out discussing what not to do. Don't try to be somebody else. By now you have your style. This is how you get things done. Don't take on things you don't believe in and that you yourself are not good at. Learn to say no. Effective leaders match the objective needs of their company with the subjective competencies. As a result, they get an enormous amount of things done fast. 

How Capable Leaders Blow ItOne of the ablest men I've worked with, and this is a long time back, was Germany's last pre-World War II democratic chancellor, Dr. Heinrich Bruning. He had an incredible ability to see the heart of a problem. But he was very weak on financial matters. He should have delegated but he wasted endless hours on budgets and performed poorly. This was a terrible failing during a Depression and it led to Hitler. Never try to be an expert if you are not. Build on your strengths and find strong people to do the other necessary tasks. 

The Danger Of CharismaYou know, I was the first one to talk about leadership 50 years ago, but there is too much talk, too much emphasis on it today and not enough on effectiveness. The only thing you can say about a leader is that a leader is somebody who has followers. The most charismatic leaders of

20

the last century were called Hitler, Stalin, Mao and Mussolini. They were mis-leaders! Charismatic leadership by itself certainly is greatly overstated. Look, one of the most effective American presidents of the last 100 years was Harry Truman. He didn't have an ounce of charisma. Truman was as bland as a dead mackerel. Everybody who worked for him worshiped him because he was absolutely trustworthy. If Truman said no, it was no, and if he said yes, it was yes. And he didn't say no to one person and yes to the next one on the same issue. The other effective president of the last 100 years was Ronald Reagan. His great strength was not charisma, as is commonly thought, but that he knew exactly what he could do and what he could not do. 

How To Reinvigorate PeopleWithin organizations there are people who, typically in their 40s, hit a midlife crisis when they realize that they won't make it to the top or discover that they are not yet first-rate. This happens to engineers and accountants and technicians. The worst midlife crisis is that of physicians, as you know. They all have a severe midlife crisis. Basically, their work becomes awfully boring. Just imagine seeing nothing for 30 years but people with a skin rash. They have a midlife crisis, and that's when they take to the bottle. How do you save these people? Give them a parallel challenge. Without that, they'll soon take to drinking or to sleeping around. In a coeducational college, they sleep around anddrink. The two things are not incompatible, alas! Encourage people facing a midlife crisis to apply their skills in the non-profit sector. 

Character Development

We have talked a lot about executive development. We have been mostly talking about developing people's strength and giving them experiences. Character is not developed that way. That is developed inside and not outside. I think churches and synagogues and the 12-step recovery programs are the main development agents of character today. 

21

6. Myths About Stress and Time Management

Myth #1: All stress is bad. No, there's good and bad stress. Good stress is excitement, thrills, etc. The goal is to recognize personal signs of bad stress and deal with them.

Myth #2: Planning my time just takes more time. Actually, research shows the opposite.

Myth #3: I get more done in more time when I wisely use caffeine, sugar, alcohol or nicotine. Wrong! Research shows that the body always has to "come down" and when it does, you can't always be very effective then after the boost.

Myth #4: A time management problem means that there's not enough time to get done what needs to get done. No, a time management problem is not using your time to your fullest advantage, to get done what you want done.

Myth #5: The busier I am, the better I'm using my time. Look out! You may only be doing what's urgent, and not what's important.

Myth #6: I feel very harried, busy, so I must have a time management problem. Not necessarily. You should verify that you have a time management problem. This requires knowing what you really want to get done and if it is getting done or not.

Myth #7: I feel OK, so I must not be stressed. In reality, many adults don't even know when they're really stressed out until their bodies tell them so. They miss the early warning signs from their body, for example, headaches, still backs, twitches, etc.

Major Causes of Workplace Stress

1. Not knowing what you want or if you're getting it - poor planning.2. The feeling that there's too much to do. One can have this

feeling even if there's hardly anything to do at all.3. Not enjoying your job. This can be caused by lots of things, for

example, not knowing what you want, not eating well, etc. However, most people always blame their jobs.

4. Conflicting demands on the job.5. Insufficient resources to do the job.6. Not feeling appreciated.

Biggest Time Wasters

22

1. Interruptions. There will always be interruptions. It's how they're handled that wastes time.

2. Hopelessness. People "give in", "numb out" and "march through the day".

3. Poor delegation skills. This involves not sharing work with others.

Common Symptoms of Poor Stress and Time Management

1. Irritability. Fellow workers notice this first.2. Fatigue. How many adults even notice this?3. Difficulty concentrating. You often don't need to just to get

through the day!4. Forgetfulness. You can't remember what you did all day, what

you ate yesterday.5. Loss of sleep. This affects everything else!6. Physical disorders, for example, headaches, rashes, tics, cramps,

etc.7. At worst, withdrawal and depression.

Wise Principles of Good Stress and Time Management

1. Learn your signs for being overstressed or having a time management problem. Ask your friends about you. Perhaps they can tell you what they see from you when you're overstressed.

2. Most people feel that they are stressed and/or have a time management problem. Verify that you really have a problem. What do you see, hear or feel that leads you to conclude that you have a time or stress problem?

3. Don't have the illusion that doing more will make you happier. Is it quantity of time that you want, or quality?

4. Stress and time management problems have many causes and usually require more than one technique to fix. You don't need a lot of techniques, usually more than one, but not a lot.

5. One of the major benefits of doing time planning is feeling that you're in control.

6. Focus on results, not on busyness.7. It's the trying that counts - at least as much as doing the perfect

technique.

Simple Techniques to Manage Stress

There are lots of things people can do to cut down on stress. Most people probably even know what they could do. It's not the lack of knowing what to do in order to cut down stress; it is doing what you

23

know you have to do. The following techniques are geared to help you do what you know you have to do.

1. Talk to someone. You don't have to fix the problem, just report it.2. Notice if any of the muscles in your body are tense. Just noticing

that will often relax the muscle.3. Ask your boss if you're doing OK. This simple question can make

a lot of difference and verify wrong impressions.4. Delegate.5. If you take on a technique to manage stress, tell someone else.

They can help you be accountable to them and yourself.6. Cut down on caffeine and sweets. Take a walk instead. Tell

someone that you're going to do that.7. Use basic techniques of planning, problem solving and decision

making.8. Concise guidelines are included in this guidebook. Tell someone

that you're going to use these techniques.9. Monitor the number of hours that you work in a week. Tell your

boss, family and/or friends how many hours that you are working.

10. Write weekly status reports. Include what you've accomplished last week and plan to do next week. Include any current issues or recommendations that you must report to your boss. Give the written status report to your boss on a weekly basis.

11. "Wash the dishes". Do something you can feel good about.

Simple Techniques to Manage Time

There never seems to be enough time in the roles of management and supervision. Therefore, the goal of time management should not be to find more time. The goal is set a reasonable amount of time to spend on these roles and then use that time wisely.

1. Start with the simple techniques of stress management above.2. Managing time takes practice. Practice asking yourself this

question throughout the day: "Is this what I want or need to be doing right now?" If yes, then keep doing it.

3. Find some way to realistically and practically analyze your time. Logging your time for a week in 15-minute intervals is not that hard and does not take up that much time. Do it for a week and review your results.

4. Do a "todo" list for your day. Do it at the end of the previous day. Mark items as "A" and "B" in priority. Set aside two hours right away each day to do the important "A" items and then do the "B"

24

items in the afternoon. Let your answering machine take your calls during your "A" time.

5. At the end of your day, spend five minutes cleaning up your space. Use this time, too, to organize your space, including your desktop. That'll give you a clean start for the next day.

6. Learn the difference between "Where can I help?" and "Where am I really needed?" Experienced leaders learn that the last question is much more important than the former.

7. Learn the difference between "Do I need to do this now?" and "Do I need to do this at all?" Experienced leaders learn how to quickly answer this question when faced with a new task.

8. Delegate. Delegation shows up as a frequent suggestion in this guide because it is one of the most important skills for a leader to have. Effective delegation will free up a great deal of time for you.

9. If you are CEO in a corporation, then ask your Board for help. They are responsible to supervise you, as a CEO. Although the Board should not be micro-managing you, that is, involved in the day-to-day activities of the corporation, they still might have some ideas to help you with your time management. Remember, too, that good time management comes from good planning, and the Board is responsible to oversee development of major plans. Thus, the Board may be able to help you by doing a better themselves in their responsibilities as planners for the organization.

10. Use a "Do Not Disturb" sign! During the early part of the day, when you're attending to your important items (your "A" list), hang this sign on the doorknob outside your door.

11. Sort your mail into categories including "read now", "handle now" and "read later". You'll quickly get a knack for sorting through your mail. You'll also notice that much of what you think you need to read later wasn't really all that important anyway.

12. Read your mail at the same time each day. That way, you'll likely get to your mail on a regular basis and won't become distracted into any certain piece of mail that ends up taking too much of your time.

13. Have a place for everything and put everything in its place. That way, you'll know where to find it when you need it. Another important outcome is that your people will see that you are somewhat organized, rather than out of control.

14. Best suggestion for saving time - schedule 10 minutes to do nothing. That time can be used to just sit and clear your mind. You'll end up thinking more clearly, resulting in more time in your day. The best outcome of this practice is that it reminds you that you're not a slave to a clock - and that if you take 10

25

minutes out of your day, you and your organization won't fall apart.

15. Learn good meeting management skills. Meetings can become a terrible waste of time. Guidelines for good meeting management are included later in this section.

Role of "Gumption"

Everything good usually starts with gumption. It's picking yourself up, deciding that you could be happier, that you want to be happier - and then doing one small thing to get you started and keep you going. Boredom and blaming are the opposite of gumption. Stress and time management start with gumption. It's the trying that counts. Poor time and stress management often comes from doing the same thing harder, rather than smarter.

http://managementhelp.org/personalproductivity/time-stress-management.htm

26

7. Ten Skills for Project Management Success

For many years, project management has been a hot skill. According to single survey of IT staffing intentions in the sphere of 2007, 26 percent of organizations willpower hire project managers and 59 percent willpower train existing staff in the sphere of connected skills. The study, by Forrester seek, found project management is the back up highest priority both in place of hiring (after security) and training (after change management).Why are project management skills in the sphere of such demand? According to IT staffing expert Samuel upbeat, “as the complexity of the IT natural world increases, and the business difficulty multiply, the need in place of project management barely increases even added.”In the sphere of other lexis, this is rebuff flash-in-the-pan boiling mark.Despite all the attention paid to project management, however, project winner duty are far from advantageous, says Forrester’s Margo Visitation. “Metrics from the Standish Group’s CHAOS loud noise program with the aim of project winner is well under 50 percent, and other studies, such in the same way as folks from KPMG, estimate with the aim of excluding than 40 percent of implemented projects, as soon as measured single time presently, showed at all of their estimated commerce importance.”Why perform so many projects fail? Visitation says the chief crisis isn’t method, but more readily “creating an natural world with the aim of fosters winner – in the same way as defined by your organization.”How can project managers create with the aim of type of natural world? At this point are 10 tips:1. Create ConsensusAbsence to be a project successful? Promote superior team dynamics, and as a consequence collaboration. In the sphere of precise, keep the team alert and frequently strive in place of the consensus desired to keep a project progressing. “It’s the project manager’s unique capability to connection differences, get hold of nothing special threads and move the crowd to a nothing special understanding and acceptance of the project’s goals, objectives, and what did you say? Their particular roles really willpower be located – or else not – with the aim of is dangerous,” explains a project director involved in the sphere of the massive re-banding of a segment of U.S. In the public domain safety radios.

27

2. Differentiate concerning Accountability and reliabilityEfficient project managers know the difference concerning accountability and reliability, says Christopher Avery, a project management consultant and author of reliability Redefined. Accountability, he says, is “essentially the process of making and keeping agreements roughly behaviors, results and penalty.” reliability is “an interior feeling of ownership.” Don’t confuse with single in place of the other.3. Get by the natural worldSuch distinctions are informative for the reason that efficient project management requires “managing the context of the natural world, more readily than the exert yourself,” says Ryan Martens, chief tools official of Rally Software Development in the sphere of stone, Colo. In the sphere of other lexis, while employees might be located accountable to the project director, the project director ought to promote an natural world in the sphere of which team members feel to blame in place of the outcome of the project, in the same way as well in the same way as their teammates’ success.4. Know Project MembersCreating with the aim of kind of state requires balancing commerce and project needs with team members’ needs. “You ought to be located able to go with the huge picture, in the same way as well in the same way as be conscious of the weight of the particular tasks with the aim of inhabit are engaged in the sphere of,” says the telecommunications project director. In the sphere of precise, understand the natural world in the sphere of which team members organize, their perceived role, and the pressures they expression. “Empathy is not sympathy – it’s a dangerous appreciation.”5. Lose the Power slipProject managers need all the dangerous tools by the side of their disposal, since they rarely arrange managerial authority in excess of team members. “If you think you arrange power in excess of the team, and you work with the aim of way, superior foul-smelling providence,” says Martens. As a substitute, think of superior project managers in the same way as being salespeople: They satisfy others to perform what did you say? They need to understand finished.6. Step Away From Microsoft ProjectAs soon as running projects, keep connected documentation effortless in place of non-project managers. “We can all lose ourselves in the

28

sphere of Microsoft Project, but barely having effortless Excel spreadsheets someplace you can sort on status and types of projects is a vast help,” says Marydale Abernathy, director of netting development in place of Diversified commerce Communications in the sphere of Portland, Maine. Behind the scenes, a project director can still manipulate a favored tool. “But as soon as you program a hefty project verify to a non-project management person, their eyes start to glaze in excess of,” she says. “So the notion is to assign them their slight pieces, and keep them straightforward.”7. Stay CalmRebuff theme what did you say? Happens in a project, kindliness under pressure is a ought to. “I get hold of, in the same way as a director, with the aim of it’s skillful having a project director who can communicate in the sphere of a level way around very heated, intense deadlines,” says Abernathy. “You arrange with the aim of calm and cool affix, with the aim of particular with the aim of is nicely maxim, ‘I go with with the aim of this is running later than usual,’ and it’s incredibly supportive.”8. Talk Business and TechnologyIn the same way as with the aim of suggests, communication skills are source, and efficient project managers can translate essential project in a row into both technical lingo and straight-up commerce reason, and not dwell on gratuitous details. Such an be similar to is especially efficient with commerce managers, in the same way as well in the same way as ensuring with the aim of “executives arrange investment in the sphere of the project with no a assortment of emotion or else technical argument,” says Abernathy.9. EvangelizeProgressive IT departments are using project management to, well, be themselves look superior. By the side of Abernathy’s company, the project management administrative center – part of the IT field – at present mechanism on each IT project, demonstrating to the complete company the importance of using its project management talent. “It’s changing the culture inside our organization,” interpretation Abernathy. “All the departments are since the clarity with the aim of is being provided, for the reason that on IT projects you’re still communicating available to the bigger business, on all the tad points and business processes.”

29

10. Position Project Management earliestMemo to senior managers: To maximize success duty, all projects need a project manager, or else by the side of smallest amount someone who acting single. “I’m a huge advocate of assigning project management duties to an particular. Even if that’s not their primary duty role, subsequently with the aim of is their primary role on the project, for the reason that we go with so much winner around projects with the aim of arrange restricted leaders,” says Abernathy. Liability so, she believes, ensures “all the T’s are crossed and I’s are dotted in place of the due diligence sooner than you perform commence a project. (This) makes projects depart so much added smoothly, and is a source to success.”Management Skills

Management skills are required for almost every job position. This is because every job requires management of one organizational resource or the other. Employees need to manage time and other resources allocated to them for the performance of their duties, human resource officers manage other employees and job positions and management manages the overall resource base of the organization. This therefore implies that everyone in a job position needs management skills, as each individual has to manage himself, his job and tasks before thinking of managing others under his leadership. The same thing for Project management skills.To begin with, we take a look at functions that constitute management, and then we can define the skills sets required. Each manager is expected to put up a plan on how he intends to use the resources allocated. Next, the resources are organized, directed and controlled. Motivation as a management function is not limited to leadership only, but motivating oneself is also classified as motivation. The basic skills every manager must possess are as follow:1. Problem Solving and Decision Making2. Planning3. Delegation4. Communication5. Direction6. Controlling

30

Problem solving and Decision making skills

Managers face problems daily in their job. Some of the problems are work related and others have to do with the relationships among staff. Managers should be able to resolve office conflicts quickly and effectively as these may cause problems in the performance of the job. Other problems may be related to the performance of the tasks assigned to employees and may include logistics problems and misunderstanding of job roles. With these problems, managers must make sure they are promptly resolved as they contribute to how well the job gets donePlanning skills

Planning one of the main roles of a manager and so every manager must know how to plan. Planning here may imply drawing up a program on how and when tasks are expected to be executed. Every other role or task of a manager must be according to this plan. The plan must include expected target and timelines. The targets must be realistic and attainable, given the available or expected resources and the timelines set.Delegation

A manager cannot do everything by himself and thus has to occasionally give out some to be done by subordinates. Delegation is one of the management skills that is frequently abused either because managers do not understand what delegation means or that they do not know how to delegate. Delegation means assigning or offloading some of the authority or task of a manager to subordinates. In the event of that, the manager is still responsible for the task and in case anything goes wrong, he will be held answerable.Communication

Communication is perhaps one of the demanding skills in every manager. A manager must be able to communicate effectively withsubordinates as well as other managers. Managers should communicate job roles and any other relevant information to their staff. Theyshould also be able to communicate problems such as delay in wages to staff.Directing

31

Managers are responsible for directing the departments or organizations they manage. They direct their staff towards the attainment ofthe goals and targets specified during the planning stage. They have to provide direction for all staff to follow in executing of their tasks.Controlling

Controlling is the most known of the management skills. A manager must always be in control of himself and his employees. He mustcontrol all that they do, how they do it and make sure they adhere to timeliness. Some people think management is all about controllingothers, but all the other roles count.Management skills are needed by everyone in one job or the other. This is because everyone is a manager, even if not managing otherpeople, oneself must be managed.

http://projectmanagementskills.org/

32

8. THE TYLENOL CRISIS, 1982

What happened?

In October of 1982, Tylenol, the leading pain-killer medicine in the United States at the time, faced a tremendous crisis when seven people in Chicago were reported dead after taking extra-strength Tylenol capsules. It was reported that an unknown suspect/s put 65 milligrams of deadly cyanide into Tylenol capsules, 10,000 more than what is necessary to kill a human.

The tampering occurred once the product reached the shelves. They were removed from the shelves, infected with cyanide and returned to the shelves (Mitchell, 1989). In 1982, Tylenol controlled 37 percent of its market with revenue of about $1.2 million. Immediately after the cyanide poisonings, its market share was reduced to seven percent (Mitchell 1989).

What did Johnson & Johnson do?

Once the connection was made between the Tylenol capsules and the reported deaths, public announcements were made warning people about the consumption of the product. Johnson & Johnson was faced with the dilemma of the best way to deal with the problem without destroying the reputation of the company and its most profitable product.

Following one of our guidelines of protecting people first and property second, McNeil Consumer Products, a subsidiary of Johnson & Johnson, conducted an immediate product recall from the entire country which amounted to about 31 million bottles and a loss of more than $100 million dollars. (Lazare, Chicago Sun-Times 2002) Additionally, they halted all advertisement for the product.

Although Johnson & Johnson knew they were not responsible for the tampering of the product, they assumed responsibility by ensuring public safety first and recalled all of their capsules from the market. In fact, in February of 1986, when a woman was reported dead from cyanide poisoning in Tylenol capsules, Johnson & Johnson permanently removed all of the capsules from the market.

33

How did Johnson & Johnson re-introduce the product to the market?

Once the product was removed from the market, Johnson & Johnson had to come up with a campaign to re-introduce its product and restore confidence back to the consumer.

1. Tylenol products were re-introduced containing a triple-seal tamper resistant packaging. It became the first company to comply with the Food and Drug Administration mandate of tamper-resistant packaging.(Mitchell 1989) Furthermore, they promoted caplets, which are more resistant to tampering.

2. In order to motivate consumers to buy the product, they offered a $2.50 off coupon on the purchase of their product. They were available in the newspapers as well as by calling a toll-free number. (Mitchell 1989)

3. To recover loss stock from the crisis, Johnson & Johnson made a new pricing program that gave consumers up to 25% off the purchase of the product. (Mitchell 1989)

4. Over 2250 sales people made presentations for the medical community to restore confidence on the product. (Mitchell 1989)

What was Tylenol's basis for its crisis management program?

The reason Tylenol reacted so quickly and in such a positive manner to the crisis stems from the company’s mission statement. (Lazare Chicago Sun-Times 2002). On the company’s credo written in the mid-1940’s by Robert Wood Johnson, he stated that the company‘s responsibilities were to the consumers and medical professionals using its products, employees, the communities where its people work and live, and its stockholders. Therefore, it was essential to maintain the safety of its publics to maintain the company alive. Johnson & Johnson’s responsibility to its publics first proved to be its most efficient public relations tool. It was the key to the brand’s survival.

Tylenol is one of thousands of companies who have faced a crisis that can be destructive to its company if not handled properly. In 1999, 17 years later, when Coca-Cola was faced with a crisis of its own, Nick

34

Purdom of PR Week wrote that "the PR industry has an important role to play in helping companies identify and manage risks that could damage their reputation."

While Tylenol succeeded in managing its crisis, the Exxon case was not as successful.

http://iml.jou.ufl.edu/projects/fall02/susi/tylenol.htm

35

Accelerating towards crisis: a PR view of Toyota's recall

The Japanese carmaker has seen its reputation for quality take a serious dent. It could have been so different, says a specialist in reputation management

Toyota has done many things right in responding to its current crisis: its spokespeople have filled the media with messages of reassurance, its PR people have blogged and tweeted non-stop to fill the information vacuum, its website is full of details about the recall and its call centre is working flat out to deal with customer enquiries. So why is its hard-won reputation still facing the biggest challenge in its corporate history?Analysis of Toyota's handling of the incident provides clues as to why – despite a barrage of communication over the last fortnight – it still seems to be fighting a losing battle. And the key to its problems lie primarily in what happened before the crisis erupted, rather than its response to it (though this has been less than perfect).

Central to Toyota's problem is its perceived delay in identifying and addressing the situation in the first place. Whatever Toyota says now, and however well it acts, there is a sense that it ignored the problem until it was forced to take action. Corporate denial appears to have been the order of the day, with the company following the advice of the Japanese proverb: "If it stinks, put a lid on it."

The most effective crisis management takes place before the problem escalates out of control during the "incubation" phase. Some of the biggest potential crises have been identified and addressed before they ever escalated out of control: this is crisis management at its best. This requires an organisational culture that is vigilant for potential crises, has open lines of communication from staff to management, and a willingness to address unpleasant truths.

In contrast, it seems Toyota had a culture ill-equipped to quickly identify and address flaws. The challenge is created by two elements of culture: firstly, an obsession with quality, which means that anything

36

less than perfection is seen as shameful and embarrassing. As a consequence, problems with quality are literally inconceivable and denial takes over.

The second interlinked element of culture is a hierarchical approach to management and a lack of open communication. Where this exists, junior employees who are best placed to spot early signs of crisis feel unable to point out flaws. As a result, problems go unnoticed and unresolved until they explode into a major crisis. Much better to put the fire out before it has reached this stage.

Another reason why Toyota has such a major challenge on its hands is that this crisis strikes at the essence of its reputation. Research from the thinktank Oxford Metrica shows that when a crisis strikes at the heart of brand values, it has the ability to do most damage. Toyota has built its reputation on quality and reliability, and anything that calls this into question is especially threatening. The same principle applied to Cadbury when Dairy Milk was found to contain salmonella in 2006: a perception that the brand had failed to put the health of its customers first struck a painful blow to a business built on wholesomeness, family and community.This is a lesson for all organisations: understand what lies at the heart of your brand and be especially vigilant for any activity that runs counter to it. It is essential that the company remains true to these values, not just in the run-up to a crisis but also in its approach to crisis management as well. Richard Branson interrupted his holiday to fly to the scene of a Cumbrian train crash in 2007. Of course, he was doing what he felt to be right, but at the same time his actions embodied Virgin's customer care. Anything less could have caused serious damage to the brand.As the Toyota crisis has rumbled on over the last fortnight, the company has failed to get ahead of events and take control. It looks like the crisis is managing Toyota rather than vice versa. Avoiding this fate requires decisive action taken in a co-ordinated way. The fact that Toyota has had to announce a second recall only days after the first one indicates an organisation that is responding to events rather than

37

setting the agenda. Compare this with Mattel, which managed a crisis of a similar magnitude, in 2007, when faced with safety concerns about its toys. It announced an immediate recall and its chief executive Robert Eckert devoted weeks to communicating the steps the company was taking to address the issue. As a consequence, its brand remains strong.The issue of the company spokesperson is an interesting one. Conventional wisdom dictates that the chief executive should be the face of the organisation in a major crisis. I would endorse this view, so long as the chief executive has the requisite skills to perform this role. No chief executive can be absent from the public eye when the business is in the middle of a crisis but this does not mean that the chief executive must be the main spokesperson. Watching Eurostar's chief executive, Richard Brown, fumble his way through media interviews when its trains broke down in the Channel tunnel over Christmas will have done nothing to protect the reputation of the organisation. And Toyota GB's managing director, Miguel Fonseca, almost certainly caused more confusion and concern as a result of his interview with BBC Breakfast on Friday. In neither case was it the right decision to field the top man.It is not necessarily the reality of how a business manages a crisis that will determine its fate. It's how the organisation is perceived to have managed the crisis: in many ways a crisis turns into a very public, very high stakes audit of management's competence. Get it right and the organisation's reputation and value can be enhanced; get it wrong and serious – sometimes terminal damage – can result.

Within this context, the role of the media spokesperson is pivotal, even in this age of social media. Observers draw conclusions based not just on what the spokesperson says, but also their body language, demeanour and tone of voice. Many senior, successful businesspeople turn a whiter shade of pale when a camera or microphone appears under their nose: executives like these are unlikely to represent their organisation well in a crisis. Even more importantly, they will be ill-equipped to communicate information clearly and simply to members of the public affected by the crisis. So businesses must identify their

38

best communicators, train them beforehand and provide plenty of practice of dealing with a media interview before they step into the white hot glare of media scrutiny amid a product recall.

What happens before a crisis – creating the right culture to avoid crisis incubation, developing workable crisis management plans and processes, and training managers likely to be part of a crisis response team – will play a large part in determining the fate of the organisation in the event of a crisis. Full recovery requires continued communication – and actions – to regain the trust of stakeholders affected by the crisis.

If Toyota's recent troubles encourage more businesses to recognise the impact that crises can have on a business's long-term reputation and take steps to protect themselves as a consequence, then at least some goodwill has come from recent events.

Jonathan Hemus is director of Insignia, a reputation management and communication consultancy, specialising in crisis, issues and online reputation management

© 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved.

http://www.guardian.co.uk/business/2010/feb/09/pr-view-toyota-reputation-management

39

SUPPLEMENTARY MATERIAL

A Manager's Guide to Project Management: The Goals of Project ManagementBy Michael B. Bender

Date: Jun 2, 2009

Executive management shoulders the responsibility to conceive, design, implement, and manage the organization’s overall objectives, culture, environment, and processes for all disciplines, including project management. MIchael B. Bender shows how focusing on five key areas will help you drive your organization’s success in projects and programs.

Every organization, whether for-profit or not-for-profit, embraces a strategy to move into the future. Sound strategies involve a synergy of goals working together to move the organization toward its vision. Organizations engage in projects, processes, operations, and research to achieve these strategic goals.

In this book, we explore one of those key actions: projects. I present projects not from the classical project manager’s perspective (enough books have been written about that), but from yours: the executive. We examine your influence over projects, whether intentional or unintentional. You will see how the decisions you make, the culture you generate, and the direction you present determine the successes and failures of projects and programs. I present a sound, comprehensive, yet simple architecture that generates a successful project management business environment—optimizing resources, eliminating waste, achieving all organizational and strategic objectives, and ensuring growth and increased value.

I begin with a brief story.

A Day in the Life of Alex

Alex woke at the usual time, but this routine bothered him now. He used to love his job, but now it just seemed like a tedious sequence of uncoordinated events strung together, serving no purpose. Alex was an electrical engineer, specializing in radio transmitter modules for integrated circuits—a job he loved—or, at least, used to. It seemed like he just didn’t get to do a lot of engineering anymore.

Alex was working on a project to upgrade an existing chip design. His design was due Friday, and it was already Tuesday. He wouldn’t be able to finish the design by Friday, let alone go through a proper design review in time. He had dropped subtle hints to Diane, his project manager, but he hasn’t formally informed her of the delay. He needed to do that today—they had a status meeting scheduled for 3:00 p.m.

40

Alex arrived at work at the usual time.“The unbroken pattern is continuing,” he thought to himself as he got his coffee and sat down at his desk. He used to arrive at work at 8:30, but time pressures led him to start earlier in hopes of getting a few hours of real work done before the interruptions began. Now 7:00 a.m. was the norm. The earlier arrival hadn’t helped. By the time he plowed his way through the array of e-mails and cleared his desk from the previous day’s chaos, most of that extra time had vanished.

“Today will be different,” he thought to himself. “Today I get on top of this design. At a minimum, I need to put a plan together so that I can tell Diane when I’ll be done.”

He gathered the papers strewn across his desk into one large pile and placed them on the floor behind his chair. He turned off his e-mail server, knowing that even looking at the list of unread e-mails would distract him too much today. Today he would focus on only one thing—the new design. He knew tomorrow he’d pay for this—tomorrow he’d need to confront that stack of papers and those e-mails, but not today. Today he was determined to break the pattern. He rummaged through his desk, gathering the papers he needed for his design. He fired up his computer and arranged the windows in the usual way. His energy level was rising, his motivation returning.

It took Alex almost 20 minutes just to get organized and figure out where he’d left off. “That’s okay,” he thought, “at least now I can get to work.” He had left off in the middle of improving the thermal stability of the first-stage amplifiers. Initially, the work went slowly, but he gathered speed. Finally he was doing what he loved and what his project manager wanted him to do.“I’ll stabilize this stage,” he thought,“and then work on a plan to finish the design for the 3:00 meeting.”

However, Alex’s productivity was short-lived. Not a half-hour later, Jim, the head of production, came to visit. Jim usually arrived at 9:00, but he was in early today. “Didn’t you get my e-mail this morning?” he asked as he poked his head into Alex’s cube.

“I’m trying to get this design finished for Diane by Friday,” Alex replied.

“They’re having problems making a working prototype of the XR–120 chip. Call them immediately—we need to get that chip out to production in three weeks!” Jim commanded as he turned and left.

By “them,” Jim was referring to the company’s prototype and manufacturing partner in China. As an engineer, Alex was often required to handle prototyping and production problems. He had actually been to the facility once but had never gotten to see the country—they had worked him 18-hour days while he was there.

Alex knew this wouldn’t be an easy problem. They had rushed the design and shortened the review cycles of that chip. The original project plan was sound, but last-minute requirement changes put the schedule into a tailspin. “I’ll bet the chip’s getting too hot,” Alex thought to himself. He turned back to his desk. He looked at his computer screen, with his windows in perfect placement for designing, his papers organized precisely the way he liked them, and his tools staged to carry out his commands. He sighed, “I guess today isn’t the day after all,” he said out loud.

41

He gathered his papers into a stack and placed them behind his chair next to the previous one.“Phone conversations with China are difficult—I’d better do my homework,” he thought as he closed the design diagrams for his current chip. He learned that reading their e-mails worked better than phone conversations—his contacts in China could write English better than they could speak it. He suspected that it was because they could review and rework the e-mail before sending it.

He fired up his e-mail server to discover nearly 25 e-mails, almost half of them marked “URGENT!” They hadn’t been there the night before, but that’s one of the problems working with China. The time difference caused e-mails to stack up from one side of the planet while the other side slept. “It’s just after 6:00 p.m. over there,” Alex thought. “I’d better get moving on this while someone is still at the plant.”

The rest of Alex’s day was similar to all the rest—dealing with the prototype problem, appeasing the vice president of marketing’s concerns regarding the ease-of-use issues their clients would have integrating the chip with their products, and helping out the younger engineers struggling through their issues. He even got a change on the thermal requirements for his current chip design. “Well,” he thought, “I guess I’m glad I didn’t finish the thermal stability design—it wouldn’t have worked for this new requirement anyway.”

Alex could have been a biochemist for a pharmaceutical company, a plant designer for a soft-drink manufacturer, a researcher for a polymer manufacturer, an infrastructure architect in an advertising firm’s IT department, the exhibit designer for a museum, or a product manager for an insurance company. Alex’s problems are not technical—they’re based on the way his organization runs projects.

Project management has mushroomed as a serious, recognized management discipline only within the last two decades. Twenty years ago, project management was an esoteric discipline, restricted to large systems integrators (such as RCA, Martin-Marietta, Raytheon, and Sperry-Univac), the construction industry, and a few savvy midsize organizations. Today you can get an MBA in it.

However, only this recognition is new. Project management is as old as mankind. The project managers who built the Egyptian pyramids used the same techniques in place today. Labor relations might have differed, and they might have used different terminology, but Gantt charts (perhaps called Prometheus charts back then), precedence diagrams, and resource leveling were critical to successful pyramid building.

The Problems You FaceAlex’s problems aren’t tactical—they’re based in the organization’s culture, environment, and lack of strategic planning. The problem in China was caused not by bad project management practices, but by a reactionary corporate environment. Although project management offers excellent tools for managing scope change, political, cultural, and environmental factors frequently derail these efforts, plunging the project team into a series of emergencies. Simple concepts and techniques employed at the senior-management level create the right environment to manage project scope change. You can trace most emergencies to either poor project management or, more frequently, their surrounding environment. Alex’s emergency will now cause another: the delay of the current project, which will cause that project

42

to be rushed, which will then cause another emergency, which will cause the next project to be rushed, which will....

As an executive manager, you help establish the personality of the organization. You set the culture, processes, morals, and ethics (both personal and work ethics) for the organization. You do this intentionally or unintentionally, architected or happenchance, planned or evolved—but you do it.

The discipline of project management is well defined. The Project Management Institute (PMI) has written a standard for project management practices (ANSI/PMI 99-001 2008), also known as the Guide to the Project Management Body of Knowledge,1 in its 4th edition at the time of this writing (PMBOK Guide2). It codifies 42 processes with well-defined inputs, tools and techniques, and outputs. Whether your organization conforms to this standard, another standard, or your own methodology, project management is quite well defined as a discipline.

If your organization struggles with projects, it’s not the discipline’s fault. For now, we will blame it on evolution. The practice has evolved from the middle out. Project management in its current format was developed primarily in the 1940s–1950s (Prometheus charts notwithstanding). It concentrated on its own internal processes. With those processes now well developed, it must look outward—or, in our case, upward.

As a seminar leader and management consultant, I frequently find that clients have skilled project managers, yet the organizations still struggle to get projects done on time and on budget. Their problems do not lie within the discipline of project management. Their problems might be the organizational culture, the way project management is viewed within the organization, political strife, structural flaws, departmental silos—a variety of issues can plague even the best project managers. In this book, we pursue these issues and attempt to address them from the executive manager’s perspective.

Starting with the assumption that our project management is sound, let’s examine the influences senior management can have on project success.

Wasted Resources

All MBA programs address resource utilization. As an executive manager, one of your primary objectives is to get more things done (in our case, projects) with fewer resources. You look around your organization and see people working hard, staying late at night; you see a beehive of activity, yet you can’t seem to get projects done on time and on budget. How can such a high level of activity surround the company, yet its projects are constantly delayed or never finished?

Let’s look at some of the results of the cultures we create.

The Project du Jour

Overly dynamic project priorities cause resources to quickly switch among projects and among activities, without finishing the original project or activity. Then suddenly priorities switch again. The result is a string of half-completed projects, exhausted staff, demoralized teams, and little accomplishment.

43

The Warm-Body Syndrome

When I started training in project management, one common problem facing project managers was a lack of human resources. Today the complaint is not the lack of resources, but the fact that the resources have the wrong skills. Attendees continue to complain that the teams they’re given have little experience in the disciplines they need. Perhaps the most notable example: I often find administrative assistants taking advanced multiproject management seminars with no basic project management training. Their bosses have asked them to manage a major project in addition to their regular responsibilities. Opportunities, situations, and emergencies pop up seemingly without warning. In an attempt to capture the opportunities, handle the situations, or manage the emergencies, we grab the next warm body and throw them at the problem, whether or not that person is qualified.

Staff Doing Project Work and Their Real Jobs

The phrase “my real job” grew out of one of the greatest problems facing project management today: the concept that projects are ancillary activities, falling into the “other jobs as assigned” category of formal job descriptions. They’re viewed as distractions, annoyances, and things that make us work late.

The truth is quite the opposite. Projects are an integral part of business activities. They are as much a part of the organization as process, operations, and research. One of my key objectives in this book is to present tools and concepts to help you successfully integrate these activities, ensuring success on all organizational fronts.

The Need to Multitask

Whether the perceived need to have all employees multitask derives from lack of planning, a truly dynamic environment, or some other cause, multitasking seems to be a requirement of every individual. Yet individuals are just that—individual. Some are good multitaskers, some are specialists. Some people quickly skim across the top of subjects; others delve deeply into them. Demanding that every employee multitask is as ridiculous as demanding that every employee specialize. Organizations need both, and projects need both. Your objective as an executive manager is to build a culture that balances these skills and employees across organizational activities—in this case, across projects.

Projects Not Achieving Their Goals

Good project managers know how to develop project plans that achieve goals. The assumption, of course, is that the goals are defined, clear, and (to some degree) static. Consider some common problems related to achieving goals:

We Didn’t Think of That!

As the project evolves, key stakeholders realize that they forgot something. They rush to the project manager to implement their new requirements—but by doing so, they re-create the same problem. In their haste to get something into the project,

44

they don’t think it through. So it happens again and again. It’s a prime cause of scope creep. The scope of the project creeps upward and onward. This is simply the result of poor planning.

Politics Interferes with Sound Business Decisions

All organizations have their politics. As clever managers, we understand that politics can be beneficial to the organization. Yet as the political power and influence change among the key stakeholders, so do their underlying projects. In such organizations, the project managers keep revising their plans as the political landscape changes, rarely achieving the projects’ goals.

Things Just Change

We live in a dynamic universe—things just change. Project management has well-developed tools and techniques for handling legitimate change and for staving off illegitimate change—all for the mutual benefit of the client, performing organization, and other key stakeholders. The question remaining for the executive is whether your organization supports these techniques or whether political influences, culture, and environmental factors thwart sound change-management practices.

We Get Smarter

As the project evolves, so does our knowledge of it. Clients, the key stakeholders, and senior management all get smarter. Does your culture constantly throw these new ideas at the project manager without regard to schedule or cost, or does your culture evaluate enhancements and judge their value?

Project Overruns and Delays

A variety of issues can cause project overruns and delays. Many of these issues are legitimate, expected, or even planned. Project managers, for example, will recognize new, innovative technologies or dealing with new vendors as project risks and develop contingency plans, time, and money. These examples are not the topic of this discussion. Here we examine those delays and overruns that you can overcome by improving the culture and organizational management. Specifically, we examine the following potential problems.

Forced Deadlines

As humans, we started experiencing forced deadlines the day we were born: nap at 2:00, bottle at 6:30. We continue to see the same effect as we get a bit older: “The book report is due Thursday and you’ll have an outline for me by Monday’s class.” So we grow up developing schedules based on deadlines set by superiors (not necessarily in the skills or intelligence sense, only in the authoritative sense). The results: We learn to back into those deadlines. It doesn’t matter whether the tasks are doable, it doesn’t matter that we have a dozen other items on our lists or what our availability is, and we don’t care whether we throw quality out the window. We’re taught to meet the deadline. It’s a habit, the way we’re brought up. Our estimates

45

are not based on the work and the resources doing the work; they’re based on dates chosen for political reasons by dictatorial personalities. In such cultures, overruns and delays are inevitable.

Poor Project Finance Management

The discipline of project management contains tools and techniques for managing project finances. Interestingly, in our profit-driven culture, these techniques are rarely enforced and frequently poorly implemented. Whether you’re a for-profit company or a not-for-profit organization, sound financial project management is critical to fiscal stability and growth.

The Definition of Done

Did you ever stop working on a task that was almost complete (or one you thought was complete) and later discovered that it wasn’t? Do you remember the time and energy it took you to pick that task back up again and really finish it?

Interestingly, this is one area in which project management has been historically lacking. Although technologies improve, our culture tends to rush us to the next hot task, forcing us to abandon our current task prematurely. You’ll hear statements such as “It’s good enough for government work,” “Ship it—we’ll fix it in the field,” and “It’s good enough for now—we have this other problem....” These decisions are usually time driven, foregoing quality and, interestingly, cost considerations; the more time we wait to finish the task, the more money and waste we incur.

The Goals of Projects and Project ManagementUltimately, both projects and project management have only one goal: to add value to your organization. You, as an executive manager, establish the values important to the organization. You then communicate these values and establish a strategic plan to foster and improve the organization along these values.

Projects are the actions an organization performs to increase its value.

Projects cost time and money. The value the projects add must be greater than the expense incurred. In addition, the projects undertaken must be the best choice in furthering these values.

Project management, as with all activities an organization undertakes, must also add value; again, the value it adds must be greater than its cost. Perhaps a bit oversimplified, the goal of project management is to reduce the cost and time for completing projects.

To manage projects, you hire project managers and pay them a salary. They then add more activities to the project for planning, management, and oversight, which all add to the cost and time of the project. However, these costs and activities must reduce both the

46

cost and time for the project by increasing efficiency and reducing rework. For both time and cost:

Project Planning + Efficient Execution

<

Inefficient Execution + Rework

Specific Goals for Project Management

Let’s examine some more specific goals for project management.

Your Clients Are Happy

You and your project managers share this goal. Of course, this is one of the key goals of project management. However, you will see that client satisfaction in projects is much more complicated than it might initially appear. Clients rarely know what they really want. Many of those that do know have difficulty articulating it in terms the project team can understand. The client’s goals frequently conflict with other key stakeholders’ goals, including yours. Political strife, conflicting objectives, and organizational silos all combine as barriers that inhibit project managers from achieving this goal.

You’re Making Money or Being Fiscally Responsible

If you are a for-profit company, this is one of the critical success factors for most projects. Yet many management structures fail to either enforce profitability during project definition or measure it after project completion. Many organizations that do attempt it fail to capture important information, which produces false results.

If you are a not-for-profit organization (I cover both in this book), then, at a minimum, you must maintain sound fiscal strategies. Although your primary objective might be preserving and presenting history; spreading a religious belief; running a city, state, or federal government (or department); or looking for a cure for cancer; fiscal responsibility is a core competency for any not-for-profit organization.

You’re Achieving Your Strategic Objectives

Organizational success relies on goals synergy, a collection of strategic objectives that work in unison for organizational betterment. Of all the activities that an organization embraces, projects are activities specifically undertaken to achieve these goals. In this book, I use simple techniques to ensure that your collection of

47

projects works with the same synergy—reducing waste, reducing rework, and achieving your strategic goals efficiently and effectively.

You Optimize Your Resource Usage

Your resources are your most valuable (or, at least, most expensive) asset. Wasting resources is almost criminal. Yet organizations incorporate and cleave to practices that generate incredible waste. Constant resource shuffling, dynamic project reprioritization, and ever-changing goals all cause staff to abandon, postpone, or half-complete activities, in an attempt to meet a deadline.

These practices are not the only resource-wasters. Projects that don’t align with organizational objectives employ precious resources that actually hinder organizational growth. Abandoned projects, or projects that don’t achieve all their goals, absorb resources that could have been applied more productively elsewhere.

I address all these issues, making sure your resources run efficiently and focus on the organization’s vision.

Things Are Getting Better

My last objective, perhaps, is our simplest. No matter where you are, no matter what condition your projects might be in, and no matter how well your organization manages its projects, you want things to get better. Fortunately, improving project management is as simple as improving any business process. Also fortunately, the techniques are the same. I seek to present project management in the correct light to enable you, the executive, to promote improvement throughout your organization.

How We Achieve These GoalsI’ve arranged the book based on several overriding themes. Although these themes weave throughout the text, I’ve divided the book into sections that focus on each theme:

Part I, “Understanding Projects and Project Management”—When properly supported, project management already defines sufficient tools and techniques to achieve project success.

Your role as an executive is to identify those aspects of project management that are critical to your organizational success and then to promote and improve those aspects. Chapter 2, “Project Management Framework and Structure,” and Chapter 3, “Project Definition and Planning,” cover project management to help you better understand the discipline for this purpose. These chapters also present key concepts needed for executive management and strategic planners for improving overall management, planning, and communication at the senior staff level. Even if you’re knowledgeable in basic project management, these chapters offer insight into those areas of project management needed for the overall architecture of the organization.

48

Part II, “Aligning Project Management with the Organization”—Projects are not ancillary activities to our real jobs; they are an integral part of all organizations. Successfully aligning project management within the organization involves three aspects: strategic, organizational, and process.

o Strategic alignment ensures that project goals align with and support organizational goals. When properly structured, this alignment reduces scope creep, overly dynamic priorities, resource shuffling, and activity waste. Fortunately, project management itself offers tools for such alignment.

o Organizational alignment integrates project resources and activities with the rest of the organization. We examine committees, teams, and other structures to help facilitate project success and resource utilization, and improve communication and decision making throughout the organization.

o Process alignment examines project management as a formal business process. By examining the interfaces among project management processes and other business processes, senior management can improve product hand-off, resource hand-off, and communication among all organizational activities.

Part III, “Project Management Oversight”—As with all organizational disciplines, project management must be managed.

As an executive, you are responsible for managing all disciplines employed within your area. Project management is no different. Each organization must employ sufficient oversight to make sure that work activities are being done correctly, that phase reviews occur at the right times and for the right reasons, that resources move smoothly between project work and other organizational work, that project managers correctly manage their budgets and finances, and that clients are satisfied.

Part IV, “Projects as Capital Investments”—Projects are capital investments. Projects invest resources and capital to achieve goals. The project’s primary objective might be profit, more efficient processes (process improvement projects) that will save money over the long run, or increased market share to create more sales. The organization’s strategic plan incorporates multiple objectives, all designed to move the organization forward. Projects are the means by which you invest your capital and resources to obtain these objectives.

Part V, “Globalization and Resource Optimization”—Globalization and advanced techniques enable us to optimize resources. Globalization has created a true need for strategic outsourcing for both manufacturing and project management. I present techniques to add flexibility and improve the organization’s capability to outsource both projects and activities within projects.

I also present advance resource optimization techniques, including Dr. Goldratt’s Theory of Constraints, queuing theory applied to a dynamic project environment, centralized resourcing, and others.

Project Management MaturityProject managers need to create a unique product that satisfies multiple, conflicting stakeholders using resources that don’t report to them under tight budgets and time

49

constraints—simple, right? As we will see, project management is a vast topic. It can’t be learned in a day. Project management takes years of experience to master the art and the science.

Organizations are no different. As individuals within the organization mature in their ability to manage projects, so does the organization.

As the software industry began to grow, the U.S. government contracted with the Software Engineering Institute (SEI) to develop a model that ranks an organization’s capability to perform projects. That model is called the Capability Maturity Model (CMM). Later the SEI generalized and further developed the model to include all projects. The later model is called the Capability Maturity Model Integration (CMMI).

Figure 1.1 shows five maturity levels: initial, managed, defined, qualitatively managed, and optimized. To be rated at each level, the organization must demonstrate that it can achieve all the defined goals for that level. You can use this model as a roadmap to help you mature your project management capabilities in a controlled and predictable manner. SEI’s Web site is www.sei.cmu.edu. SEI is tied to Carnegie Mellon University.

Figure 1.1 CMMI maturity levels

SummaryProject management is an evolving discipline. Historically, the discipline concentrated on itself—focusing on the tools, processes, and techniques for successfully executing projects. Now that these are well developed, the discipline must look outward, focusing on its environment. Executive management shoulders the responsibility to conceive, design, implement, and manage the organization’s overall objectives, culture, environment, and processes for all disciplines, including project management.

Focusing on these key areas will help you drive your organization’s success in projects and programs:

Foundations—Establishing an understanding for sound project management practices

Alignment—Ensuring that projects align with all the organization’s activities Management—Tracking, measuring, and improving project management as

an organizational discipline Investment—Ensuring that the capital and resources invested in project

activities yield valuable results Resource optimization—Using outsourcing and advanced technologies to

improve resource optimization

50

© 2012 Pearson Education, Inc. All rights reserved.800 East 96th Street Indianapolis, Indiana 46240

51

A Holistic View of Six SigmaBy Roger W. Hoerl,Ron D. Snee

Date: Dec 3, 2004

This chapter has provided a general overview of Six Sigma—the key elements of the initiative and the key concepts, methods, and tools—and the tremendous opportunities for using Six Sigma to improve processes, functions, and organizations beyond the factory floor.

"Only the over-all review of the entire business as an economic system can give real knowledge."

—Peter F. Drucker

You may have heard of Six Sigma, a process-focused strategy and methodology for business improvement. Companies such as General Electric, Honeywell, Motorola, DuPont, American Express, Ford, and many others, large and small, have been using it to improve business performance and realize millions of dollars in bottom-line savings (Honeywell 2002, Welch 2001, Young 2001). Six Sigma is a strategic approach that works across all processes, all products, and all industries. Six Sigma focuses on improving process performance to enhance customer satisfaction and bottom-line results. Motorola created the methodology in 1987, and the use of Six Sigma by others increased rapidly during the 1990s. Six Sigma remains in widespread use as of this writing.

You also may have heard how Six Sigma has been used to improve the performance of manufacturing organizations, but thought it doesn't apply to your situation. Perhaps you don't work in manufacturing. Perhaps you want to improve results in a financial services organization. If so, you must ask whether Six Sigma can be used to improve the performance of your organization, and if so, how. The answer to the first part is a resounding yes! In our experience, and that of many others, Six Sigma works in all processes, in all parts of the organization, and in all organizations, services and health care as well as manufacturing. The second part of the question (how) is answered throughout the remainder of this book.

Six Sigma "beyond the factory floor" refers to improving processes in the non-manufacturing parts of the economy (the rest of the economy beyond manufacturing, such as financial services, e-commerce, health care, and so on). For reasons discussed shortly, we refer to this as the real economy. This real economy includes businesses that do not manufacture, such as banks and law offices, non-profits (including non-profit hospitals), and all the other (non-manufacturing) parts of organizations that do manufacture products. For example, Figure 1.1 shows a systems map for a manufacturing company. You can see from this graph that manufacturing is only one of many processes—such as delivery, finance, and human resources—needed to operate the company. Figure 1.2 shows a systems map of a typical manufacturing facility. Here again you see that many non-manufacturing

52

processes are needed to run the facility, such as purchasing, shipping, and maintenance.

Figure 1.1 A corporation's core processes.

Figure 1.2 A manufacturing facility.

The real economy therefore consists of all businesses that do not manufacture physical products as well as all the other functions and processes involved in manufacturing. All processes in an organization present opportunities for improvement. This is what we mean by a holistic view of Six Sigma—seeing the big picture and not allowing our deployment or results to be limited by preconceived notions about Six Sigma and where it applies.

This book is organized according to the three major levels at which organizations must consider how to adapt Six Sigma to receive its full benefits beyond the factory floor:

The deployment (strategic) level—How to think through overall deployment of the initiative across the entire organization.

The project (tactical) level—How to select, conduct, and close out projects in these environments.

The methods and tools (operational) level—How to properly apply the analytic techniques of Six Sigma when faced with difficulties common beyond the factory floor, such as skewed (non-normal) cycle time distributions, or the prevalence of discrete data.

This book is intended as a guide for those just starting their Six Sigma deployment and as a reference for experienced Six Sigma practitioners such as Six Sigma leaders, Champions, Master Black Belts (MBBs), Black Belts (BBs),Green Belts (GBs), and for others who are involved in the deployment of Six Sigma and want to assess the effectiveness of such. Of course, different sections of this book are likely to be of greater value to some than to others (depending on their role with Six Sigma).

In Statistical Thinking—Improving Business Performance (Hoerl and Snee 2002), we explained the concept of statistical thinking and its key elements—process, variation, and data. We focused on how to use statistical thinking to improve business processes—those beyond the factory floor—by reducing variation. All processes vary, and reducing variation, both between the process average and process target, and also around the process average, is a key to improving process performance. In fact, Jack Welch (Welch 2001) states that process consistency is, in many ways, more important to customers than the average level of process performance. Statistical Thinking—Improving Business Performance also contains detailed descriptions of the statistical thinking and Six Sigma tools, including how they apply in a business setting. These tools include basic problem-solving tools (scatter plot, histogram, run chart, Pareto chart, and so on), regression, experimental design, statistical inference, and so on. Since writing this book, Six Sigma is the best way we have found to actually deploy statistical thinking broadly.

In Leading Six Sigma: A Step-by-Step Guide Based on Experience with GE and Other Six Sigma Companies (Snee and Hoerl 2003), we showed how to deploy Six Sigma in

53

an organization and how to integrate it with other improvement initiatives. We presented detailed case studies, both successful and unsuccessful, identified the key factors required for success, and presented a detailed deployment strategy. The last chapter included a set of commonly asked deployment questions; our answers to them are based on our experience deploying Six Sigma. The majority of this material was intended for those working in a manufacturing or engineering environment, although the issue of deployment in the real economy was discussed.

This book takes the methodology one step further, focusing on perhaps the most challenging use of Six Sigma: improving processes beyond the factory floor. This requires special attention because formal improvement methods have been applied less frequently here, resulting in less being known about how to improve these processes. For example, less data are typically available on real economy processes than manufacturing. Chapter 2 addresses the differences between manufacturing and real economy applications of Six Sigma more fully. Understanding these differences will help you better understand what is required to improve processes beyond the factory floor.

Those with a holistic view of Six Sigma will see the potential "big picture" impact it can offer, instead of seeing it as a narrow technical methodology used in manufacturing. They will realize that Six Sigma can and should be applied to all types of organizations, in all functions, and by all employees (or volunteers). The holistic approach also utilizes Six Sigma as a key organizational development strategy. For example, GE, 3M, DuPont, Honeywell, and several others have consciously used Six Sigma to develop their future leaders.

This first chapter discusses why Six Sigma is needed beyond the factory floor and how it can, and has, made significant impact here. The chapter then explains how Six Sigma should be viewed as part of an overall process management system. Chapter 1 concludes with a brief overview of the Six Sigma methodology and a discussion of the key roles involved.

The Impact of Six Sigma Beyond the Factory FloorIt is generally agreed that more than half the opportunity for improvement in a manufacturing company lies beyond the manufacturing function. This opportunity can be as much as 30% to 40% of sales. Improvement beyond manufacturing has been limited in the past for at least three key reasons: lack of well-defined processes, lack of process metrics and data, and lack of an appreciation for the importance of reducing variation (both internally and to the customer). The advent of Six Sigma methodology and information technology systems has changed this situation, enabling organizations of all types to focus on improvement as never before.

The need for broadening the use of Six Sigma beyond the factory floor becomes clearer when you reflect on the trends within the business world. Three key trends, closely connected to one another, are driving the world economy: migration away from manufacturing-based economies, the rapid expansion of information technology (IT), and increasing global competition. The economies of the United States, most of Western Europe, and many other developed countries transitioned from an agricultural base in the 1800s and early 1900s to a manufacturing base in the 1900s. This movement is known as the industrial revolution, and it brought profound economic and social changes.

54

With the rapid expansion of IT in the late twentieth and now early twenty-first century, the world economy has continued to evolve. For example, the occupation of computer scientist did not exist during the industrial revolution. International finance, statistics and operations research, music and entertainment, e-commerce, and consumer credit are just a few examples of professional fields whose rapid expansion has been enabled by advances in IT. The overall result of this evolution is that fewer and fewer people make their living by manufacturing something. So-called white-collar jobs, such as accounting, health care, and computer science, are replacing the traditional blue-collar jobs on the assembly line. Figure 1.3 (Bisgaard 2002) shows data on the growth of such jobs in the United States relative to drops in agriculture and manufacturing over the past century. Similar results apply to most developed countries in the world today. For the purposes of this graph, white collar refers to jobs involving primarily mental work (computer scientist, accountant, and so on), blue collar refers to primarily physical labor (construction, assembly line, and so on), and service refers to jobs that interact directly with customers, such as fast-food counter service, hotel receptionist, and postal delivery.

Figure 1.3 Occupational distribution of the U.S. labor force.

Agricultural jobs have been decreasing steadily for more than 100 years, and blue-collar jobs began a steady decline around 1950. Clearly, the United States no longer has a manufacturing-based

economy. The real economy in the United States today, as well as in most of the developed world, involves such fields as financial services, health care, e-commerce, and logistics, but less and less manufacturing, which has tended to move offshore to low-cost locations. In fact, it has been reported that manufacturing now represents less than 20% of the U.S. gross domestic product (George 2003, 3). Productivity improvements and increased use of automation continue to reduce the number of blue-collar jobs. Some of the key players in the real economy that need to benefit from Six Sigma include the following:

Health care Financial services

Educational institutions

E-commerce

Government

Retail sales

Food service

Logistics and transportation

Of course, the list could go on and on.

Even within manufacturing businesses, less and less of the income and profit derive from manufacturing and selling "widgets." GE Transportation Services (GETS), for example, is a division of GE that manufactures locomotives. In the year 2000 GE Annual Report (p. 25), GETS noted that their earnings increased that year despite lower revenues, which resulted from a softening market for locomotive sales. How

55

did GETS increase earnings in a softening market? It was "the result of a fifth consecutive year of double-digit growth in our global services business."

By taking advantage of the latest communication and information technologies, GETS has developed value-added services, such as predicting and optimizing maintenance requirements, satellite tracking of locomotives, logistics planning, and so on. Even a "smokestack industry" such as locomotives is transitioning from selling "widgets" to selling information and value-added services. The 2001 GE Annual Report (p.5) noted that the total of contractual services agreements within GE reached the $60 billion mark (yes, $60 billion!) in 2001. These service agreements continue to grow at the time of this writing. Similarly, General Motors now makes more money from financing than they do from selling cars. The public generally thinks of GM as an automaker, but it would be more accurate to think of GM as a bank that also sells cars on the side.

These examples, the data in Figure 1.3 and system maps such as Figure 1.1, highlight the fact that even within companies that manufacture and sell things, a major portion of the people and processes critical to the organization's success lie beyond manufacturing. Part of the holistic application of Six Sigma involves taking Six Sigma to each of these areas in turn, instead of restricting Six Sigma to manufacturing. Also productivity and automation gains are reducing the cost of goods and services sold. These gains further indicate that you should look beyond manufacturing and operations for improvement opportunities.

Of course, the growth of IT has also intensified global competition, and thereby provided further impetus for real economy organizations to improve. Developing countries such as India and China are expanding the technical skills of their labor force, including in such areas as computer science and software development. With the rapid expansion of the Internet and other IT tools, developing countries have created a competitive, low-cost alternative for organizations that need skilled labor. It is now feasible for a software developer in India to work remotely for an organization located in Germany, Australia, or the United States.

In fact, Time magazine (Time 2003) anticipated that U.S. financial services firms would move more than 500,000 jobs to India in the next 5 years. This job-migration figure does not include migration of jobs from other developed countries, the impact of the rapidly growing Chinese economy, or the migration from industries other than financial services. This trend is reminiscent of the tremendous impact that global competition had on manufacturing industries, such as automotives and electronics, beginning in the 1970s. Clearly, improvement is just as critical to survival in the real economy today as it was to manufacturing in the latter part of the twentieth century.

This need to improve has added an additional organizational responsibility. It used to be that we had one primary task: Come to work and perform our job to serve our customers. Global competition requires of us a second task: Improve how we do our work to better serve our customers to stay ahead of the competition. Therefore, we now have two jobs: doing our work and improving how we do our work. Six Sigma provides many of the needed road maps and tools for doing this improvement work, thereby enabling us to serve our customers more effectively and efficiently.

Fortunately, many real economy organizations are "stepping up to the plate" relative to Six Sigma and reaping impressive benefits. GE has been applying Six Sigma to financial services almost since the beginning of its Six Sigma launch. A single project in credit card collections produced almost $3 million in annual benefits (Hahn et al.

56

2000). Commonwealth Health Corporation (CHC), a health-care provider based in Bowling Green, Kentucky, generated more than $800,000 in savings in the first 18 months of deployment. Chapter 3 presents CHC's case study in detail. The gains realized by American Express from Six Sigma are discussed in Young (2001). Bank of America is also deploying Six Sigma and reaping significant financial benefits ($2 billion in the first two to three years; Jones 2004).

The early implementers of Six Sigma such as Motorola and AlliedSignal began their initiative in manufacturing and moved, sometimes slowly, to applying Six Sigma across the organization. Former Motorola CEO Bob Galvin stated, "The lack of initial Six Sigma emphasis in the non-manufacturing areas was a mistake that cost Motorola at least $5 billion over a four-year period" (George 2003, 3). Note that beginning Six Sigma in manufacturing, or operations of service companies, is a good strategy because process metrics are usually well developed and significant opportunities for improvement exist there. The goal should be to move the deployment of Six Sigma as quickly as possible to the rest of the organization to maximize its benefits.

Intangible Impact

Six Sigma is increasingly recognized as an effective method for changing culture (how an organization does its work and rewards its people) as well as improving the bottom line. This is particularly important for those real economy organizations that do not have the legacy of a continual-improvement culture. As discussed in Chapter 2, our experience, and that of many others, is that few organizations outside of manufacturing have such a legacy. In the process of deploying Six Sigma, leaders enhance many systems that define the organization's culture, including developing a greater focus on improvement, changing recognition and reward systems, improving communication systems, and improving performance management systems.

Many companies are seeing Six Sigma as a way to develop leaders, build teamwork, and empower employees. Companies such as GE, DuPont, 3M, Honeywell, and American Standard have required BB and GB certification for promotion up the ranks of management. Jack Welch, then CEO of GE, stated in the 2000 Annual Report, "The generic nature of a Black Belt assignment, in addition to its rigorous process discipline and relentless customer focus, makes Six Sigma the perfect training for growing twenty-first century GE leadership." Banks, hospitals, dot.coms, and other organizations operating beyond the factory floor are beginning to see and reap these types of organizational benefits of Six Sigma.

The use of Six Sigma as a leadership development tool becomes clear when you think about what a leader does. A leader enables an organization to change the way it works, to move from one paradigm to another paradigm. Changing the way people work requires changing the process they use to do their work. Six Sigma provides the strategy, methods, and tools to improve processes. A leader skilled in the use of Six Sigma is a more effective leader, thereby making Six Sigma an effective leadership development tool. This is just as true in the real economy as it is on the factory floor.

Integration of Process Design, Process Improvement, and Process ControlUnfortunately, Six Sigma is often promoted with a great deal of hyperbole, fanfare, and outright hype. Some authors make Six Sigma sound like an organizational "snake oil" that will magically solve any issue or problem. In fact, Snee and Hoerl (2003) is

57

the only book that we are aware of on the subject that discusses unsuccessful Six Sigma efforts. It is important for readers to understand that Six Sigma is a rigorous, disciplined improvement methodology that utilizes scientific tools and formal deployment strategies. As such Six Sigma provides leaders with a set of concepts, methods, and tools that enables them to align organizations to focus on improvement, provide road maps for change and improvement, and empower the right people to make the needed improvements. Therefore, to reap maximum long-term benefits from Six Sigma, organizations must eventually integrate it into an overall process management system utilizing the Six Sigma goals of rapid organizational change and improvement. Typically, this integration is the last phase in Six Sigma deployment (Snee and Hoerl 2003) and occurs years after launching a Six Sigma initiative. As discussed in Chapter 6, Six Sigma is not an organizational cure-all; some issues and projects are best addressed by methods other than Six Sigma.

As you think about using Six Sigma holistically as a key element of your improvement strategy, and eventually as part of your overall process management system, it is important to keep in mind the three major aspects of process management: process design/redesign, process improvement, and process control. Process design/redesign focuses on the design of new processes and the redesign (reengineering) of existing processes. Six Sigma can contribute significantly to design efforts through design for Six Sigma (DFSS), which can utilize the define, measure, analyze, design, verify (DMADV) framework. DMADV is the framework used by GE and other organizations. Other frameworks have been proposed (Creveling et al. 2003). Process improvement focuses on the improvement of existing processes without changing the fundamental design of the process. Process control focuses on keeping the process operating on target and within requirements so that the process produces products and services that satisfy customers profitably.

The key distinction between process improvement and process control is that process improvement determines how to drive the process to new levels of performance. Process control, on the other hand, identifies root causes for why the process performance has deteriorated, so that performance can be brought back to normal levels. For example, most of the routine maintenance done on cars is process control—such as doing a tune-up or oil change to maintain performance. By switching to titanium spark plugs and premium gasoline, however, an owner might be able to improve the cars' performance beyond its original capability. This would be an example of process improvement. Further improvement might require redesign of the engine.

Six Sigma uses the define, measure, analyze, improve, control (DMAIC) framework to improve and control existing processes. In general, the DMAI phases focus on improvement, and the C phase focuses on process control and sustaining the gains. It is interesting to note that Six Sigma considers the need for control and implements a formal control plan in each design and improvement project. Chapter 6 further discusses these aspects of Six Sigma and how they should integrate with an overall process management system.

The Essence of Six SigmaThis section provides a brief overview of Six Sigma for those with minimal background in the initiative. Table 1.1 summarizes the key elements of Six Sigma. Further detail on each of these elements is provided in Chapter 4. The approach can be broken into three key aspects: deployment of a management initiative,

58

improvement projects, and a set of methods and tools. See Snee and Hoerl (2003) for more detail on deployment aspects of Six Sigma, and Breyfogle (2003) for more detail on the methods and tools.

Table 1.1 Key Aspects of Six Sigma

Deployment Projects Methods and Tools

Improvement Right projects (linked to business goals)

Process thinking

Breakthrough Project management (project reviews)

Process variation

Systematic, focused approach

Sustain the gains (new projects)

Facts, figures, data

Right people (selected and trained)

Results (process and financial)

Define, measure, analyze, improve, control

Communication Recognition and reward

Project tracking and reporting

8 key tools (sequenced and linked)

Six Sigma initiative   Statistical tools

reviews   Statistical software

    Critical few variables

Deployment Aspects

Breakthrough Improvement. Six Sigma is about business improvement; it is not about culture change per se, although it will radically change culture. The strategy is to get the improvements, and then create the infrastructure and systems (culture) that will grow and maintain the gains. Six Sigma is not about quality—at least not in the traditional sense of the word—although it results in improved quality. It is not about training, although training is used to build the skills needed to deploy it. Viewing Six Sigma as a massive training initiative is a low-yield strategy. Six Sigma is about breakthrough business improvement, not incremental improvement. Six Sigma

59

projects are defined to produce major improvements (30% to 60% and more) in process performance in 4 to 6 months with a significant bottom-line impact. Such changes greatly affect how business is conducted day to day. As the Six Sigma mindset permeates the organization, individuals become aware of non–value-added work, ineffective processes, and poor performance and take action to make the needed improvements.

A Systematic and Focused Approach. Not all executives are used to the discipline that such an approach requires. There are road maps and step-by-step procedures for the managerial and technical aspects of Six Sigma. These processes and systems enable the key players in the initiative, such as Champions, BBs, and GBs to move up the learning curve more quickly and keep the organization focused on rapid improvement. (These and other titles are defined in the "Roles of Six Sigma Leaders" section later in this chapter.) Six Sigma is not an art, although experience, good judgment, and creativity are certainly required.

Right People. Six Sigma is about selecting and training the right people to fill the key roles. Successful organizations select their most talented people to fill the key Six Sigma positions (Champions, MBBs, BBs, and GBs). Most companies consider these people to be their future leaders. After those selected complete their Six Sigma assignments, they move into leadership positions and utilize their Six Sigma experience to guide others in improving the organization using the same approach. In this way, the cycle of continuous improvement is ingrained into the culture of the organization, and the company is assured of having "enlightened" leaders in the future.

Communication. It is important that a communication plan be developed to support the Six Sigma initiative. In the early stages of deployment, people will be asking a number of questions: What is Six Sigma? Why is our organization using this approach? Why are we doing this now? What will the benefits be? What progress are we making? Answers to these questions and other related messages must be communicated in a clear, concise, and consistent way. The message must be repeated several times, using a variety of media to make sure that everyone is exposed to understandable information. Clear understanding of the what, why, and how of the initiative will help generate the support in the organization needed to ensure that the BB and GB projects and the Six Sigma initiative as a whole succeed.

Recognition and Reward Plan. A recognition and reward program must be created to support the Six Sigma initiative. People want to know "what's in it for me." This helps them decide whether to get involved and at what level of intensity. We know of no organization that has successfully implemented Six Sigma without a recognition and rewards program to recognize and reinforce the desired behavior. Such a program typically includes both financial and psychological rewards.

Management Reviews of the Six Sigma Initiative. It is widely recognized that regular review of initiatives is needed to ensure the success of the initiative. Accordingly, regular reviews of the Six Sigma initiative (preferably quarterly) are required to monitor progress, to ensure the initiative milestones are being met, and to identify when adjustments and major changes to the deployment plan are needed. It is unlikely that a Six Sigma initiative will succeed without regular reviews by the senior management team who is accountable for the success of the program.

60

Improvement Projects

Right Projects. Six Sigma is about working on the right projects: those that support the business strategy. Six Sigma projects are linked to the goals of the business and to key problems that must be solved if the organization is to be successful (for example, critical customer complaints, process downtime producing stock-outs, major accounts receivables issues). As you will see in later chapters, project selection is often where the battle is won or lost. Even top talent cannot salvage a poorly selected project. BBs and GBs work on important projects during as well as after the training. The specific roles of the BBs and GBs, who lead the improvement projects and are the primary "doers" in Six Sigma, are outlined later in this chapter and discussed more fully in Chapter 4.

Working on the right projects obviously requires careful business planning and coordination. Having BBs and GBs pick their own projects is not a good strategy in our experience. It is important, however, that the goals of the BB and GB projects are realistic and achievable so that the projects will be successful and the BBs and GBs—and organization as a whole—will build confidence that Six Sigma will work "here."

Project Management and Reviews. Six Sigma is about effective project management, including project selection, planning, and management reviews. Proper planning is important to ensure success. Such planning helps to avoid "scope creep" (project size and definition slowly growing beyond what is reasonable to accomplish considering the allotted time and resources), misalignment with management, lack of resources, projects that move at glacial speed, and other common project pitfalls. Management reviews are critical to success. Projects should be reviewed weekly by Project Champions and monthly by business leaders. As noted previously, the overall Six Sigma system should be reviewed quarterly and annually. Management reviews are critical to success. The lack of management reviews significantly reduces the impact of the Six Sigma effort. The reviews keep the BBs and managers focused on the project and emphasize the long-term commitment of management to improve the performance of the organization, ensuring it will be a long-term source of products, services, and employment.

Sustaining the Gains. As previously noted, a methodology for sustaining the gains is an integral part of the Six Sigma approach. This methodology is usually called the control plan and is one of the unique aspects of Six Sigma. The control plan can be viewed at both a tactical and strategic level. At the tactical level, it sustains the gains of individual projects; at the strategic level, it sustains and broadens the gains of the Six Sigma initiative overall. A key element of the strategic control plan is a system for the continual identification of new projects and the placing of those projects in the project hopper. As the BBs complete their projects, they are assigned new projects that have been taken from the hopper. It is helpful to think of the project hopper as a "project portfolio," the contents of which blend together to drive the improvement needs of the organization (Snee and Rodebaugh 2002).

Right Results. Six Sigma is about getting the right results—improvements in process performance that are linked to the bottom line. The team estimates what a project is worth, typically with the help of the finance organization, before work is initiated. After the project has been completed, the team calculates the bottom-line savings. Many organizations, such as GE, require a sign-off from the finance organization verifying the financial impact and identifying where in the income statement it will show up. In this way you will know exactly what the bottom-line impact of the project

61

has been. Surprisingly, many previous improvement initiatives discouraged focus on the financials when identifying or evaluating projects.

Project Tracking and Reporting. To monitor the progress of the initiative, check on the achievement of milestones, and provide a corporate memory, a project tracking and reporting system is needed. The tracking system is typically a software system that contains the bottom-line financial results and the improvements to process performance metrics for each project. Such systems typically have the capability to generate management reports on financial and process performance improvements for any process, business, function, organizational level, and so forth.

Six Sigma Methods and Tools

Process Thinking. The first key method is process thinking—taking the view that all work is a process that can be studied and improved. All work in all parts of the organization, whether it is in manufacturing, new product development, finance, logistics, or procurement, is accomplished by a series of interconnected steps. When you view problems from the framework of a process with inputs, processing steps, and outputs, a common approach to improving processes and solving problems can be applied. Because Six Sigma had its roots in electronics manufacturing, there is a common misunderstanding that Six Sigma can only help in this one activity. This mistake is analogous to assuming that the Internet can only be useful in the defense industry (where it originated).

Figure 1.4 shows a schematic of a customer order process. Process variables are divided into four groups: process inputs, controlled variables, uncontrolled variables, and process outputs. Examples of these variables for the customer order process are shown in Figure 1.4. The process inputs include those things used to produce the process outputs. The controlled variables are those that run the process and, as the name implies, can be controlled ("knobs" on the process). The uncontrolled variables are those that affect the output of the process but over which there is limited control. Obviously, the inputs come from suppliers, which could be the person down the hall or another process or raw material supplier; and the outputs go to customers, either internal or external to the organization. Viewing processes this way produces the SIPOC model (suppliers, inputs, process, outputs, customers). In the SIPOC model, all processes, no matter the source, begin to look similar in nature, enabling common improvement strategies to be used.

Figure 1.4 Schematic of a customer order process and its variables.

Process Variation. Variation is present in all processes and every aspect of work. Unintended variation reduces process performance,

decreases customer satisfaction, and negatively impacts the bottom line. Customers want a consistent product or service, one that they can count on to provide the same value all the time. Products need to work as anticipated and be delivered and serviced on time, just as financial transactions need to proceed smoothly with minimal disruptions and just as patients need to be able to count on health-care providers for consistent and quality care.

Six Sigma is focused on reducing the negative effects of process variation in two major ways: (1) It shifts the process average to the desired target level, and (2) it reduces the variation around the process average. This results in a process

62

performing at the right average level with minimal variation from product to product or transaction to transaction. The need to address variation is the primary reason for including so many statistical tools in the Six Sigma toolkit. Statistics is the only science focused on identifying, measuring, and understanding variation, and therefore is a tool you can use to reduce variation.

Facts, Figures, and Data. Six Sigma is about facts, figures, and data—in other words, data-based decision making versus reliance on gut feeling and intuition. The approach requires data on all key process and input variables (see Figure 1.4). The project doesn't proceed until adequate data are available. The focus on the use of data, along with process thinking and variation, helps integrate the scientific method into the Six Sigma methodology. The integration of process thinking, understanding of variation, and data-based decision making is often referred to as statistical thinking (Hoerl and Snee 2002).

DMAIC Improvement Methodology. The primary improvement methodology of Six Sigma has five key phases: define, measure, analyze, improve, and control (DMAIC). All improvement projects touch on these phases in one way or another. (New design projects use a different process called design for Six Sigma.) The tools of Six Sigma are integrated into these phases. This is a strength and uniqueness of Six Sigma. All projects utilize the same improvement process, although the individual applications may be quite different. In contrast to most statistics training that throws a lot of tools on the table and lets practitioners fend for themselves, the DMAIC framework shows practitioners how to integrate and sequence the tools into an overall improvement strategy. This enables practitioners to attack virtually any problem in a systematic manner.

DMAIC is by far the most widely used road map in Six Sigma deployment. Other road maps are possible, but none are as useful in our judgment because of the effectiveness and elegant simplicity of DMAIC. We note that in the case of design for Six Sigma, DMADV or some other road map should be used. The key elements of deployment, projects, and methods and tools are still applicable.

Eight Key Tools. Six Sigma utilizes many individual tools, but the following eight tend to be most frequently applied:

Process mapping Cause-and-effect matrix

Measurement system analysis

Capability study

Failure modes and effects analysis (FMEA)

Multi-vari study

Design of experiments

Control plans

These eight key tools are linked and sequenced in the DMAIC framework to ensure proper integration. This relatively small number of improvement tools helps the BBs

63

and GBs move up the learning curve more quickly. They learn the order in which to use the tools and how the output of the use of one tool becomes the input for another tool. You will learn more about application of the tools beyond the factory floor in Chapter 7.

Statistical Tools. Some, but not all, of these tools are statistical tools. As noted earlier, statistical tools are required so that process variation can be dealt with effectively. Six Sigma has effectively integrated statistical tools with those from other disciplines, such as industrial engineering, quality management, operations research, mechanical and electrical design, and reliability. The result is a toolkit much broader and more powerful than available within any one discipline. Because the toolkit is diverse and flexible, and because the focus is on a limited set of core tools, BBs and GBs do not need to become professional statisticians to be successful. They are trained to use key statistical thinking and methods and data to improve processes.

User-Friendly Statistical Software. Another reason Six Sigma has been effective is the general availability of user-friendly statistical software that enables effective and broad utilization of the statistical tools. The statistical software package most widely used in Six Sigma is Minitab. JMP and other statistical software systems are also used in some Six Sigma deployments. Prior to the availability of such user-friendly software, statistical methods were often the domain of professional statisticians, who had access to, and specialized training in, proprietary statistical software. Specialists in statistical methods have an important role to play in Six Sigma, but practitioners who are not professional statisticians do the vast majority of statistical applications.

Critical Few Variables. The final key methodology of Six Sigma is its focus on the identification of the critical few input and process variables. Most processes, from performing surgery to closing the books for a global conglomerate, involve a large number of potentially important input and process variables. Studying each in-depth, and then managing them on an ongoing basis, would be time-consuming and prohibitively expensive. Fortunately, often just three to six critical process input variables drive the process output variables. Identification of these variables can lead to effective ways to optimize and control the process in a parsimonious and cost-effective way. Six Sigma finds, and then focuses attention on, these few key variables. This principle of focusing attention on a few key things is consistent with general principles of good management. The ultimate goal is to move from measuring outputs and making process adjustments (reactive) as the primary method of process control to measuring and then adjusting process inputs (proactive) to control the process and achieve the desired process performance.

Roles of Six Sigma LeadersSix Sigma has well-defined leadership roles, and success depends on each of the roles fulfilling its unique responsibilities. Some of the key players involved in a Six Sigma initiative are shown in Figure 1.5. The lines in Figure 1.5show the key linkages between the roles. For this discussion, we define the organization as the unit that has responsibility for identifying the improvement opportunities and chartering the Six Sigma projects. This could be a corporation, a division, a facility, or a function. The leadership team (often called the Six Sigma Council) leads the overall effort and has responsibility for approving the projects undertaken by the BBs. In the case of a finance function, the leadership team might be the chief financial officer (CFO) and selected members of his or her staff.

64

Figure 1.5 Roles of leaders.

Each project has a Champion who serves as its business and political leader. (Some organizations use the term Champion to refer to the

overall leader of the Six Sigma effort.) The project Champion is typically a member of the leadership team and has the following responsibilities:

Facilitating the selection of projects Drafting the initial project charters

Selecting BBs and other resources needed to conduct the project

Removing barriers to the successful completion of the project

Holding short weekly progress reviews with the BBs

The BBs lead the team that does the actual work on the project. BBs are hands-on workers who are assigned to work full time on their projects and do much of the detailed work. The BB also leads the team, acts as project manager, and assigns work (for example, data collection) to the team members as appropriate. See Hoerl (2001) for a more detailed discussion of the BB role and the key skills required to perform it.

BB projects are typically defined so that they can be completed in 4 to 6 months, are focused on high-priority business issues, and are targeted to produce $175,000 to $250,000 per year to the bottom line. The team that works with the BB is typically comprised of 4 to 6 members who may spend as much as 25% of their time on the project. The amount of time spent by each team member will vary depending on the person's role. The team may also include consultants and specialists as well as suppliers and customers. BBs also act as mentors for GBs, as do MBBs.

GBs may lead a project under the direction of a Champion or MBB, or they may work on a portion of a BB project under the direction of the BB. GB projects are typically less strategic and more locally focused than are BB projects. A GB project is typically worth $50,000 to $75,000 per year to the bottom line and should be completed in 4 to 6 months. GBs do not work full time on improvement projects and typically have less-intensive training. GBs work on improvement projects in addition to their existing job responsibilities. As noted earlier, several companies have recognized the value of Six Sigma as a leadership development tool and have the objective of all members of the professional staff being at least a GB.

The MBB is the technical leader and enables the organization to integrate Six Sigma within its operations. The MBB has typically completed several BB projects and 2 to 5 weeks of training beyond the 4 weeks of BB training. The MBB helps the Champions select projects and review their progress. The MBB provides training and mentoring for BBs and, in some instances, training for GBs. The MBB is also responsible for leading mission-critical projects as needed, and sharing project learning and best practices across the organization. In essence, these resources are intended to combine technical skills beyond that of a BB with managerial and leadership skills similar to a Champion.

65

The functional support groups, such as human resources, finance, IT, and legal, assist the Six Sigma effort in four key ways, beyond improving their own processes through Six Sigma projects:

1. They provide specialized data as needed by BBs, GBs, and teams outside their function.

2. They provide expertise associated with their functional responsibilities.

3. They provide members for the BB and GB project teams when appropriate.

4. They help identify improvement opportunities for the organization to pursue.

Functional support groups (Enterprise Processes in Figure 1.1) are typically involved in more aspects of the organization's work than other groups, such as manufacturing. They interact across the organization, and as a result they see where improvements are needed in cross-functional processes operated by the organization. In a hospital, for example, the finance organization interacts with procurement, operations management, marketing, legal, IT, and external insurance agencies, and therefore can more easily pinpoint cross-functional issues that require attention.

There are two other types of Champions in addition to the Project Champion. As noted earlier, an organization typically names a Corporate Six Sigma Champion who reports to the president or CEO and has overall responsibility for developing the Six Sigma infrastructure. In large organizations, it is not unusual for each business and each functional unit (human resources, finance, IT, etc.) to name what they will call a Business or Functional Champion. Different organizations have used different titles for such roles, such as Quality Leader, Six Sigma Leader, and Six Sigma Champion. The role is basically the same: to oversee the implementation of Six Sigma in that unit. It is more prudent to focus on the actual role, and not get hung up on the title.

The Rest of the StoryThis book is divided into four main parts: the case for Six Sigma beyond the factory floor, ensuring successful deployment, ensuring project success, and ensuring proper application of methods and tools. In this overall flow, we address strategic, tactical, and operational aspects of deploying Six Sigma. In Chapter 1, we have set the context for the book, highlighting the growing importance of health care, financial, service, and non-manufacturing functions to our economy, and the tremendous opportunity and need for improvement in these areas. We refer to these operations as the real economy. In Chapter 2, we address the fundamental barrier to improvement—the attitude that "we're different"—and show that, in fact, improvement efforts in diverse processes and environments have much more in common than they have differences. We find that Six Sigma works very well beyond the factory floor.

In Chapters 3 and 4, we present deployment case studies, key lessons learned from these cases, and a Six Sigma deployment road map that has been shown to be effective in a number of companies from a number of different environments. The focus of these two chapters is on the management systems that must be put in place to effectively deploy Six Sigma. One of the key things that makes Six Sigma different from earlier improvement methods is the existence of an infrastructure of management systems to support the deployment of Six Sigma. One of the key reasons that previous improvement approaches, such as total quality

66

management (TQM) and statistical process control(SPC) were not as successful long term was that these approaches lacked an effective deployment method. This is not the case with Six Sigma.

Chapters 5 and 6 focus on ensuring project success. The successful completion of projects, one after another in a steady stream, is at the heart of Six Sigma. The discussion consists of case study presentations, the Six Sigma method for doing project-by-project improvement and keys to completing successful projects. Chapter 7 discusses technical considerations essential to successful improvement in the real economy. Many of these issues are not discussed elsewhere in the literature. The topics include the tools used and unique aspects of the data analysis in applications beyond the factory floor.

Chapter 8 discusses some next steps you may want to consider to make Six Sigma an integral part of the way your organization does business and serves its customers (and community). The goal is to get more out of Six Sigma. This can be accomplished by making Six Sigma part of, if not, your strategic signature—something for which your organization is known. As a result, all work in all areas of the organization will be using some aspect of Six Sigma to help make them successful. When others look at your organization, they will see Six Sigma as your signature.

SummaryThis chapter has provided a general overview of Six Sigma—the key elements of the initiative and the key concepts, methods, and tools—and the tremendous opportunities for using Six Sigma to improve processes, functions, and organizations beyond the factory floor. An overview of the roles in Six Sigma was also provided. Now that you have a general idea of what Six Sigma is, its key uniqueness, and the roles of the players involved, you are in a position to consider the fundamental barrier to deploying Six Sigma: the common perception that "we're different," and therefore Six Sigma won't work here. As with most excuses, the belief that "we're different" does have a kernel of truth. Chapter 2 elaborates on what about the real economy really is different from manufacturing, what is really the same, and how to get beyond this issue. Process thinking and leadership are suggested as two key "antidotes" for this and other excuses.

ReferencesBisgaard, S. 2002. Improving business processes with Six Sigma. Presented at 56th Annual Quality Congress. Denver, CO (May).

Breyfogle, F.W. 2003. Implementing Six Sigma, second edition. New York: John Wiley and Sons.

Creveling, C. M., J. L. Slutsky, and D. Antis, Jr. 2003. Design for Six Sigma in technology and product development. Upper Saddle River, NJ: Prentice Hall.

George, M. L. 2003. Lean Sigma for service. New York: McGraw-Hill.

Hahn, G. J., N. Doganaksoy, and R. W. Hoerl. 2000. The evolution of Six Sigma. Quality Engineering 12 3:317–326.

67

Hoerl, R. W. 2001. Six Sigma Black Belts: what do they need to know? (with discussion). Journal of Quality Technology 33 4:391–435.

Hoerl, R. W., and R. D. Snee. 2002. Statistical thinking: improving business performance. Pacific Grove, CA: Duxbury Press.

Honeywell. 2002. The Honeywell edge. Six Sigma Forum Magazine (February) 14–17.

Jones, M. H., Jr. 2004. Six Sigma ... at a bank? Six Sigma Forum Magazine (February) 13–17.

Snee, R. D., and R. W. Hoerl. 2003. Leading Six Sigma: a step-by-step guide based on experience with GE and other Six Sigma companies. Upper Saddle River, NJ: FT Prentice Hall.

Snee, R. D., and W. F. Rodebaugh, Jr. 2002. Enhance your project selection process: every company should be able to manage its project portfolio and create an overall organizational improvement system. Quality Progress(September) 78–80.

Thottam, J. 2003. Where the good jobs are going. Time (4 August) 36–39.

Welch, J. F. 2001. Jack: straight from the gut. New York: Warner Business Books.

Young, J. 2001. Driving performance results at American Express. Six Sigma Forum Magazine (November) 19–27.

© 2012 Pearson Education, Inc. All rights reserved.800 East 96th Street Indianapolis, Indiana 46240

68

The International Institute for Learning has created a Unified ProjectManagement Methodology (UPMM™) with templates categorized according to thePMBOK® Guide Areas of Knowledge:

CommunicationProject CharterProject Procedures DocumentProject Change Requests LogProject Status ReportPM Quality Assurance ReportProcurement Management SummaryProject Issues LogProject Management PlanProject Performance ReportCostProject ScheduleRisk Response Plan and RegisterWork Breakdown Structure (WBS)Work PackageCost Estimates DocumentProject BudgetProject Budget ChecklistHuman ResourcesProject CharterWork Breakdown Structure (WBS)Communications Management PlanProject Organization ChartProject Team DirectoryResponsibility Assignment Matrix (RAM)Project Management PlanProject Procedures DocumentKickoff Meeting ChecklistProject Team Performance AssessmentProject Manager Performance AssessmentIntegrationProject Procedures OverviewProject ProposalCommunications Management PlanProcurement PlanProject BudgetProject Procedures DocumentProject ScheduleResponsibility Assignment Matrix (RAM)Risk Response Plan and RegisterScope Statement

69

Work Breakdown Structure (WBS)Project Management PlanProject Change Requests LogProject Issues LogProject Management Plan Changes LogProject Performance ReportLessons Learned DocumentProject Performance FeedbackProduct Acceptance DocumentProject CharterClosing Process Assessment ChecklistProject Archives ReportProcurementProject CharterScope StatementWork Breakdown Structure (WBS)Procurement PlanProcurement Planning ChecklistProcurement Statement of Work (SOW)Request for Proposal Document OutlineProject Change Requests LogContract Formation ChecklistProcurement Management SummaryQualityProject CharterProject Procedures OverviewWork Quality PlanProject Management PlanWork Breakdown Structure (WBS)PM Quality Assurance ReportLessons Learned DocumentProject Performance FeedbackProject Team Performance AssessmentPM Process Improvement DocumentRiskProcurement PlanProject CharterProject Procedures DocumentWork Breakdown Structure (WBS)Risk Response Plan and RegisterScopeProject Scope StatementWork Breakdown Structure (WBS)Work PackageProject CharterTime

70

Activity Duration Estimating WorksheetCost Estimates DocumentRisk Response Plan and Register MediumWork Breakdown Structure (WBS)Work PackageProject ScheduleProject Schedule Review Checklist

71