Leadership Development and Sustained Process Improvement Program Success

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Leadership Development and Sustained Process
Improvement Program Success

• Weiyong Zhang
• Department of Management
• School of Business
• Virginia Commonwealth University
• [phone]
• wzhang_at_vcu.edu
• www.business.vcu.edu
• IIBA Central Virginia Chapter
• April 16th 2008

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Before we get started, lets take a look at the
Six Sigma program at 3M
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3M Annual Report 2002
We fully integrated Six Sigma, making it part of
the fabric of the company. As of year-end, more
than 3,300 active Six Sigma projects were
directly driving improvement in our business
units, and operating management had closed more
than 1,200 projects, a big increase over the
previous year.
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3M Annual Report 2003
Our continued focus on and execution of our five,
integrated corporate initiatives Six Sigma, 3M
Acceleration, eProductivity, Global Sourcing
Effectiveness, and Indirect Cost Control. The
initiatives increased operating income by more
than 400 million on top of a benefit of more
than 500 million in 2002. The disciplined
actions inherent in each of our initiatives are
embedded in the everyday operations of 3M, and we
expect our corporate initiatives to contribute an
additional 400 million of operating income in
2004.
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3M Annual Report 2004
Six Sigma is 3Ms overarching initiative, and it
continues to drive growth, reduce costs and
increase cash flow in 3M businesses around the
world. Since its launch four years ago, it has
become deeply embedded in every function, every
business and every country. Simply put, its now
the way we work. Today, more than 700 of our
leaders around the world are dedicated to Six
Sigma on a full-time basis. We already have
completed more than 16,000 projects, and an
additional 16,000 projects currently are under
way. These include more than 400 Six Sigma with
Our Customers projects, in which teams of
employees from 3M and other companies work side
by side to solve pressing problems.
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3M Annual Report 2005

• We only found one place that mentioned Six Sigma.

The Companys future results may be affected if
the Company generates less productivity
improvements than estimated. The Company utilizes
various tools, such as Six Sigma, to improve
operational efficiency and productivity. There
can be no assurance that all of the estimated
productivity improvements will be realized.
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3M Annual Report 2006
The use of Lean Six Sigma in 3Ms manufacturing
plants brought great productivity and quality
benefits to 3M over the past few years. But in
the euphoria of driving out waste, expectations
that it would continually deliver more capacity
were sometimes overestimated. There is, after
all, a practical limit to the number of shifts
that can be run, yield that can be obtained and
line speeds that can be increased in a
manufacturing plant. This overestimation led to
demand and capacity imbalances, with the largest
divergence naturally emerging in those businesses
with the highest growth rates.
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What happened?

• Year 2005 seems to be a turning point it looks
  like two companies before and after.
• Did 3M drop Six Sigma?
• If so, did 3M consciously choose to drop Six
  Sigma?
• Or 3M just dropped the ball?
• Why did 3M drop Six Sigma?
• What are the possible reasons?

• James McNerney was the CEO of 3M from 2001 to
  2005.
• In year 2005 - 2006, 3M dropped Six Sigma.
• Is this simply coincidence?

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Agenda

• 1. Motivation
• 2. Process improvement program
• What is it?
• Why?
• 3. Process improvement program management
• Strategic project selection
• Project management infrastructure
• 4. Leadership development
• How is leadership development different from
  leadership?
• Leadership development and sustained success

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1. Motivation

• Companies implement various types of process
  improvement programs (e.g., Six Sigma, Lean, Lean
  Sigma). Some are very successful. Others are
  not.
• Question how can we achieve process improvement
  program success?
• A more important question how can we achieve
  sustained process improvement program success?

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2. Process Improvement Program

• Definition a systematic approach for improving
  organizational performance that consists of
  specific practices, tools, techniques, and
  terminology and is implemented as a set of
  process improvement projects.

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Why process improvement program?

• Some facts
• Various programs being implemented by many
  companies.
• Each costs huge amount of money (e.g., millions
  of dollars).
• Each has a specific set of practices.
• Hence it is very difficult to learn from each
  other.
• If we look at these programs as a generic set
• They share many commonalities in terms of how
  they are managed.
• Enables cross program learning.

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3. Process Improvement Program Management

• How process improvement programs are managed will
  greatly affect the success of the program.
• Two important management tasks
• Strategically select improvement projects
• Establish a project Management infrastructure

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3.1. Strategic Project Selection (SPS)

• An organizations commitment to selecting process
  improvement projects based on the organizations
  strategic objectives.
• Strategic alignment
• Voice of customer
• Selection and prioritization

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3.2. Project Management Infrastructure (PMI)

• An organizations commitment to ensuring that
  process improvement projects follow a standard
  methodology and that project leaders are held
  accountable for results.
• Standard project management methodology
• Project leader accountability

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3.3. How SPS and PMI affect Performance

• Synergistic view
• They enhance each others impact on program
  success.
• Enabling view
• PMI enables SPS.

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Empirical Research Settings

• Sponsored by the University of Minnesota and a
  Fortune 500 company (disguised as Hightech Inc.)
• Plant-level data from 57 suppliers (a total of
  130)
• Response rate 43.8
• Multiple responses from the same supplier
• Sales, manufacturing, and quality managers
• Small to medium sized businesses
• Web-based survey
• Performance variable Supplier operating
  performance
• Cost, quality, delivery, cycle time, flexibility
• Regression analysis

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Synergistic View
Unfortunately, this view is not supported by the
empirical data.
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Enabling View
SPS
PMI
Program Success
The enabling view is supported by the empirical
data.
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What does this mean?

• Firms need to establish an organization
  infrastructure for disciplined project
  management. The infrastructure is composed of
  accountable project leaders using structured
  method.
• Such an infrastructure will promote strategic
  project selection.
• Project leaders seek to lead strategic projects.
• Structured method promotes fact-based culture.
  Such a culture encourages the development of
  process for project selection.
• In summary, firms can use PMI as an effective
  implementation strategy.
• In Six Sigma, the use of Black Belt and DMAIC is
  highly promoted.

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What is missing?

• The notion that SPS and PMI lead to program
  success is based on an important prerequisite
• Top management support to process improvement
  program.
• It is also assumed that a top-down approach is
  used in program implementation.
• What could happen if top management turnover
  happens?
• Even if top management remains stable, how can
  the program achieved sustained success?
• There is always resistance to change.
• The command and control system will not work
  forever.
• We need all employees actively embrace the
  program.
• We need to change the organizations culture!

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Six Sigma and the Path to Transformation
C) Governance for Transformation

• Strategic Scorecard (especially
• predictive, preventive indicators)
• Integrated Management System
• Leader Development/Succession
• Educating the Board of Directors

RESUL TS
B) Infrastructure Alignment

• Marketing and Design
• H.R. Policy
• Finance
• Information System
• Best Practice exchange
• Supply Chain

R.I.P.?
A) Project-based Improvement
TIME

• Project Savings
• Black Belts, Green Belts
• Etc.

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4. Leadership and Leadership Development

• Leadership The art of motivating people to act
  towards achieving a common goal.
• Leadership Development Expand the collective
  capacity of organizational members to engage
  effectively in leadership roles and processes.

Why leadership development?
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We all understand that

• Leadership plays a critical role in the success
  of any change program.
• However, what is the role of leadership
  development in the success of process improvement
  programs?
• Why should we care about leadership development?

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Leadership Development Practices

• 360-degree feedback
• Coaching
• Mentoring
• Networks
• Job Assignment
• Action Learning

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We studied the following

• Whether firms view process improvement project as
  a key component of leadership development.
• Whether firms select the best people to lead
  process improvement projects.
• Whether firms rotate people through process
  improvement project leadership positions.

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A Simple yet Useful Model
Program Success
Leadership Development
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What does this mean?

• Leadership development is probably the hidden
  secret of modern process improvement programs.
• After all, the content practices of improvement
  programs largely remain the same over time.
• What have changed significantly are the ways to
  implement the content practices.
• Specifically, many companies now explicitly
  announce that they use process improvement
  program (or whatever it is called) to develop
  their future leaders.
• In GE, managers without Six Sigma project
  experiences will not be promoted to executive
  level.

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What has James McNerney done differently at
Boeing?
We drive learning and sharing in many ways, from
our Leadership Center (the flagship of our
comprehensive leadership- development approach)
to our four growth-and-productivity initiatives.
Here are some examples of how our strategy of
leveraging the depth and breadth of Boeing is
taking root At the Leadership Center,
Boeing leaders present real Boeing business
challenges and ask classes for help solving them.
In fact, my leadership team has receivedand is
acting ongood ideas from several 2007 classes
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Thank You

• Questions?