Executive Briefings

Four Critical Steps to Managing Change in the Supply Chain

The life of a business professional today means being constantly connected, with little downtime to recharge. Supply chain professionals often find themselves at the center of the storm, striving to balance very demanding operational imperatives with the need to satisfy customers and help grow revenue. They must find ways to operate successfully, yet also rapidly improve to be competitive in the future. And, improvement basically means "managing change." Change management is the essence of the real work of a business professional.

Ironically, supply chain professionals often find themselves ill-equipped to deal with change management, and in fact most have only a vague idea of what it is all about. Yet, studies show that projects fail more due to human and organizational reasons than technical challenges. A common comment heard from supply chain professionals when asked what it takes to successfully implement initiatives is that it simply requires excellent analysis and a good plan. Many do not naturally gravitate to the softer issues of communication planning and organizational buy-in. Yet failures in these areas are at the root of many initiative failures.

The Project Management Institute's statistics on project success are not encouraging:

• Only 16 percent of projects come in on time, on budget, on benefit
• 53 percent are completed, but greatly miss time or budget or benefit
• 29 percent are never completed
• 62 percent of companies have a runaway project that seriously damaged the firm

A Computer Sciences Corporation's CSC Index study is only slightly more encouraging, with successful projects representing 32.1 percent of the sample.

What creates this dismal track record? Many factors cause the failure of initiatives, from scope mismanagement to lack of good project leadership to technical deficiency. But the experience from working with hundreds of companies at the University of Tennessee strongly indicates that the most significant shortcoming is in the area of change management.

A major study of change management in the supply chain area was completed at the University of Tennessee and published in the book titled Handbook of Global Supply Chain Management. This work was grounded in a complete review of change-management literature as well as data from hundreds of companies in the university databases.

The study found there are four change-management imperatives that must be addressed to ensure success in supply chain initiatives:

1. Identify Key Stakeholders

One project manager from a major firm thought he had designed the perfect change-management plan. He introduced the topic with a well-crafted, 30-minute presentation to everyone affected. He followed that with a one hour review with everyone directly involved to go deeper into the coming change. About a month after the project began, he issued a newsletter that clearly showed the progress being made and the benefits to be achieved. Finally, as the project neared completion, he got a 600-word article in the company newsletter. This project manager did many things right, but missed in one key area. He did not first identify the individuals critical to the success of his initiative and design a communication plan specifically for them.

We estimate that companies communicate over two million words to their employees about new initiatives each quarter. The communication plan described above amounts to only one-half of one percent of that mass of information bombarding employees quarterly. Unless the communication process precisely targets the key players, it will not rise above the normal noise level in a large enterprise. There are people in every company for nearly every project that will make or break the project. These people may be anyone from senior executives to critical subject matter experts embedded in the organization. To manage change effectively, these key people must be identified and exposed to a customized communication plan.

When change management is taught in executive education programs at the University of Tennessee, each participant goes through a short exercise. They first identify the most important supply chain project facing them, and then they rank individuals as either highly influential, moderately so or people with little influence. Finally, within each of those categories, people are assessed as enthusiastic about the initiative, possessing no apparent position on it, or who oppose it.

The communication plan cannot be designed effectively without first going through this exercise. Once it is done, it is then time to develop a detailed communication process with a targeted message.

2. Develop Communication Plan with Targeted Message

Developing a good communications plan means addressing in detail the following seven items: audience, message, media, frequency, timing, responsibility and feedback mechanism.

The message needs to change depending on the audience. In the extreme stereotype, operations people love to hear about cost-reduction projects, and sales managers get excited about plans to increase revenue. Although never this simplistic, the message must be tailored to the audience.

The feedback mechanism needs to be more than an afterthought. Feedback operates on two dimensions. On the one hand, feedback to the project team should drive reasonable changes within the project scope. But more importantly, feedback to the original audience is the catalyst that creates buy-in.

One project manger said she would gather suggestions from key stakeholders for her project, work them into the project, and then meet again to show the stakeholders how their feedback was being used. This created strong cross-functional ownership, and she found it well worth the substantial time investment.

3. Plan for Good and Bad Resistance

Resistance to new concepts is normal, and it takes two forms. In one case, a project manager lamented that her project to improve product availability was failing because of severe resistance. Forms of resistance included key people not coming to project review meetings, critical persons being pulled off her team and assigned to another project, and individuals simply ignoring the project. This was compounded by highly confrontational statements made at critical times to cause the initiative to lose credibility.

A project cannot succeed in the face of such negative resistance, and such actions must stop if the project is to progress. If face-to-face, fact-based reviews and appeals to the individual opposing the effort do not work, then the senior sponsor must be leveraged.

On the other hand, some level of initial resistance is to be expected and indeed should be viewed as positive. Such actions as open-minded questioning, initially challenging the project's need and debating its alternatives, and questioning the approach can all be important parts of a healthy buy-in process. But, this buy-in process takes time that is not accounted for in most project plans. We strongly recommend that this process be planned for in a formal way. Time for debate should be scheduled as tasks on the project. Otherwise, they will be by-passed too quickly, causing this critical buy-in process to be short circuited. In a rush to stay on schedule with the technical tasks, the soft items often take a back seat. Yet ironically these are the most important factors in the eventual project success.

4. Develop a Plan to Sustain Change

In a major durable goods company, an interesting scenario played out. The CEO decided  improved forecast accuracy was critical. This occurred after someone mistakenly sent him a report showing a 60 percent forecast error at the SKU location level. He decided that this situation had to be the source of many of the operational inefficiencies in his company, and he then delegated this problem to a young marketing vice president who was rising rapidly in the firm. When given the assignment, the VP realized that he knew nothing about forecasting technology or even the current basic approach being used in the firm. So, he did a little research and brought in the best consultant he could find.

The consultant conducted an audit and found many deficiencies in the process and the systems used. He designed a world-class process and brought in state-of-the-art software. He also convinced the VP to initiate a forecast collaboration process with the company's three largest customers.

The plan was outstanding and worked beautifully. Forecast error fell by one-fourth, from a 60-percent error to a 45-percent error. Room for improvement, of course, still existed, but the CEO was ecstatic with the process. Of course, the CEO was not so pleased that he didn't demand additional improvement for the next year. The VP was on to other problems assuming this one was on the right track. But, by mid-year, he checked in and found something very wrong. All of the accuracy improvement had been reversed! By the time the situation stabilized, it was too late, and the results for the year came in at an embarrassing level actually worse than the year before.

What went wrong here? The plan for improvement was technically flawless, but a key piece was missing however. The plan to sustain the change was missing.

Sustaining change is often more difficult than implementing it in the first place. Yet, ironically, project managers rarely develop a well-designed plan to sustain change.

Much has been written on the subject of change management with some excellent models in place. There is John Kotter's strategic eight-step model for transforming organizations, Todd Jick's tactical 10-step model for implementing change, and the General Electric seven-step model for accelerating change. These have a lot of similarities. But, the analysis at the University of Tennessee based on working with hundreds of companies indicates that the above four areas are the most often deficient.

Very simply, to effectively manage change and successfully implement supply chain initiatives, the project team must identify the key individuals and design a targeted communication plan specifically for them. The project plan must include sufficient time to deal with healthy debate and, once the project is implemented, a plan to sustain the change must be executed.

J. Paul Dittmann is director of corporate partnerships at the University of Tennessee.

The life of a business professional today means being constantly connected, with little downtime to recharge. Supply chain professionals often find themselves at the center of the storm, striving to balance very demanding operational imperatives with the need to satisfy customers and help grow revenue. They must find ways to operate successfully, yet also rapidly improve to be competitive in the future. And, improvement basically means "managing change." Change management is the essence of the real work of a business professional.

Ironically, supply chain professionals often find themselves ill-equipped to deal with change management, and in fact most have only a vague idea of what it is all about. Yet, studies show that projects fail more due to human and organizational reasons than technical challenges. A common comment heard from supply chain professionals when asked what it takes to successfully implement initiatives is that it simply requires excellent analysis and a good plan. Many do not naturally gravitate to the softer issues of communication planning and organizational buy-in. Yet failures in these areas are at the root of many initiative failures.

The Project Management Institute's statistics on project success are not encouraging:

• Only 16 percent of projects come in on time, on budget, on benefit
• 53 percent are completed, but greatly miss time or budget or benefit
• 29 percent are never completed
• 62 percent of companies have a runaway project that seriously damaged the firm

A Computer Sciences Corporation's CSC Index study is only slightly more encouraging, with successful projects representing 32.1 percent of the sample.

What creates this dismal track record? Many factors cause the failure of initiatives, from scope mismanagement to lack of good project leadership to technical deficiency. But the experience from working with hundreds of companies at the University of Tennessee strongly indicates that the most significant shortcoming is in the area of change management.

A major study of change management in the supply chain area was completed at the University of Tennessee and published in the book titled Handbook of Global Supply Chain Management. This work was grounded in a complete review of change-management literature as well as data from hundreds of companies in the university databases.

The study found there are four change-management imperatives that must be addressed to ensure success in supply chain initiatives:

1. Identify Key Stakeholders

One project manager from a major firm thought he had designed the perfect change-management plan. He introduced the topic with a well-crafted, 30-minute presentation to everyone affected. He followed that with a one hour review with everyone directly involved to go deeper into the coming change. About a month after the project began, he issued a newsletter that clearly showed the progress being made and the benefits to be achieved. Finally, as the project neared completion, he got a 600-word article in the company newsletter. This project manager did many things right, but missed in one key area. He did not first identify the individuals critical to the success of his initiative and design a communication plan specifically for them.

We estimate that companies communicate over two million words to their employees about new initiatives each quarter. The communication plan described above amounts to only one-half of one percent of that mass of information bombarding employees quarterly. Unless the communication process precisely targets the key players, it will not rise above the normal noise level in a large enterprise. There are people in every company for nearly every project that will make or break the project. These people may be anyone from senior executives to critical subject matter experts embedded in the organization. To manage change effectively, these key people must be identified and exposed to a customized communication plan.

When change management is taught in executive education programs at the University of Tennessee, each participant goes through a short exercise. They first identify the most important supply chain project facing them, and then they rank individuals as either highly influential, moderately so or people with little influence. Finally, within each of those categories, people are assessed as enthusiastic about the initiative, possessing no apparent position on it, or who oppose it.

The communication plan cannot be designed effectively without first going through this exercise. Once it is done, it is then time to develop a detailed communication process with a targeted message.

2. Develop Communication Plan with Targeted Message

Developing a good communications plan means addressing in detail the following seven items: audience, message, media, frequency, timing, responsibility and feedback mechanism.

The message needs to change depending on the audience. In the extreme stereotype, operations people love to hear about cost-reduction projects, and sales managers get excited about plans to increase revenue. Although never this simplistic, the message must be tailored to the audience.

The feedback mechanism needs to be more than an afterthought. Feedback operates on two dimensions. On the one hand, feedback to the project team should drive reasonable changes within the project scope. But more importantly, feedback to the original audience is the catalyst that creates buy-in.

One project manger said she would gather suggestions from key stakeholders for her project, work them into the project, and then meet again to show the stakeholders how their feedback was being used. This created strong cross-functional ownership, and she found it well worth the substantial time investment.

3. Plan for Good and Bad Resistance

Resistance to new concepts is normal, and it takes two forms. In one case, a project manager lamented that her project to improve product availability was failing because of severe resistance. Forms of resistance included key people not coming to project review meetings, critical persons being pulled off her team and assigned to another project, and individuals simply ignoring the project. This was compounded by highly confrontational statements made at critical times to cause the initiative to lose credibility.

A project cannot succeed in the face of such negative resistance, and such actions must stop if the project is to progress. If face-to-face, fact-based reviews and appeals to the individual opposing the effort do not work, then the senior sponsor must be leveraged.

On the other hand, some level of initial resistance is to be expected and indeed should be viewed as positive. Such actions as open-minded questioning, initially challenging the project's need and debating its alternatives, and questioning the approach can all be important parts of a healthy buy-in process. But, this buy-in process takes time that is not accounted for in most project plans. We strongly recommend that this process be planned for in a formal way. Time for debate should be scheduled as tasks on the project. Otherwise, they will be by-passed too quickly, causing this critical buy-in process to be short circuited. In a rush to stay on schedule with the technical tasks, the soft items often take a back seat. Yet ironically these are the most important factors in the eventual project success.

4. Develop a Plan to Sustain Change

In a major durable goods company, an interesting scenario played out. The CEO decided  improved forecast accuracy was critical. This occurred after someone mistakenly sent him a report showing a 60 percent forecast error at the SKU location level. He decided that this situation had to be the source of many of the operational inefficiencies in his company, and he then delegated this problem to a young marketing vice president who was rising rapidly in the firm. When given the assignment, the VP realized that he knew nothing about forecasting technology or even the current basic approach being used in the firm. So, he did a little research and brought in the best consultant he could find.

The consultant conducted an audit and found many deficiencies in the process and the systems used. He designed a world-class process and brought in state-of-the-art software. He also convinced the VP to initiate a forecast collaboration process with the company's three largest customers.

The plan was outstanding and worked beautifully. Forecast error fell by one-fourth, from a 60-percent error to a 45-percent error. Room for improvement, of course, still existed, but the CEO was ecstatic with the process. Of course, the CEO was not so pleased that he didn't demand additional improvement for the next year. The VP was on to other problems assuming this one was on the right track. But, by mid-year, he checked in and found something very wrong. All of the accuracy improvement had been reversed! By the time the situation stabilized, it was too late, and the results for the year came in at an embarrassing level actually worse than the year before.

What went wrong here? The plan for improvement was technically flawless, but a key piece was missing however. The plan to sustain the change was missing.

Sustaining change is often more difficult than implementing it in the first place. Yet, ironically, project managers rarely develop a well-designed plan to sustain change.

Much has been written on the subject of change management with some excellent models in place. There is John Kotter's strategic eight-step model for transforming organizations, Todd Jick's tactical 10-step model for implementing change, and the General Electric seven-step model for accelerating change. These have a lot of similarities. But, the analysis at the University of Tennessee based on working with hundreds of companies indicates that the above four areas are the most often deficient.

Very simply, to effectively manage change and successfully implement supply chain initiatives, the project team must identify the key individuals and design a targeted communication plan specifically for them. The project plan must include sufficient time to deal with healthy debate and, once the project is implemented, a plan to sustain the change must be executed.

J. Paul Dittmann is director of corporate partnerships at the University of Tennessee.