mckinsey management infrastructure
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Management Infrastructure
Management Infrastructure
Fast-forward and perfect your next transformation
MMP Global ConferenceVienna, July 21 - 23, 2003
Manufacturing PracticeManufacturing Practice
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Agenda
•Context
•Performance management
•Organisation
•Continuous improvement infrastructure
•Next steps
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The EU OS&E practice has developed a three part model to explain how to transform clients operations
Operating System
Management Infrastructure
Mindsets & Behaviour
Sustainable future state
Currentstate
The processes, organisation and related infrastructure required to influence and enforce the operating system to ensure business goals are achieved
Assets and resources configured and utilised to deliver customer value with minimal waste, low variability and high flexibility
Performance-oriented leadership and organisation-wide behaviour to sustain an institutionalised continuous improvement ethic
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A knowledge initiative was launched last September to consolidate and develop the firm’s materials in management infrastructure
Origin McKinsey material, Sep 2002
Operating System
ManagementInfrastructure
Mindsets and Behaviour
• Toyota • Comprehensive suite of Industrial Training Presentations
• Guidelines for application to new environments (e.g. retail, heavy industry)
• McKinsey consultants
• McKinsey Organisation Practice
• NA People Systems initiative
• “MMP Common knowledge” of performance management
• McKinsey (Practical Change Management initiative)
• Client discussion documents
• Change Journey Workshop
• Front line diagnostic material
Focus of this initiative
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Five elements of management infrastructure have been defined
What this is . . .• Definition and
alignment of the key management infrastructure elements needed to effect and support a lean production process
What this is not . . .
• A definition of every management process needed to run a manufacturing business
Process to develop
operational skills and
capabilities
Continuous improvement infrastructure
Performance management
system
Alignment of the
operations organisation
structure
Management of key
functional support
processes*
Management infrastructure
Focus of this initiative to date
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The elements addressed so far concern questions that are critical to the effectiveness of a production system transformation
• What is the right role profile for the front line leader?
• How should front line teams link organisationally to the top management?
• How should front line support be organised?
• What is the right size/structure of the front line team?
• How should tracking and reporting systems be designed?
• How should targets be set and deployed?
• How should performance review processes be run?
• What are the right metrics to track performance of operations and people?
• What is the best way to codify the production system and improvement tools required?
• How should incentive systems be set up and run?
• How should the CI office progress over the change journey?
Operations organisation Performance management CI infrastructure
• How should a CI office be set up and run?– Size– Skills– Relationship to line
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Skills and capabilities
The remaining elements of management infrastructure involve other questions that are equally important
• How should management skills be defined and captured?
• What processes and programs are needed to provide operators and managers with the skills to do the job?
• How should operating skills be defined and captured?
• What changes to the financial systems and processes – especially cost accounting and budgeting - are needed to align to the lean operating system?
• How should HR processes – resource planning, labour scheduling, attendance etc - be provided?
• How should the quality system be set up and run?
• What IT systems are required to support the operating system?
Functional support processes
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Operations organisation
Performance management
CI infrastructure
Initial documents are now available for the first three elements
Long and short diagnostic toolsBest practice compendium
Compendium of design criteria
Compendium of design criteria
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2.1 Diagnose overall flow
3.1 Design flow 4.1 Implement flow 5.1 Refine flow
2.2 Diagnose process effectiveness
3.2 Prioritise stabilization/improvement
4.2 Run focused improvement initiatives
5.2 Re-establish priorities
2.3 Diagnose performance management
3.3 Design performance management
4.3 Establish and coach performance reviews
5.3 Monitor reviews
Flow
TAK
Performance management
Main application ofdocuments
The material has been particularly helpful in the diagnostic phases of pilot transformations at sandvik
3. Design high-level target system
4. Implement 5. Plan refinement2. Diagnose current state1. Start-up
2.4 Diagnose organisation
3.4 Design target organisation
4.4 Make changes to organisation
5.4 Redevelop changesOrganisation
Documents have helped to:• Convey best practice• Provide template pages
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Sandvik is a Swedish industrial company who has engaged the firmon a major production transformation initiative
Size
Products
• USD1bn sales
• Metal products– Steel ingots/feedstocks– Tubes– Strip– Wire
Sandvik Materials Technology Wire Business Unit
• USD 250 m sales
• Flat profiles (e.g. piston rings)
• Welding electrodes
• Spring wire
• Other (e.g intimate piercing)
Engagement
• Pilot transformations in all businesses
• Central team of 'navigators' built for rapid deployment of program
• Flat pilot transformation
• Weld pilot transformation
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Agenda
•Context
•Performance management
•Organisation
•Continuous improvement infrastructure
•Next steps
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Operations
People
System set-up and definition Dynamic management of performance
KPI definitionReporting formats and frequency
Data collection, information management and report production
People Management Process Definition
Motivation Systems DesignObjective setting/personal
plan development
Target setting
Corrective action
planning
Improvement planning
Implemen-tation
Performance review
Implemen-tation
Performance review
Manage rewards/ consequences
The performance management model was developed to bring together best practice thinking in the firm
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The 'static' elements of the operating system model prescribe how the systems should be initially set up and periodically updatedOPERATIONS SYSTEM SET-UP AND DEFINITION
a. Linkage of KPIs to ROCE using trees
b. Top level KPI definition
c. Cascade of KPIs through the organisational hierarchy
d. Use of supporting input or process metrics
KPI definition
a. Hierarchy of review meetings
b. Real time shop floor process control
c. Real time shop floor performance tracking
d. Front line performance reporting
e. Area management performance reporting
f. Operations top management reporting
Reporting formats and frequency
Data collection, information management and report production
a. Data collection efficiencyb. Data warehousing,
storage and processing efficiency
c. Report production processes
d. Performance management IT infrastructure
e. Alignment of financial processes to match operations organisation
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Production
0
5
10
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40
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1
1.02
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du
ctio
n (m
bd
)
Production Potential
Losses
0
5
10
15
20
12
.01
1.0
2
2.0
2
3.0
2
4.0
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5.0
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7.0
2
Lo
ss
es
(m
bd
)
Planned losses Unplanned losses
For example, the use of input or process metrics is recommended to help account for performance gaps
EXAMPLE
Exceptionally poor performance in June is explained by a planned shutdown which is only clear by looking at the driver (losses) as well as the result (production).
Similarly poor performance in July is caused by unplanned losses and is, therefore, of much more concern. This would be a target for further investigation and root cause problem solving
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Risks & Opportunities are identified under each element, capturing issues that arise from performance review and related actions
Measures are displayed by performance element with one driver and one result measure per element
Examples
• Key metrics for each performance element are displayed against target with a short trend history (e.g. one week)
Target driven
Accessible• Boards are located near
to the shop floor and are manually updated for quick and easy maintenance
Clear• Simple display that
clearly indicates what the measures are and is easy to understand for someone new to the area
Balanced• Metrics selected are a
balance of results and drivers
Controllable• Metrics selected can be
influenced within the reporting cycle by the team reviewing performance
Guidelines and examples for front line performance reporting have been detailed
EXAMPLE
SHORT-RUN REVIEW AT THE FRONT LINE NEEDS TO BE SUPPORTED BY A SIMPLE DISPLAY OF KEY METRICS
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Imple-men-tation
Target settinga. Definition of highest
level objectives to deliver business strategy
b. Cascade of objectives through the KPI hierarchy
Improvement planninga. Developing improvement
actions for the delivery of business targets
b. Documenting improvement plans
c. Integrating corrective action plans into mainstream improvement plans
Performance reviewa. Identifying performance gaps b. Shop floor review and planning
meetings c. Area management performance
reviewsd. Operations top management
performance reviews
Corrective action planninga. Prioritising areas for improvement b. Identifying root causes of performance gapsc. Evaluating short term containment actionsd. Generating solution ideas to address root causes
and selecting prioritiese. Resetting targets within the business planning cyclef. Shop floor action tracking for problem resolution
The second section of the model prescribes how operations performance reviews should be conducted
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• Clear consequence management: Not making base targets leads to loss of job
• Appraisals take account of creativity in setting stretch targets – lack of ambition can also be punishable by sacking
• 360 degree appraisals include contribution from occupant of previous job - prevents “slash and burn” approach to achieving targets
• Great reward, both financial and development, for achieving stretch
Performance management system
• Mindset – brutally facing reality while believing in stretch
• Missing your base targets in a ‘social sin’ and you are ostracized
• Delivering stretch targets leads to ‘hero worship’
Mindsets and behavioursCapability building
•Base targets are set top down – aimed at delivering steady year-on-year improvement
•Managers at each level set their own stretch targets
•If stretch targets are achieved, they become the basis for the following year’s base targets
•The system builds in checks and counterbalances to prevent “sandbagging”
Example:
For example, targets must be set that are consistent with business strategy and corporate culture
EXAMPLE
TARGET SETTING DEPENDS ON THE SUBTLETIES OF THE MOTIVATION SYSTEM AND CORPORATE MINDSETS FOR SUCCESS
Role-modelling
Under-standing & commitment
Aligned systems &
structure
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The material includes illustrations of 'best practice' for formulating improvement plans to close gaps to targets
EXAMPLE
Level 2 TIP for focussed equipment improvement displayed with chart tracking the key measure being addressed – line downtime
Progress against the plan can be directly related to performance against the target
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a. Explicit choice of motivation levers
b. Translating choice of lever into specific policies
c. Construction of appropriate incentive packages
a.Appraisal process definition
b.Disciplinary process definition
People management process definition
Motivation systems design
The third part of the model concerns establishing systems to manage people's performance
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• “You need to believe in our ‘cult-like’ values and live by them”
Coordination and control levers ("sticks"): How senior management personally interacts to manage the business
Motivation levers (“carrots”): Levers senior managers explicitly pull to motivate the broader workforce
Typically drive business by focusing intensely on one area
Financial control and planning
Operation con-trol and planning
People-intensive focus
Incentives Opportunities Values and beliefs
Coordination and control levers Motivation levers
Level of personal focus and attention by senior management
• “We proactively put the right people in the right place by focusing on people practices”
• “Meet our tough financial goals and we won’t micromanage your operation”
• “Intrusive operational planning and tracking is the only way to ensure we are truly effective”
• “Recognize performance with money and/or non-financial rewards (including a fun and stimulating environment)”
• “Give them chances to grow into bigger roles, the freedom to shape own work content, and/or greater autonomy to act on ideas”
Description Description
Superior/ Best practices
Distinctive execution
Common practices
Often a second area is driven to “near-distinctive” level
Senior managers can set the direction of their people management system by determining the relative importance of six choices…
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Choices are dictated by the extent of problems/issues at the company
• “Sinking ships” can realistically pull only operational and incentives levers
• “Leaking ships” have more latitude and can pull any combination of financial/ operational and opportunities/ incentives
• “Smooth sailing ships” have the most latitude and can pull any combination of levers; generally, though, smooth sailing companies are already distinctive on 2 levers
Motivation levers
Incentives Opportunities Values/belief
Ope
ratio
nsF
inan
cial
Peo
ple
Co
ord
inat
ion
/co
ntr
ol l
ever
s
Smooth sailingSmooth sailing
LeakingLeaking
SinkingSinking
…although the choice may be limited by overall business performance
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Objective setting and personal development planning
Performance review
a. Effectiveness of appraisal processes
b. Identifying performance issues in real time and taking action
c. Providing coaching and development interventions
Reward and consequence management
a. Robustness of reward and consequence management
b. Linkage of performance to career development and progression
Imple-men-tation
a. Alignment of personal and operations objectives
b. Quality of objective definitions
c. Planning for personal development
The model's fourth quadrant is concerned with conducting performance appraisals
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Best practice is for performance to be explicitly linked to career progression
High performers need to be nurtured
• Retention is difficult if high performers do not feel stretched or adequately rewarded
• Know who the high performers are and tell them
• Shape the work to excite and stretch them
• Create rapid progression opportunities for those with potential
• Pay them enough to keep them
• Measure and manage retention
• Distinguish between potential and performance
• Focus senior management attention on high- potential people
• Excellent performers are hard to identify – in many companies 85% of people receive “Average” or “Above average” appraisals
• Performance rewards are so commonly awarded that they are seen by most as an entitlement
• There are no clear benefits, such as accelerated progression, for those demonstrating excellent performance and potential
• Everyone gets a similar salary increase
• Advancement mainly based on tenure rather than performance
Many companies do not sufficiently recognise excellent performance
12B. LINKAGE OF PERFORMANCE TO CAREER DEVELOPMENT AND PROGRESSION
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For example, GE has created a fluid environment for high performers among its 300,000 employees
• Objects move through a stationary bed of sand only with great difficulty. Agitation creates a ‘fluidised bed’ which allows objects to move quickly through it. The higher the rate of agitation, the more quickly objects can move
• GE continuously creates a state of agitation to reduce organisational viscosity and to allow its leaders to rise quickly through the organisation. In turn this promotes a more rapid spread of ideas and knowledge
• “The sense of urgency at GE is extreme, you feel like you’ve had a bullet fired at you, and your always running out ahead of it”
– Former GE employee
• “I just wish we were faster - I never move fast enough” – Jack Welch
Pace
• Job rotation is considered the primary vehicle for development with ‘high potential’ people rotated through quickly
• Spans of control were increased from 5-9 to 20-30
• “We try to give our very best people experiences before they are ready. We believe the payoffs far outweigh the risks”
• Leaders are evaluated on ‘Edge’, a strong bias for action
• “Your best development opportunity is your next job”
• Decisiveness is strongly encouraged and evaluated
People
Leaders
Operatingenvironment
'Fluidised bed'
EXAMPLE
12B. LINKAGE OF PERFORMANCE TO CAREER DEVELOPMENT AND PROGRESSION
GE’s operating environment is like a fluidised bed . . .
. . . stimulated and catalysed by agitation mechanisms
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A standard diagnostic has been developed which helps to assesses a client's gaps to best practice in all areas
"EPR"-like documents have been developed to rate client practices against each element
of the model
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In Sandvik the diagnostic helped to explain that ensuring access to performance data available was not enough
KPI definition
Reporting formatsand frequency
Data management
0
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1b
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2d2e
2f
3a
3b
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3d
3e
1a1b1c1d2a2b2c2d2e2f3a3b3c3d3e
Performance set-upROCE–KPI listKPI definitionKPI cascadeSupporting metricsHierarchy of reviewsShop floor process controlsShop floor performanceShop floor reportArea performance reportTop performance reportData collection efficiencyData processing efficiencyReport production efficiencyIT infrastructureFinancial tracking
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The diagnostic also enabled the current gap in managing performance to be discussed objectively with the client
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Target setting
Corrective actionplanning
Improvementplanning
Performancereview
Performance executionHigh-level targetsCascade targetsDevelop planDocument planCorrect planIdentify gapsShop floor reviewManager reviewTop management reviewPrioritise problemsIdentify root causesEvaluate actionsGenerate solutionsReset targetsTrack problems
4a4b5a5b5c6a6b6c6d7a7b7c7d7e7f
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The standard template was used to propose a consistent set of performance reviews
Foreman (Gunnar)
Production head (Bengt)
Division manager
(Jan)
Monthly QuarterlyWeekly
Team
Daily
Lev
el
Frequency
Real Time
Production manager (Karin)
Team KPI board
Weekly scorecard
Monthly scorecard
Quarterly scorecard
Andon
Process Control Charts
Monthly performance
review
Weekly performanc
e review
Daily performance
review
FLAT WIRE EXAMPLE
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Standard agendas were then adjusted for Sandvik's review meetings
Daily team review Timing: 1-2 x 15 min daily
Agenda
1. Review performanceIdentify gaps to targetsComment on KPI trends
2. Identify recent problemsFor each gap to target (in descending order)
Identify main machine(s)Investigate root cause of problemLog problem and assign action if appropriate
3. Review ongoing problems For each change on problem resolution board
Summarise progress madeCommunicate changes
4. Brief discussion of extraordinary items
AttendeesProduction leader All Team MembersMaintenance, Quality, Process engineering, Planning
Input • Summary board• Problem resolution board
Meeting rules• Update board with KPIs prior to meeting• All present in meeting must speak with data
Purpose: To review the performance of the last 24 hours and direct/feedback improvement actions
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Scorecards to facilitate the weekly performance reviews were developed from a PSDC model
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Example of flat rolling daily performance board
Photos removed
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Agenda
•Context
•Performance management
•Organisation
•Continuous improvement infrastructure
•Next steps
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Organisation design principles developed in the materials were agreed with the Sandvik management team
• Numbers and roles within operating teams should be designed to support the transformed operating system
• Non-operations personnel should be organised to suit the nature of support required by the operating system
• Single point accountability along flows in business should be driven to the lowest possible level
Effective
Efficient• Numbers of non-production
personnel should be kept to the minimum required
Principle
• None at this stage
• Process engineers and maintenance organised into neighbouring support team
• Front line team leaders will be Flow Managers
Planned change at Sandvik Wire
• Numbers of non-production personnel should be kept to the minimum required
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The material prescribes a design process that starts with operating system requirements
End product
Determine foundationDetermine size and role of frontline teams
Determine size and role of subsequent levels
Determine design of functional support
Number ofmanagers in linehierarchy
Role for eachmanager
Organisation design for each support function
Stage oforganisation design
Front line team size and leader
role
Line management structure
Functional support
People and processes required
One value stream segment
Number of operators per value stream loop on all shifts
Max number of reports to front line team leader
Front line teams assigned to areas of business
Roles for front-line team leaders
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Five factors from the operating system design may shape the optimum size of the front line team
Current process stability Greater instability will require more frequent intervention and closer management attention
Complexity and variability of tasks
The greater the complexity of tasks, the greater the requirement for managing data, organising work and training operators
Criticality of quality Greater criticality of processes will require closer supervision and closer management attention
Takt time For long takt times the Cover required to relieve/assist each operator for short periods to avoid stopping line
Size of equipment and degree of automation
The greater the density of operators, the less likely it is that team formation be constrained by physical layout
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Additional strategic factors may also shape a smaller or larger front line team
Managementdevelopment
Grouping and accountability should be assigned to unbroken value stream segments wherever possible
High required pace ofcontinuous improvement
More focus is required from leader to ensure faster pace of change
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The prescribed analysis was completed at Sandvik wire, and helped to justify the target design
Front line team size
Small (<4) Large (~50)
Process stability
Complexity of tasks
Process criticality
Work content to remember
Takt time – manual CFP
Operator density
Required pace of improvement
Strategic requirement
<20%
>£10K
<1
>20%
<60s
>100hrs
100%
<£1
>100
0%
30min
<1 hour
>Daily <Monthly
<4 ~50
The analysis helped to consider relevant factors in the Wire flows
The analysis helped to consider relevant factors in the Wire flows
It helped to confirm that Wire flow managers could manage up to 20 people
It helped to confirm that Wire flow managers could manage up to 20 people
Process engineering support is required to compensate for instability of processes
Process engineering support is required to compensate for instability of processes
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The material will also now be used at Sandvik to consider the optimum nature of the support functions
Functions
Maintenance
Production Planning
Human Resource
Quality
Functions
Finance
Should we integrate the function into the front line teams?
Should the support be organised into a functional silo?
Are there models somewhere in the middle?
Questions
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THERE ARE FIVE MAIN WAYS IN WHICH SUPPORT FUNCTIONS MAY RELATE TO FRONT LINE TEAMS
5. Functional silo
Produc-tionmanager
Frontlineteam leader
Support manager
Opera-tionsteam
Supportteams
Plant manager
1. Fully-integrated into frontline team
Front lineteamleader
Opera-tionsteam
Support
2. Report via middle manager
Areamanager
Frontlineteam leader
Supportteamleader
Opera-tionsteam
Support
3. Report via senior manager
Produc-tionmanager
Frontlineteam leader
Supportmanager
Opera-tionsteam
Supportteams
4. Matrix
Produc-tionmanager
Frontlineteam leader
Supportmanager
Opera-tionsteam
Supportteams
Plant manager
Area manager
Area manager
Area manager
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Seven factors will affect the integration of support into the value stream
Integrated in value stream Centralised functionDesign criterion
Source:Team workshops
Interactions with front- line are not time critical
Response is required quickly to maintain production
Required responsiveness
Skills are not specialist or scarce
Scarce skill must be nurtured across multiple production areas
Specialist skills
There are enough tasks to do at the frontline to keep one person fully utilised
Not enough work content at frontline to merit a full-time position in frontline team
Utilisation
All equipment/systems local to the line or can be replicated at the line (IT systems)
Access to centralised equipment or specialist IT systems needed
Access to central systems
Degree of independence No reason for being separated from front-line
Conflict of interest if working too close with front-line
Never have to deal with front lineFrequency of interaction Interaction is critical
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The proposal for the organisation of Sandvik’s maintenance department is to report to production via the first level managers
High Low
LowHigh
Low High
HighLow
HighLow
Low High
Value stream
Central function
Rating
Interaction with line
Responsiveness to front-line
Skills nurturing needed
Deployment utilisation
Access to central equipment/systems
Independencefrom line required
Criterion
Model 1 52 3 4
2. Report via middle manager
Productionmanager
Flowmanager
Supportmanager
Opera-tionsteam
Technician
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Agenda
•Context
•Performance management
•Organisation
•Continuous improvement infrastructure
•Next steps
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The current CI material has been developed to explain how a CI team should be designed to serve three functions
Core activities Elements Importance
Building CI capability
• Transferring CI knowledge to the line
• Reinforcing improvement behaviours
• Spreads awareness of why and how to improve
• Ensures practical change takes place
Developing methodology and vision
• Codifying improvement methodology
• Creating improvement vision
• Shows people how to create improvement
• Provides a tangible and consistent target
Supporting CI implementation
• Resolving technical CI issues
• Overseeing improvement programme
• Overcomes barriers to implementation
• Maintains space through effective planning and review
For all but the smallest organisation, the line function lacks the knowledge and resources to perform these activities adequately
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The design should vary as an organisation progresses through different phases of corporate transformation
Begin Build Embed
SummaryTransformation kick-off
Deployment throughout value-stream
Continuous improvement as normal routine
ThemeDemonstrating change
Managing programme
Devolving to line
Change modelStep change; push Step change; push Incremental
change; pull
Focus areaPilot area (usually value stream)
Multiple value streams
Whole business
LeadersSenior managers with external support
Line managers with external support
Line managers with internal support
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The structure of the CI team should also develop as its role progresses
Begin Build EmbedStage
Typical CI organisation structure
Function
Group
Plant Manager
Ops External support
Line Line Model line
Change agents
Push
External support (consultancy) helps kick-start change through joint change agent team working in model line pilot area
Internal change agents deployed across the plant, supported by plant CI function. External support helps in deployment and building group CI infrastructure
CI coaching ‘pulled’ by line to help them meet targets. Improvement teams add skilled resource. External support replaced by group CI function
Group
Plant Manager
Ops
Group CI team
External support
Push
Plant CI team
Push
Line Line Line
Change agents
Change agents
Push Push
Change agents
Group
Plant Manger
Ops
Group CI team
Pull
Plant CI team
Pull
Line Line Line
Improve-ment team
Improve-ment team
Pull Pull
Improve-ment team
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The skills and capabilities within the CI organisation will also need to change for each stage
Training/facilitation/coaching
Change management
Improvement project design
Project management
Practical implementation
Technical CI knowledge
Skill/capability
Requirement
Begin Build Embed
Focus on change management
Focus on project management
Focus on technical improvement
High
Medium
Low
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Stage 1 (begin) CI infrastructure – organisation size and structure
Typical size
Team size equivalent to approx 0.5 - 1% of manufacturing personnel
1-3 change agents with 1 –2 consultants per pilot area
Explanation of each roleTypical structure of CI organisation
Group
Plant Manager
Ops External support
Line Line Model line
Change agents
Push
External support is required for technical advice and as a driving force for change. This group (often consultants) works with the operations organisation and plant manager to manage the implementation. It also works hand-in-hand with the change agents to implement change
A small group of change agents newly created for the transformation, work with external support in the pilot area to make change happen
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Stage 2 (build) CI infrastructure – organisation size and structure
1 internal consultant per 2-4 plants covered
1 external consultant per 2-4 internal consultants
0.25-0.5% of plant workforce
1-3 change agents per deployment area
Typical sizeExplanation of each roleTypical structure of CI organisation
Group
Plant Manager
Ops
Group CI team
External support
Push
Plant CI team
Push
Line Line Line
Change agents
Change agents
Push Push
Change agents
New group-level CI team created to act as internal consultants. Trained by the external support group they gradually take over their role
External support now advises the new group and plant CI teams in deployment
New plant-level CI team created to drive plant-wide deployment through operations
Change agent teams expanded to cover implementation across several deployment areas
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Stage 3 (embed) CI infrastructure – organisation size and structure
1 internal consultant per 2-4 plants covered
Team of 1-2 for area of 100 shop floor workers
*Assumes plant size of up to 500 people
Group
Plant Manger
Ops
Group CI team
Pull
Plant CI team
Pull
Line Line Line
Improve-ment team
Improve-ment team
Pull Pull
Improve-ment team
Typical sizeExplanation of each roleTypical structure of CI organisation
Group CI team strengthened to support company-wide activity. External support no longer required
Plant CI team coaches operations as requested to meet their targets. No external support, but can draw on group CI consultants for advice
0.25-0.5% of plant workforce
Improvement teams replace change agents. They report directly to the operations function and help facilitate practical CI activity
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• March-June 2004
Lead time and
productivity leadership
• Feb-Oct/Nov, 2003Timing • Nov–Feb, 2003
Complete implementation in Sandviken and initiate global roll-out initiated
Phase 3Training program
Drive pilots and build capability/ competence
Scale-up in Sandviken and institutionalize production capability
Phase 1Phase 2
Drive full global roll-out
Phase 4
• July-Dec 2004
• 6 units• 90–100% of
Sandviken
• 6 units/flows*• 30% of Sandviken
site
Scope • 6 units**• 70% of Sandviken
site
• 6–9 units• 100% of Sandviken
site
"Full results in Sandviken and global roll-out
started"
"It is possible""You have the
internal capabilities"
"Full results-new performance
level"
"What does it mean"
Product Areas fully in charge
The CEO of Sandvik Materials Technology is ambitiously investing in rapid corporate deployment of production system transformation
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The build phase has been reached within the first 6 months
Core activity Criterion Begin Build Embed
Building capability
Sourcing of CI knowledge
Consultancy and recruitment
Recruitment, some consultancy
Develop in-house expertise
Resourcing of training
Consultancy Grow in-house (plant-based)
Grow in-house (corporate-based)
Reinforcement of behaviour
Change agent/shadow reinforces
Change agent/shadow reinforces
Line reinforces, CI functions as adviser
Supporting implementation
Driving of improvement
CI function drives CI function drives through the line
Line drives, advised by CI function
Management of programme
Project management Strong project management/ deployment
Devolved line kaizen
Developing methodology
Targeting of improvement vision
Top-down, step change vision for pilot area
Top-down, step change vision for deployment area
Incremental, based on technical limits, ‘ideal state’ vision
Prescriptive, standardised methodology
Prescriptive, standardised methodology
Principle-based, adaptive methodology
Codification of methodology
Few tools, focussed on high priorities
Few tools, focussed on high priorities
Broader toolkit, more advanced tools
Selection of toolkit
McKinsey will lead 6 pilot transformations
The flow transformation approach has been standardised and training is being developed
Six full-time “production system designers” are being trained
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Agenda
•Context
•Performance management
•Organisation
•Continuous improvement infrastructure
•Next steps
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Transformation compendium
Purpose
• To help CSTs and clients prepare transformation plans to reach the end state
Example issues to be addressed
• Given diagnostic result, what are the immediate priorities for the business?
• Which performance review should start first?• What materials can be used to help coach
leaders of reviews?• What are the implementation stages for initial
shop floor performance reviews?
Case study• To provide a complete
client example from diagnosis to implementation
• What did client’s diagnosis look like?• What was the end-state vision?• How was a stretching, realistic
implementation plan created?• What tools were used when implementing?• What lessons were learned by the client?
Example materials to be developed in the next phase
How to video• To provide a role model
for conducting performance reviews
• How does a good leader create the right flow and flavour in a performance review?
• What helped him/her achieve this?
Client document
• Client-ready document that introduces concepts and design/ implementation process
All of the above