ARE 112 - 4/20 - Wk 4

Change strategies (way forward)

Force coercion - I am the boss, this is how we are going to make things work; sometimes you have to rewards people and if they don't do it you have to fire them; the primary one is legitimate power; political maneuvering - make sure everyone in the organization knows what is going on; results = b/c we force people into doing something unless we got them locked into a system they might revert back to the old system b/c we didn't give them a chance to buy into the system Rational persuasion - ex. Ralph in the goal giving Alex all that new data; Duke h.case - came up with new data to show that things aren't working the way you think they are working; not so much a focus on the power but on the base - if you don't have expertise power giving you the rational and empirical arguments you cant get it done; informational efforts - tell people what you got going - ex. red tag or green in The Goal - you got to get the facts out there - very much related to the MECE approach; Results - people see what the change is and have to accept it, people have to see that it is going to be worthwhile Shared power - best of the three; ex. clinical pathways in the Duke h. case, - led by the doc. That had referent power - everybody participated in the program knowing that the doctor was in front of them working on it; shared power of inventory levels in The Goal; Results - b/c people can see the benefits in what was going on in the change

Notes on IBM UNIX Ring

Linking operations and leadership (IBM book) = Transformational organization Dumb Terminal: Mainframe = large computer (attached to it are terminals, sometimes called dumb terminals; called "client terminals" on the pdf - > all together called a local area network (LAN)/ Monopoly = problems to the way they perceived their customers - 1980s - PC world came UNIX Ring: - Don't worry about the jargon in between the lines in the diagram - Front end processor - "communications server" - How it works - PCs connected to communications server - UC system was one of the drivers behind of the dev. Of the UNIX Ring (instead of physically sending software data, we can communicate w/ each w/ tokens w/ the UNIX Ring) - PC to communications server to receiver (in sending over data to each other) - no emails back then - The PC's were able to develop software to then take over the connection world that they had in the mainframe (top diagram) - The problem with this system in the book - the hardware that was developed - the big application software - "the stack" - became inadequate b/c of Microsoft and Dell

Lessons from Deloitte's Women's Initiative

Make sure senior management is front and center. - To overcome the resistance of partners, the CEO actively led the Women's Initiative. He put his own reputation on the line. Make an airtight business case for cultural change. - Emotional appeals weren't going to be enough. We had to docu- ment the business imperative for change before we could justify the investment and effort that the initiative would require. Let the world watch you. - We appointed an external advisory council and told the press about our plans. They wouldn't let the initiative be another "program of the year" that led nowhere. Begin with dialogue as the platform for change. - We required everyone to attend intensive workshops to reveal and examine gender-based assumptions in mentoring and client assignments. Use a flexible system of accountability. - We first required local offices to measure their efforts with women professionals. Next, we worked with the office heads to select their focus areas for change under the initiative. Promote work-life balance for men and women. - Policies for flexible work arrange- ments and lighter travel schedules not only eased the strain on busy professionals but also helped open our corporate culture.

Back to Anthony's hierarchy and the value proposition

Managers deal w/ strategy and operations/ supervisors and workers operate on the lower half/ market segments - who am I going to sell a product to/ org. compt. And capa. - what am I going to do over here/ we see these strategic lenses in this diagram to Anthony's man. Hierarchy/ what we've talked about so far has been about general management - how do we get things done (either a project or process); 3 schools we've talked about;

The Deloitte Case

Nine years ago, the professional services firm of Deloitte & Touche realized too many of its talented women were walking out the door. Stopping them was urgent - but it took a deeper change in the organization than anyone expected. Nine years ago, we came to grips with the fact that women at Deloitte were on the march-out the door. In 1991, only four of our 50 candi- dates for partner were women, even though Deloitte & Touche-America's third largest accounting, tax, and con- sulting firm at the time - had been heav- ily recruiting women from colleges and business schools since 1980. Not only - We also found that women were leaving the firm at a significantly greater rate than men. To be frank, many of the firm's senior partners, including myself, didn't actu- ally see the exodus of women as a prob- lem, or at least, it wasn't our problem. We assumed that women were leaving to have children and stay home. If there was a problem at all, it was society's or the women's, not Deloitte's. In fact, most senior partners firmly believed we were doing everything possible to retain women. We prided ourselves on our open, collegial, performance-based work environment. How wrong we were, and how far we've come. Over the next few years, we analyzed why women were leaving and worked to stop the outflow. At first, the program was largely our CEO's idea; unlike many of us, he saw women's leaving as a seri- ous business matter that the firm could and should fix. - These days, you'd be hard-pressed to find partners within the firm who dis- agree. It took a cultural revolution, but Deloitte now has a radically different approach to retaining talented women. Based on six principles, it is an approach that other companies might well con- sider, for its results speak for themselves. Today 14% of our partners and direc- tors are women. While we aren't yet where we want to be, this percentage is up from 5% in 1991 and the highest in the Big Five. The number of women managing partners has increased dra- matically, and we've eliminated the gender gap in our turnover: - women now stay on at about the same rate as men each year - The firm's annual turnover rate as a whole fell from around 25% in the early 1990s to 18% in 1999, despite an intensifying war for talent. Besides saving us $250 million in hiring and training costs, lower turnover has en- abled Deloitte to grow faster than any other large professional services firm in the past several years. a 2-stage Process - Deloitte's Initiative for the Retention and Advancement of Women grew out of a 1992 task force chaired by Mike Cook, then CEO of Deloitte & Touche - A number of women partners initially wanted nothing to do with the effort because it implied affirmative action. But Cook, along with a handful of part- ners - women and men - insisted that high turnover for women was a problem of the utmost urgency. In professional services firms, they argued, the "product" is talent, billed to the client by the hour; and so much of our firm's product was leaving at an alarming rate. Once in place, the task force didn't immediately launch a slew of new orga- nizational policies aimed at outlawing bad behavior. Instead, it approached the problem methodically, just as we would approach a consulting assignment. Thus, it first investigated the problem and gathered the data necessary to make a business case - not a moral or emotional one - for change. - Then it prepared the groundwork for change by holding a series of intensive, two-day workshops for all of our management professionals These sessions were designed to bring to the surface the gender-based assump- tions about careers and aspirations that had discouraged high-performing women from staying. Only then did the firm announce a series of policies aimed at keeping women. A major component of these policies was to first get all the firm's offices to monitor the progress of their women professionals. The head of every office received the message that the CEO and other managing partners were watching, and in turn, women started getting their share of premier client assignments and informal mentoring. Other policies, designed to promote more balance between work and life for women and men, also helped. These efforts have opened up our work envi- ronment and our culture in ways we never expected. Preparing the way for Change: - we think our lessons will apply to a great many organizations. Make sure senior management is front and center. Despite its name, the Women's Initiative was always driven by the managing partners - it never became an "HR thing" foisted on the firm. Like other organizations, we were used to having new personnel programs every so often, just one more thing added to an already full plate. I'm sure most of our partners felt initially that the focus on women was the latest "program of the year"; we would try our best and then move on to something else. But from the start, senior man- agement signaled that the initiative would be led by the partners. Cook named Ellen Gabriel, a star partner, as the first leader of the initiative. Cook's own leadership involved no small investment and risk. In a firm like ours, where the partners are also owners, leadership is not top-down. He took charge of the effort personally and visibly and with every step, we all got the sense that change was a high priority for him. In Cook's case, a reputation for toughness helped to give this initiative credibility. Make an airtight business case for cultural change. - The task force pre- pared the firm for change by laying a foundation of data, including personal stories. Deloitte was doing a great job of hiring high-performing women; in fact, women often earned higher per- formance ratings than men in their first years with the firm. Yet the percentage of women decreased with each step up the career ladder, in all practices and regions, and many women left the firm just when they were expected to receive promotions. - Interviews with current and former women professionals explained why. Most weren't leaving to raise fam- ilies; they had weighed their options in Deloitte's male-dominated culture and found them wanting. Many of them, dis- satisfied with a culture they perceived as endemic to professional services firms, switched professions. And all of them together represented a major lost oppor- tunity for the firm. Let the world watch you. - With the endorsement of the management committee, the firm moved forward. It held a press conference to launch the Women's Initiative, but it also went fur- ther and named an external advisory council. Chaired by Lynn Martin, for- mer U.S. secretary of labor, the council comprised business leaders with expertise in the area of women in the workplace - the council brought visibility to the effort. As the task force realized, going public would put healthy pressure on the partners to commit to change and deliver results. And that's what hap- pened, particularly with slow-moving offices in the organization. Local man- agers received prodding comments from their associates like,"I read in theWall Street Journal that we're doing this major initiative, but I don't see big change in our office." Along with helping the task force think about gender, the council has opened the firm's eyes to broader issues. In 1994, the council was meeting with a group of eight professionals - four men and four women-identified by their managers as rising stars at Deloitte. At the end of the meeting, one member of the council asked, almost as an after- thought,"How many of you want to be partners next time we see you?" Only one of the eight said yes. Stunned, the council asked for an explanation. - They were surprised to find that young men in the firm didn't want what older men wanted; they weren't trying to buy good enough lifestyles so that their wives didn't have to work. At the time, the average partner at Deloitte was making $350,000 and working 80 hours a week, but these young people - men and women both - would've been happy working 60 hours a week for$250,000. They believed they were good enough, and they weren't willing to give up their families and outside lives for another $100,000. - Begin with dialogue as the platform for change - found that women at Deloitte perceived they had fewer career opportunities than men, but no one could point to any specific policies as the culprits. We had to tackle our underlying culture to fix the problem. Accordingly, the firm held special two-day workshops designed to explore issues of gender in the work- place. - We needed to begin a dialogue: in our view, the key to creating cultural change in the firm was to turn taboo subjects at work into acceptable topics of discussion. - Cook per- sonally monitored attendance; as one partner puts it, "Resistance was futile." Many harbored doubts. I myself saw it as just one more thing to do, and I had always been skeptical of HR-type pro- grams. I'm sure I wasn't the only part- ner calculating in my head the lost rev- enue represented by two days' worth of billable hours, multiplied by 5,000 - not to mention the $8 million cost of the workshops themselves. - I was dead wrong. The workshops were a turning point, a pivotal event in the life of the firm. - Through discussions, videos, and case studies, we began to take a hard look at how gender attitudes affected the environment at Deloitte. It wasn't enough to hear the problems in the abstract; we had to see them face to face. Sitting across a table from a respected colleague and hearing her say,"Why did you make that assumption aboutwomen?It'sjustnottrue,"I,like many others, began to change. Many of us had little exposure to dual-career families but did have highly educated daughters entering the workforce. A woman partner would say to a male counterpart, "Sarah's graduating from college. Would you want her to work for a company that has lower expecta- tions for women?" Suddenly he'd get it - Case studies were useful for bringing out and examining subtle differences in expectations. Drawing on scripts pro- vided by outside facilitators, people in the workshops would break into groups, discuss cases, and share solutions with the full group. - a typical case = - Of the woman, a partner would say,"She's really good, she gives 100%. But I just don't see her interacting with a CFO. She's not as pol- ished as some. Her presentation skills could be stronger." The conversation about the man would vary slightly, but significantly: "He's good. He and I are going to take a CFO golfing next week. I know he can grow into it; he has tre- mendous potential." Beginning with these subtle variations in language, careers could go in very different direc- tions. A woman was found a bit want- ing, and we (male partners) couldn't see how she would get to the next level. As one woman summed up, "Women get evaluated on their performance; men get evaluated on their potential." It was very popular, and there were never any women. It hadn't occurred to him to ask why. He figured "no woman would want to go to a golf outing where you smoke cigars and drink beer and tell lies." But the women in the session were quick to say that by not being there, they were frozen out of informal networks where important informa- tion was shared and a sense of belong- ing built. Today women are routinely included in such outings. Work assignments got a lot of atten- tion in the workshops. Too often, women were passed over for cer- tain assignments because male part- ners made assumptions about what they wanted: "I wouldn't put her on that kind of company because it's a tough manufacturing environment," or "That client is difficult to deal with." Even more common, "Travel puts too much pressure on women," or "Her husband won't go along with relocating." Usu- ally we weren't even conscious of mak- ing such assumptions, but the work- shops brought them front and center. The workshops also highlighted one of the worst aspects of these hidden assumptions: they were self-fulfilling. Say a partner gets a big new client and asks the assignment director to put together a team, adding,"Continuity is very important on this engagement." The assignment director knows that women turn over more rapidly than men and has the numbers to prove it. So the thinking goes,"If I put a woman on this account, the partner will be all overme-andthat'swhoevaluatesme." - In the end, John gets to work on the big account and Jane works "somewhere else."Afterawhile,Janesays,"I'mnot going anywhere here. I'm never going to get the big opportunities," so she leaves. And the assignment director says, "I knew it." The task force realized the workshops were risky; the firm was opening a can of worms and couldn't control the re- sults. Indeed, a few of the workshops flopped, disintegrating into a painful mixture of bitterness and skepticism. Some people dismissed the experience as a waste of time. But ultimately the workshops converted a critical mass of Deloitte's leaders. The message was out: don't make assumptions about what women do or don't want. Ask them. Putting the new attitudes to work: - The workshops generated momentum, but the dialogue had to be followed with concrete operational steps if we were going to bring about real change. The task force had clear expectations: more of our qualified women should be promoted, and the turnover rate for women should fall. But the firm had to be careful not to set quotas or seem to give women all the plum assignments. The key was to send a clear, powerful message for change while still giving heads of local offices some discretion. Use a flexible system of accountability. - Since the fastest way to change behaviors is to measure them, the task force started by simply asking for num- bers. Beginning in 1993, in the midst of the workshops, local offices were asked to conduct annual reviews to determine if the top-rated women were receiving their proportionate share of the best assignments. - Some offices resisted, questioning the usefulness of this time- consuming exercise or fearing that the initiative would lead to quotas. How- ever, a few pointed phone calls from the CEO prodded the laggards. The re- views confirmed our suspicions: women tended to be assigned to projects in nonprofit, health care, and retail - seg- ments that generally lacked large global accounts - while men received most of the assignments in manufacturing, fi- nancial services, and highly visible areas like mergers and acquisitions. Most offices began tracking the activi- ties of their high-performing women on a quarterly basis. To complement the connections that men naturally made with one another, we began hosting regular networking events for women - for example, panel discussions where women partners discussed their careers and leadership roles, followed by net- working receptions. We also started formal career planning for women part- ners and senior managers. This plan- ning proved so helpful that women suggested men also be included, thus giving rise to Deloitte Consulting's cur- rent Partner Development Program. It offered offices a menu of goals derived from the Women's Ini- tiative - such as a recruiting hit rate or a reduction in the gender gap in turn- over - yet left it up to the offices to pick the goals best suited for their particular situations. Office heads started includ- ing their choices among the objectives that drove their year-end evaluations and compensation. And the firm made sure that results on turnover, promo- tion, and other key numbers for each office were circulated widely among management, feeding a healthy inter- nal competitiveness - Low-performing offices got calls or visits from task force members to push for better progress. Today partners know that they will not become leaders of this organization if they have not demonstrated their com- mitment to the Women's Initiative. It's Not Just About Women - what started out as a program for women soon began to affect our overall corporate culture. Promote work-life balance for men and women - We discovered that work- life balance was important to everyone. On paper, we had always allowed tem- porary, flexible work arrangements, but people believed (rightly, at the time) that working fewer hours could doom an otherwise promising career. In 1993, only a few hundred people were taking advantage of the policy. So now we said that opting for flexible work wouldn't hinder advancement in the firm, though it might stretch out the time required for promotion - And when a woman was admitted to the partnership in 1995 while on a flex- ible work arrangement, people really began to get the message. By 1999 more than 30 people on flexible work arrange- ments had made partner, and in that year, the total number of people on flex- ible schedules had doubled to 800. - We also reexamined the schedule that all of us work, especially within the consulting practice. A grinding travel schedule had long been an accepted part of the macho consultants' culture. Typically, a consultant was away from home five days a week, for up to 18 months at a time. In 1996, we started a new schedule, dubbed the 3-4-5 pro- gram. Consultants working on out-of- town projects were to be away from home three nights a week, at the client site four days a week, and in their local Deloitte offices on the fifth day. By breaking the collective silence about the personal price everyone was paying, we made everyone happier. We now expect the vast majority of all projects to con- form to 3-4-5. As a result of these and other changes, we've transformed our culture into one in which people are comfortable talk- ing about aspects of their personal lives, going well beyond client assignments and career development. Teams are get- ting requests like "I want to talk to my kids every night at 7:00 for half an hour," or "I'd really like to go to the gym in the morning, so can we start our meetings at 8:30 instead of 7:30?"This more open environment not only helps us keep our rising stars but also makes us more cre- ative in a variety of areas. A New Outlook - The changes at Deloitte are by no means complete. For many years, women have made up one-third to one-half of Deloitte's recruits, so we need to make sure the percentage of women partners and directors rises well above 14%. And we face new challenges. Now that more women are becoming partners, how can we make sure they continue to develop and advance into positions of leadership? In an increasingly global firm, how can we extend the values of the initiative while respecting local cul- tural differences? - And we've opened our eyes to differences in style that go beyond gender to include culture. We've not only narrowed the gender gap; we've narrowed the gap between who we think we are and who we truly are. Now when I say ours is a meritoc- racy, I'm speaking about men and women. It's not easy to manage a di- verse group of people; we have to be creative and flexible in developing coaching and mentoring capabilities. Although the Women's Initiative has made managing more complicated, the benefits are substantial: greater cre- ativity, faster growth, and far greater performance for our clients.

Change Methods - Examples (how we are going to get this change to occur) - methodologies and strategies to effectuate change; there is a framework for change management

Phase Method Crossover approach Phase Method - - used for big changes that take a long time - Unfreezing - prepare for change (tell people what we are doing now is not going to work; we have to figure out a better way to do things so everything is up for change; ex. what we are going to do w/ patients after they get discharged) - everything is open up for change - Changes (then we do the change) ex. the red and green cards for Alex; clinical pathways in the Duke case; 2 stage process in the Deloitte case - Refreezing - change is stabilize (we have to make sure that this is what we are going to do; we're not going to fall back (the benefit); change has stabilized and we are not going to fall back to our old methods) - here's the advantage- ex. Chevron in the early 2000s decided they were going to be a resource company and not an oil company so they spent 5 years and a sig. amount of money to change the way Chevron is going to operate) - they looked at every business process they had - business process reengineering; how do we do it better Crossover approach: - for short term periods of change; crossing over from one side of the street to the other side of the street; ex. we're using PCs in the office on Friday, on Mon. we'll use apples; it doesn't mean that it's a simple change but it has to be a quick change b/c that's the only way we are going to get the change done; we can't phase this an have half the people working on apples and have on PCs on Mon.; has to be planned; don't have the luxury of time to make the change, it has to be done right away/ - ex. 2 banks merging - Wells Fargo had a better name recognition so the other bank agreed to come under the Wells Fargo name - problem - small business owners had issues with figuring out the money they had for payroll; very diff. if you don't test even the smallest aspect of the change in the cross over approach - These are extremes (phase method - long term; crossover approach - short term) but you want to effectuate the change and you want a methodology to do it

Survival Strategies - Duke Hospital Case

The challenges faced by Duke Children's Hospital are by no means unique to the health care industry. Indeed, many organizations find themselves in similar situations. They fear that focusing on costs will compromise their higher mission of serving the commu- nity - but in fact, a strong bottom line will make fulfilling their missions that much easier. If you're trying to turn your organization around, you may want to adopt the operating principles we followed to make DCH a thriving business. Communicate, Communicate, Communicate - If your organization is in trouble, be honest. Make it absolutely clear to everyone in the company that survival depends on cost management. - Listen to what employees are saying; they know their jobs better than you do. Instead of issuing orders, ask them, "What can we (as an organization) do?" - Share the pulpit. People with other expertise can help build consensus. - Change people's roles; instead of identifying with an in- dividual job ("I am a nurse"), employees should identify with goal-oriented teams ("We, the ICU team, work together to help children with heart problems"). - Offer constant feedback. Frequent evaluations help keep the organization on track. - Publicly celebrate every employee and team success. - Cultivate your sense of humor - people will respond if you can laugh at yourself. Chart Your Path - Start with a pilot project; succeeding in one department will pave the way for organizationwide change. - Set conservative goals at first; you'll gain the confidence needed to set more aggressive targets. - Focus on a few key goals; changing everything at once leads to failure. - Turn data into information. Work with your information technology people to ensure that employees can correctly interpret measurements and statistics. - Let employees compete with their own performance, not with some abstract competitive or statistical target. Never Stop - • • • When mapping your business to the balanced scorecard, don't get sidetracked by semantics. - Be willing to experiment; learn from failures - Constantly revise and improve practices. - Encourage strategic thinking at all levels.

Duke Hospital Case

tools of impt: - reams of data - fresh approach to teamwork - balanced scorecard the author was the physician in the ICU at Duke Children's Hospital - he was looking after a tiny girl named Alex who was recovering from heart surgery - her parents were waiting for her to get better and grew very exhausted - she couldn't come off the ventilator just yet b/c there was no respiratory therapist available to help her - She received medication to help her sleep and to keep her from fighting the venti- lator until the therapist arrived in the morning. But her parents didn't sleep; they were too confused and upset. s I watched Alex andher parents, I thought backto similar scenes I had wit-nessed over the years atDCH, a 134-bed pediatrichospital located on the fifthfloor of Duke University Hospital. Here, 800 employees care for patients in our neonatal intensive care unit, pediatric intensive care unit and pediatric emer- gency room, bone-marrow transplant and intermediate care units, as well as in our subspecialty and outreach clin- ics When I came to DCH in 1992, we had a $4 million annual operating loss; it had grown to $11 million by 1996, which forced administrators to cut back on resources. As a result, some caregiv- ers felt that the quality of clinical care had deteriorated. - parents' complaints increased - some dissatisfied doctors threatened to send their patients elsewhere - frustrated staff quit And then it struck me. I saw with perfect clarity the reason that DCH was struggling to meet the needs of its customers - our patients and their parents. And I knew what had to be done to make things right. The problem was that our hospi- tal was a collection of fiefdoms: each group, from accountants to adminis- trators to clinicians, was focusing on its individual goal rather than on the organization as a whole. We would be a far more effective organization if we could stop that from happening. Most companies in the United States had this insight 20 years ago, but the nonprofit world remains, for the most part, un- aware of it. I realized that DCH needed to start thinking less like a money- losing nonprofit and more like a prof- itable corporation. A sense of mission, of course, is criti- cal to any organization's identity. The institutional mission of a hospital is to promote the health of the community. But during difficult periods, it's easy to lose sight of the big picture and focus solely on your fiefdom's specific goals. Clinicians - that is, doctors and nurses - want to restore their patients to health; they don't want to think about costs. Hospital administra- tors have their own mission - to control wildly escalating health care costs. Cost cutting in avacuum traumatizespatients, frustratesclinicians, and ulti-mately cripples thehospital's mission.The decision to cuta respiratory ther-apist from the nightaffected Alex and her parents as well as their insurance company, which had to pay an additional $2,000 to cover the cost of the ventilator and ICU care. The deci- sion also left the clinicians feeling pow- erless, since decisions regarding clini- cal practice were being made without their input. - Such trade-offs between quality of patient care and cost control cause intense conflict for health care professionals. In worst-case situations, efforts to improve profit margins actu- ally have the opposite effect - they chase away customers, cost executives their jobs, and put the entire hospital at risk of financial ruin. regaining balance: - Considering the magnitude of the issues we faced - a $7 million increase in annual losses in four years - it's hard to believe that we ever turned things around. But we did, = by changing people's minds and hearts - step one - what is the goal? = In 1997, the chief nurse ex- ecutive, nurse managers, and I began working together to start turning the organization around. First, we discussed our current realities with the entire clin- ical team. We opened the meetings by talking about our goals for our patients. "We want patients to be happy," the doctors and nurses agreed,"and for them to have the best care." 2. the facts - data = We also described our pressing financial challenges. We showed the clin- icians our raw data. The average length of stay at DCH was eight days - 20% longer than the six-day national average. The average per-patient cost was $15,000 - more money than we were bringing in. If we continued to spend at the same rates, we would be forced to cut clinical programs, staff, and beds. The quality of patient care and our reputation would then suffer, and we would fail to meet the needs of our community. (against the goal) Confronted with this grim picture, the clinicians began to understand that if we wanted to save our programs and our patients, create an environment in which staff are fulfilled, and keep our jobs, we would all have to readjust our individual missions and start paying attention to costs. If the hospital didn't show a margin, clinicians wouldn't be able to fulfill their mission. Thus, we adopted the now-familiar mantra in health care: no margin, no mission. It was also clear that the adminis- trators needed to be highly involved. To bring the administrators' and the clinicians' missions into alignment, we turned to a practical management approach that had worked well in nu- merous Fortune 500 corporations: the balanced scorecard method Balanced scorecard method - Developed by Robert Kaplan and David Norton, - it had improved customer service, driven organizational change, and boosted bottom-line performance in leading companies like AT&T, Intel, and3M. Our goal was to become the health care leader in the balanced scorecard. - Our balanced scorecard aligned the hospital's goals along four equally important quadrants: financial health; customer satisfaction; internal business procedures; and employee satisfac- tion. - if you sacrifice too much in one quadrant to satisfy another, your organization as a whole is thrown out of balance - Or we could increase productivity in the internal business quadrant by assigning more patients to a nurse, but doing so would raise the likelihood of errors - an unacceptable trade-off. Our vision, which became the new mission statement, was to provide patients and families with high quality, compassionate care within an efficient organization. Taking our Medicine: - Developing and implementing a bal- anced scorecard is labor intensive be- cause it is a consensus-driven method- ology. To make ours work required nothing short of a pilot project, a top- down reorganization, development of a customized information system, and systematic work redesign. The most difficult challenge was convincing employees that they must work in different ways. At first, doctors and managers saw attempts to move them into teams as a shift in their power base. Nearly every- one complained that applying a sys- tematic approach to cost management was "cookbook medicine." It took a good deal of persuasion, persistence, and reassurance to get some individuals to buy into our process. One cardiologist routinely stormed out of meetings when we talked about cost per case. We knew that changing people's minds would be hard work. But once people saw how successful the balanced scorecard approach was in one area of the hospital, we reasoned, it would be easier to sell the methodology through- out the rest of the organization. So we decided to launch a pilot project. Some physicians were much more willing to change than others - those who understood the impt. of applying systems to medicine - such as surgeons - became our first champions So we started the balanced scorecard in one very important microcosm of the hos- pital - the pediatric intensive care unit, which I lead. *First, we reorganized the roles that individuals play in the ICU. We moved from mission-bound departments in which people identified only with their particular jobs ("I am a manager," "I am a nurse," and so on) to goal-oriented, multidisciplinary teams focused on = a particular illness or disease ("We, the ICU team, consisting of the manager, the nurse, the physician, the pharmacist, and the radiologist, help children with heart problems")* = We called these teams clinical business units - what other industries call business or oper- ating units. - The lead physician and the lead administrator shared responsi- bility in these teams. Together, they reviewed financial information, pa- tient and staff satisfaction data, and in- formation on health care trends and initiatives. The various clinical business units worked together to organize "care coor- dination rounds" and brainstorm solu- tions to difficult patient cases. They cre- ated a patient's care plan - a document, shared with the parents, that records everything from treatment recommen- dations to post-hospital care. The teams also developed proto- cols we call clinical pathways - a set of best practices for various treatments = For example, a respiratory therapist, a nurse, and a physician developed a se- ries of steps a nurse could follow to remove a patient from a respirator with- out having a therapist present. As the clinicians developed new pathways, they shared their successes with the entire organization so we could all learn from their experience. By developing and promoting proto- cols like these, we improved care dra- matically. For example, we knew that babies recovering from heart surgery had trouble feeding and that parents needed to learn how to help them. Before we had formed the pathways, we would wait until the day of discharge to teach parents how to do so. Once people started sharing their expertise to develop the pathways, we learned that there was no reason to wait so long and moved the training to the day after surgery. Patients were able to go home much sooner, and their hospital costs were cut by 28%. We developed more protocols by comparing patient data. A study of 20 heart patients, for example, revealed that treatment costs varied dramatically. - As a group, the clinicians went over each case, comparing notes and reviewing the medical literature. They decided which tests were unnecessary and eliminated them. - within 6 months - - our balanced scorecard approach in the ICU was garnering impressive results - we reduced the cost per case by nearly 12%and improved our measured patient satisfaction by 8% - In fact, our pilot proj- ect was working so well that we imple- mented it in pediatrics, then in all of the other areas of DCH, within a year. We didn't use a cookie-cutter approach; rather, leaders in each unit customized the scorecard template for their spe- cific areas. Over time, even the physician who had angrily left our initial meetings began to find ways to lower his cost per case without compromising patient care. - For example, instead of keeping some patients awaiting surgery in the hospital, he discharged them overnight to a nearby hotel, lowering the total cost by $1,000 per day while making the patients and their parents much more comfortable. A Measure of Progress - Like most hospitals, DCH collects a tre- mendous amount of data. We rigor- ously detail things like length of stay, number of staff, cost per case, and so on. But we were culling very little useful information from the data - and some of it was false. = his performance report showed that he discharged 70 patients w/ an avg. length of stay of 29 days and an avg. cost per case of $70,000 - but he knew that since he had been there as head of the ICU, he cared and transferred 1500 patients (A closer look at the data revealed that they reported on only the 70 patients who had died, not my total caseload) Clearly, we needed to approach the data in a new way and turn it into useful information. Unless we did, we wouldn't know where our potential cost savings were. - We didn't know, for exam- ple, that babies were needlessly kept on $2,000 ventilators at night, nor did we know how much that decision was costing the hospital. So for every clinical business unit, we created a measurement system for each of the four balanced scorecard quadrants. To measure our progress, we asked our IT department to help us develop our own database and cost-accounting system. Using information pulled from national databases, we determined na- tional averages for indicators such as length of stay and complication rates. (In 1997, custom development was our only option. We've since installed StrategicVision software from SAS to support our extensive data manage- ment, trend analysis, and performance reporting needs.) The system logged each patient's treatment history and costs for everything from a $15 hypoder- mic needle to a $5,000 heart-lung by- pass operation. The system also tracked the average waiting times for admis- sion and discharge, blood culture cont- amination rates, and so on. The new system helped us find ways to improve our performance in each of the four quadrants. Many of the steps we took were small, but cumulatively, they made a big difference. So we created a six-bed, $1,200- per-day transitional care unit, where the nurse to patient ratio is 1 to 3. Pa- tients could stay there until they could be moved to the general floor. Not only did our cost-per-patient numbers drop but also our patients' families got to spend more time with their recovering children. - p. 9 Overall, the results we've achieved at DCH by using the balanced scorecard have been stunning. By increasing the number of clinical pathways and com- municating more with parents, our cus- tomer satisfaction ratings jumped by 18%. Improvements to our internal busi- ness processes reduced the average length of stay from 7.9 days in 1996 to 6.1 days in fiscal year 2000, while the readmission rate fell from 7% to 3%. And employees noted a 45% increase in sat- isfaction with children's services and with the way the entire administrative team performed its job. - Impressive results occurred on the financial front, too. The cost per patient dropped by nearly $5,000 (a fact not loss on parents, insurers, and our own senior leaders) By FY 2000, we had gone from $11 million in losses to profits of$4 million, even though we were admit- ting more patients. We achieved a re- duction in costs of $29 million over these four years, without staff cutbacks. Our methodology has proved so suc- cessful that the entire Duke University Hospital now uses it as a framework. With the balanced scorecard we have drastically improved our margin and achieved our hospital's mission. Lessons Learned - anced scorecard approach presented us with huge management challenges on a daily basis. In the early stages, we often found it difficult to keep discus- sions on target. We spent nearly a month debating whether a certain goal or target belonged in the internal businessprocess quadrant orthe customer satis-faction quadrant. Welearned to limit thosediscussions - it was too easy to get embroiled in semantics and lose our focus on patients and staff. We learned to set our targets conser- vatively at first: an annual 10% reduction in the length of stay was something most of us felt comfortable reaching for, but a goal of 20% would have been too intimidating. As we became more successful, we set more aggressive targets. And I learned that there's a fine art to communicating with professionals who know more than you do about their par- ticular subject and who are passionate about their work. You can't just order them around. You have to get inside their heads and figure out what they're going through. - Before 1996, I thought I was a decent communicator. But over time, I've had to learn to listen carefully not only to what people are telling me but also to what I'm saying to them - you can't make a point to someone by talking in the abstract; you have to say something that personally matters to the other individual - I learned not to say things like, "Duke Children's Hospital is losing $11 million per year." Rather, I opened conversations with a question, such as "How impor- tant do you think it is to have a therapist on this unit to work with your patients?" When they said it was important, I'd follow up with "How can we work together to manage our costs so we can preserve the therapist's job?" We created all kinds of com- munication and feedback mechanisms. - I started a newsletter, "Practicing Smarter," so staff members could share best practices and keep one another apprised of their progress. We honored "team members of the month," started on-line discussion groups, and spon- sored a series of staff brown-bag lunches and open forums. These approaches may sound simple, but they really did help to change our culture. For the first time, employees felt that their opinions mattered. Even in the most earnest conversa- tions, I've found that having a sense of humor is essential. For example, I devel- oped a Letterman-style list of the "Top Ten Reasons for Using the Balanced Scorecard," poking fun at myself in meetings. Once, I even walked through the hospital dressed up as the eminently poke-able Pillsbury Doughboy. Keeping things light made it easier for us all to endure the tremendously challenging course we'd set for ourselves. - meaningful information is also impt. I spent hours with members of our IT department, telling them what the staff was telling me - trying to slice and dice our enormous mountains of data into useful information. When we finally pre- sented people with accurate tracking measures about their personal perfor- mance, they were fascinated - and anx- ious to improve. It's been four years since we set out to improve performance at Duke Children's Hospital, and changes are still happening. We talk about our score- card constantly; we're fine-tuning what works and discarding what doesn't. Whenever a clinician comes up with a better pathway, we spread the word through our newsletter and on our bulletin boards. Of all the changes that have occurred, the most telling are the ones we see in our patients - Ryan like Alex had the same situation but was efficiently and more carefully cared for and treated to satisfy both workers and his parents alike - p. 11

Threats to the change process - some examples: (just recognize these terms - for the quiz)

· Degree of change · Time frame · Impact of culture · Loss of existing benefits · Threat to position power · Threat to security · Redistribution of power · Disturb existing social networks · Uncertainty regarding change · Disruption of routine

Change Management

(charc. Primarily as a project) - change the way the organization operates - A. Why change occurs - this is not the same as transformational change - more of general comments about change but we do see change management in the area of transformational change. - we have to have a crisis on hand to change things - 3 crisis - below (these are not driving forces for change but are the context for which change management will occur); if you don't have a problem, people are resistant towards change and that's just inertia - organizational inertia; change is very reactional and tends to not be radical... 1. Dissatisfaction with the present situation- if you don't like where we are, we have to change; however, Alex was dissatisfied at the plant but he didn't think about change; Duke Hospital Case = they were losing money - that's not a good environment b/c then you can't invest in new equipment for the hospital 2. External pressures toward change - external pressures for change on Alex or else they would shut down the plant; university didn't like them losing $5 mill.; costs much higher than peers organizations - they don't like that; patients weren't happy about being in the hospital for too long 3. Momentum toward change - once everyone saw how they were going to do things w/ Alex, everyone was going to go with their new Theory of Constraints approach/ Duke Hospital case- implementing the balance scorecard -> "low-hanging fruit" - get the peach you can reach - apply balance scorecard to the ICU - once it works for them other people in other depts. Of the hospital are going to see it and apply it a. 1&2 are maybe 90% of the reasons of why changes occur; the last one is maybe the last 10% (once people see something works, they are going to do it) - sometimes called pixie dust - sprinkle pixie dust over there (: - These are not the same as the driving forces for change but the context of change management - Change rarely occurs without a reason for change

SWOT Analysis: Strengths, Weakness, Opportunities and Threats

(links operations w/ strategy) - start w/ a situation analysis and end up w/ a SWOT profile (start w/ where are we as a company) - Need lots of details - Internal analysis include organizational competencies such as the targets for transformation change (what people do I have/ what skills do I have/ what tasks do I do here) - what am I good at and what am I not very good at - one of our strengths are people and deve. - IBM - Weaknesses = too bureaucratic (IBM) - External analysis includes the driving forces for transformational change (what are my opp's and what are my threats?)/ in IBM = system integration, coming up w/ partnership arrangement w/ clients - threats: commercial - bulls in Spain chasing people - another copied the ad w/ squirrels - the squirrels were Microsoft - Dell, Netscape = threats; In IBM they got rid of their software b/c they could not compete - Internal analysis - who you are External analysis - what's the market place like - To do this analysis, you need lots of detail

Decision Making

(which one of the strategies I am going to use and which method I am going to use; whether or not I should change requires a decision) we also make decisions in general management; not personal decisions but a management decision on what product we are going to make, what markets are we going to go into, what equipment we should acquire for the plant General comment: 1. "The process (this is a process for decision making) 2. by which managers (managers make decisions in the organizational management, this is not strategy or industrial psychology in about how workers relate to each others; we're talking about how managers allocate and acquire resources) 3. respond to opportunities and threats (from the SWOT world) - change doesn't occur unless there is a crisis or problem - generally decisions are forced upon us as opposed of going to look out for what decisions were are going to make 4. by analyzing options (we're not making a decision on which option we are going to take - this is the MECE approach - do nothing - do A do B do C) 5. and making determinations (not what you like but specific organizational goals in courses of action) 6. about specific organizational goals 7. and courses of action."

Balanced Scorecard - BSC

- Financial - Customer - Internal Business Processes - Learning and Growth - Metrics - Initiatives The Duke Hospital case is an example of BSC - The first 3 here are commonly used for the for profit world of companies, not so much of not for profit or hospitals or universities or govts. (though the SWOT analysis is) - Applies to both businesses and non profit and govt. organizations - To succeed financially, how do we appear to our shareholders? - To be financially successful, you have to have customers, and you have to be selling your product to customers; financials first then customers (to achieve our vision in who we want to be, to our customers - we are providing a great product at a good price/ made a product for $6 and sold it for $10 = customers were happy = that's why you were financially successful) <- your customers like your product - How can you make the product for $6? = internal business processes (read that description) - what business processes do you excel at? And what we are not good at we don't do -ex. if someone can do something better than I can - - To achieve our vision, how do we sustain our ability to change and improve? - how can we come up w/ better products for our customers and better processes to make those better products and that is the key to the balance scorecard = learning and growth = cultural component of the organization === IBM = if you don't have the right culture, you are going to fail - which balances everything else in the diagram - Not all components are equal weights, each company has to craft their own strategy to determine how we craft our balance scorecard and what weight we give to each category

Another Lens (Review)

- I'll take care of strategy and you'll take care of implementation (to the employee base) - Lou - IBM book - Leaders do thing right thing, managers do things right - helped IBM to succeed under Lou - You manage the organization based on the business processes you do - What business processes you do will be driven by the value chain (you are only going to do things that add value to your products or services - ex. what do our customers want?) - only make things you can sell - throughput concept - Value chains come from competitive strategies "how do you craft strategies?" - you DON'T manufacture it - ex. what are our core competencies? - You decide which strategies to use based on the industry structure - (ex. the grocery industry - "we're best at buying things from people who manufacture things" - industry structure said) we're really a distributor food rather than a producer food - ex. Tyson, Del Monte) - Based on your industry structure = how do I compete based on that structure - you then dev. Your competitive strategy - how do we do that in terms of the value chain to add value? And into business processes; and then we organize it in the organizational management

Notes on specified IBM pages pdf #5c (bar charts) & pie charts

- In 92' and 93'- significant losses $$$; they had to turn around the company fast to stop hemorrhaging cash; right-sizing, smart-sizing, down-sizing; right-size the company by 1994; 2001 - prob. w/ internet bust; Lou would say it was not him who saved IBM - it was the people who took early retirement or moved on - stop hemorrhaging cash = layoffs = downsize - next year more people laid off 93'; lost 80K employees yet revenue increased; big transformational change happened in the company (graph w/ the IBM employees on the y axis) - pie chart - could no longer survive as hardware company; Hardware = "steel"; services = consulting services; 2001 = hardware w/o techn. Using 3rdparties hardware; tech. = connectivity; they doubled their services in 2001; the techn and software were there but there was no people integrated = frustrated Lou = integrators make these things work = people who install systems and make it work - hardware company -> consulting firm company (2001) - IBM global solutions/ services = largest consulting firm in the world/ the firm was a hierarchy = beginning of book - leadership - "I manage by principle, not procedure", procedures = doing things right / principles are doing the right things <- leadership/ "the marketplace dictates everything we should do" - I have to do this and it dictates (the market) - "dictates" & "should"/ - IBM was not considering what the customer wanted; ; "I am heavily involved in strategy; the rest is yours to implement" - strategy has to be linked w/ our operations model - culture is the linkage b/w operations and strategy - Lou had micro problems he saw in the company - 5 90day priorities; "finish right-sizing by the beginning of the 3rdquarter" = he had all the right parts but they weren't in all the right places; "develop a business strategy" ; think about business processing reengineering; teams- conflict resolution; impt. points - finish right-sizing by the beginning of the 3rd quarter - develop an intermediate-term business strategy that next big thing wasn't the advent of personal computing, which is the popular view. The more imminent threat to the mainframe model started w/ the rise of UNIX, an "open" operating environment championed by companies like Sun and HP, UNIX offered customers the first viable, economically attractive alternative to IBM's mainframe products and pricing - problem of PCs - did not think PCs would ever challenge IBM

Boston Consulting Group Growth-Share Matrix

- for cash generation - (made up of a bunch of academics) Relative market share = of all the units that are sold, you have 2 or 50% of the market; you have low market share and high market share; Cash generation - if I have low market share then I generate very little cash; If I have high market share, I have high cash generation = the more units I sell the more cash I got - Market Growth Rate - if you MGR is high, I have to support new channels of distribution, I have to advertise a product, I have to put new enhancement on my product- that's going to generate a lot of cash usage; if the MGR is low, I don't have to hire more people to sell product, I don't have to do more advertising - whatever I got as my promotional mix is going to be satisfactory; cash usage is not a dollar for dollar, instead - if I generate 100$ worth of cash (on top), ill use 10$ (cash usage)/ 100 vs. 10 - Im generating a lot of cash and im using a lot of cash (on both sides) - the best way to learn this is serial = inside the boxes · Cash cows - the problem we have with the cash cow is that other people are going to see that it is a cash cow and they are going to come in with similar products so that sooner or later the cash cow becomes a dog · Stars - high market share, and high growth rate; everyone wants one of these things; if everyone wants one, they are going to come in and copy your product; what happens to a star is once you've saturated the market, once you've filled everybody that wants one of these things, it becomes a cash cow - we milk the cash cow; so its still generating lots of cash up at the star, but now there is low market growth rate so I don't have to worry too much about incurring more costs for the expanding market; · Question marks - you've got a product, youre not selling many so it becomes low cash generation b/c you are not selling many of them; HOWEVER, you think its going to enter a market and its going to be very popular so that's going to be a market growth rate; you want to move your product from a q mark b/c we don't know whats going to happen to it to a row so you are going to get rid of q mark and its going to be a flop (we want to go from a q. mark to a star) · Dogs - low growth rate but b/c we now have a cash herd instead of a cash cow, they are going to push you over to be a dog, so your dog has low market share and low growth rate; (2 things you can do w/ a dog = can let it out of the dog house and turn it into a q. mark Ex - apple came out w/ Ipod, the ipod was the q. mark - apple knew this was going to be successful, it rapidly became a star = huge market share; single cassette players disappeared; everyone wanted a ipod so it was a star; all of sudden there was a lot of substitutes b/c of a lot of of them didn't have patents on them so there were multiple solid state music items; the ipod became a cash cow b/c they still had a high market share but at some point everybody wanted to buy an ipod had a ipod and the substitutes were pretty good so apple lost its · market share in the ipod and became a dog; ---- so they looked at their ipod and said lets incorporate it into an iphone - its worked its way around the matrix as well and then pushed it into a tablet around the matrix again = this is not the product life cycle but this is the way you assess what customers want and how to succeed as a company - Boston consulting group growth share matrix · Market share and cash generated · Market growth and cash usage

Power: Used to change beliefs and/or behavior - or attempts to do so (to affect change you have to have power; not sufficient but its necessary)

1. Coercive power → the power to punish (worse type of power; doesn't move the process forward; generates fear and animosity; by punishing an organization you can furlough people, you can cut their pay, you can fire them) 2. Legitimate power → the power granted by some authority (Peach and Alex had legimiate power, the doctor has legitimate power b/c they... aka position power - to affect change you do have to have some legitimate power but it doesn't satisfy the entire framework) 3. Expert power → the power of have some specific skill or knowledge not found in others (we saw this in the goal with Ralph and Jonah; but Ralph had this expert power in data processing - he delivered what he was supposed to - he didn't make a big deal about it - we all like Ralph - great power to have b/c it says that person can do something that we need - it makes a contribution - you have to have some expert power to get things done) being a team leader is expert power as well 4. Referent power → the power from admiration or respect (BEST type of power to have; this is pervasive; Lou and Alex had referent power, the doctor had referent power; in sports - in terms of the best power, the person we wanted to be with was the person we like b/c we respect them; All love to work for Terry b/c he knew how to get things done; got along with others and wasn't afraid to ask questions - admired him b/c he knew how to be in control of the game) referent power is the person who has leadership skills 5. Reward power → the power from being able to provide a reward to others (promoting people, giving them raises, giving them bonuses, making sure they get recognition for the work that is done; power that is exercised at the end of a project) NOTE: To have authority you need to have power. (authority is telling people what to do, responsibility is getting things done) · Authority: The ability to command, direct, or influence thought, opinions, or behavior. · But power alone does not give authority - this is a topic in our leadership section later in the class.

Strategic Analytical Lenses (see what works in terms of the strategy)

The four-p's from - (how we link the product to the customer) There is really 5 components here to the 4 p's The floor is the cost; the ceiling = diminishing returns on revenue Strategic pricing = very risky; very diff. full of assumptions - b/w the product and the price we go to promotion - we promote the product and the price (ex. it cost 6 dollars to make, I think customers are willing to pay $10 for it = $4 profit - you have to promote the product as having value and promote the price as having value (promotion) = where can I close the sale = the place) - sell on the web or my own store? Or through a distributor; here I have a strategy about who are my customers = strategy is marketing driven, financially measured and operationally implemented (trying to link what we can do with our raw materials w/ what our customers want through our strategy) strategy through culture and the rest of the diagram on notes #1 A. Just know the lenses for the quiz - you don't really have to apply the lenses (much of this came out the 1950s and early 60s) - product - price - promotion - placement - target markets (this is who you are going to sell your product to) · This is done in a serial fashion, not parallel

Porter's Five Forces Model

Unlike all the other models which are company specific, these 5 forces are industry specific How do companies compete in their industry as opposed to how do they compete on their own Industry and not firm perspective He first looked at industry competitors - industry members (ex. if you're at safeway, you compete w/ target and Costco = industry competitors) but there is other competition as well You do not need to know the order of this but this is the way you want to learn it Selling fruit loops at Safeway = comes from Post, we want to sell it for a $1.99 a box, that means we have to pay $1.75 for it from the supplier; supplier says no - bottom line is $1.90; 1. let's see if we can negotiate = bargaining power of suppliers - a lot of little or sig. like Walmart - firm inside the middle= set prices; suppliers have bargaining power; buyers - some are called value buyers and they are going to buy fruit loops; if its 2.19 they are not going to buy it until it goes on sale; = bargaining power of buyers can be sig.; can be similar to the supply chain concept; maybe 90% of your competition falls in the horizontal line from suppliers to buyers; Have to compete w industry members and suppliers over price and buyers in terms of warranty, price, delivery; (1) Industry members (2) Suppliers (3) Customers or buyers (4) Potential Entrants o Depends on what your market is like o If I am at a grocery store, it is very diff. to enter the market o Target was the last one to enter the grocery market o Sometimes they are easy and sometimes it is diff.; you have to compete - threats of new entrants and they have power, not bargaining power - they are a force; (5) Substitutes o There can be a substitute for the products you sell o In the grocery market, you sold groceries o Alt. to buying groceries is to buy take out - ex. single parents fams or both parents working - so now all the grocery stores have a deli section · Potential entrants and substitutes are about equal in how you analyze them · This is really a qualitative diagram but gives us an idea of how competitive the market is & strategic perspectives on what you are going to do