Beer's Critical Path Method

Beer’s Critical Path Method

Introduction

Background:

This essay analyzes the transformation of a business-unit (Alpha) of a large public sector undertaking (PSU) company Beta. Alpha was set up with an intention of manufacturing x product for y market. Until December 2003, the primary mission of Alpha of about 900 people was the development, support and maintenance of product x, which was developed and implemented using sequential development method (App-2). The clumsy nature of the employed process and bureaucratic structure of the company was resulting into consistent delays into deliveries of low quality and over budgeted products. The unit had not been able to produce cost-competitive product with high-quality. It had been running without making profit for last three consecutive years.

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In 2004, newly elected government’s inclination towards disinvestment of underperforming PSUs forced Beta to mull over the rationalization of its underperforming business-unit. Consistent pressure from the competitive market and senior managers from head-quarter (HQ) inevitably forced head of Alpha to revisit the unit’s structure and processes. It was decided to come up with design and development of product with superior quality and cost competitiveness within a limited budget and time (i.e. Eighteen months). Revisit to the existing process and structure highlighted the major problems, which were due to lack of coordination and participation among functions in addition to sequential product-development methodology. Consequently, management decided to change the existing structure, and adopt concurrent engineering methodology (App-3) to produce x moving forward.

Change Analysis

Nature and type of change:

Nature of change at Alpha can be analyzed by applying TROPICS test (Paton & McCalman, 2008). Based on analysis, this change can be located at the Flexi/Grey area of change spectrum. Although time scales, control and sources factors are identified hard, but as a whole, change is inclined more towards soft end of the spectrum. Problem at Alpha can be considered messy as it involves soft complexities due to the introduction of a new working model and process method (Open university, 1985, cited in Senior & Fleming, 2006).

TROPICS Test (Modeled on source: Paton & McCalman, 2008)

Dimensions of the change

CCP (Content, Context and Process) model (Pettigrew & Whipp, 1991), widely used in organizational change analysis, can be applied in this case to understand the changes at Alpha. Although this model was originally developed to analyze private sector organization but later on, its application was extended to other fields and sectors (Pettigrew et al., 1992). Overall framework focuses on what (content), why (context) and how (process) dimensions of the organization change.

CCP Framework (Modeled on source: Pettigrew & Whipp, 1991)

Context (Why):

Traditionally, PSUs are considered to have bureaucratic culture (bureaucratic organization-structure and process culture) (Deal & Kennedy, 2002). Such culture is generally hierarchy-driven, procedural, regulated, ordered, cautious, and power orientated (Wallach, 1983). The purpose of bureaucracy is to restrict individuals’ capacity exerting control over decision-making processes and activities (McHugh & Bennett, 1999). According to Hofstede (2003), bureaucratic structure is based on rigid rules and processes, and competencies tied to the positions; where employees are accustomed to systemic but precise way of working, which operates on ‘one person, one job’ basis and require high degree of job specialization. Therefore, business knowledge and skills are owned by individuals; this makes knowledge sharing very problematic. De Long & Fahey (2000) argue that the organization culture plays vital role in determining the people and specific business knowledge relationship.

Alpha had been facing similar issues; due to the bureaucratic culture, decision-making was traditionally made at the top without much coordination with and participation of functions. Sequential-development approach used is linear in nature, which does not provide tangible results and product visibility until the product development lifecycle end (Martin, 1991; McConnell, 1996). Lack of individual’s participation and knowledge sharing, conflict of authorities in conjunction with slow decision-making speed and cumbersome sequential nature of the product development used to induce significant delays in product delivery and implementation, causing low product-quality and high cost-per-product. Fig- can be used to show cause of realized changes using multiple-cause diagram.

Multiple-Cause diagram (Modeled on source: Paton & McCalman, 2008)

Primary drivers for change can be identified by using a classical change management tool, Force-field analysis (Lewin, 1947). Main purpose for using this tool is to understand context (driving forces) and content (objective, goal, and restraining forces) and determine the process (ways to enhance positive factors and lessen negative factors) (Giardino et al., 1994). This tool confirms the nature and type of change at Alpha confirms, analyzed by TRPOICS test. The primary restraining forces indicate that most of the barriers to change involved soft aspects, such as senior management, existing culture and employee related barriers.

Field force analysis (Modeled on source: Lewin, 1947)

Content (What):

Existing situation at Alpha was not conducive for proposed concurrent development approach either. This approach follows iterative process, which calls for authoritative and speedy decision-making activities along with team culture (Cockburn, 2002). However, bureaucracy structure hinders speed (Martin, 1991) and is not suitable for highly dynamic and complex business processes (Carnall, 2003). Crozier (1964, cited in Hughes, 2003) feels that static working patterns and fixed procedures are not beneficial in a dynamic and volatile business environment. Hence Alpha not only required change in product-development process but also to organization structure.

Process (How):

Changes at unit were managed and implemented using Beer et al.’s (1990) critical path to corporate renewal. This six-step planned-change model needs to be executed in sequence to achieve a successful change. The critical path process in the present case was led by unit head with a middle management team.

1. Mobilize commitment to change through joint diagnosis of business problem:

Prior to any effective change effort, it is important to have business problem clearly defined ???. Management should help people in developing a shared diagnosis of the problem (Beer et al., 1990) and realizing the need for change in existing status quo (Richardson & Varkoi, 2003). Kotter (1996) describes the need for a powerful guiding coalition with involvement of key members of the organization. The number of such key members can be small to start with, and can gradually be increased as project gains momentum (Borjesson & Mathiassen, 2003).

At Alpha, initial step taken by the unit head to review the business broadly. Sticking to Lippit’s ‘golden rule’ (1959), an external consultant with his assistant was brought in to lead the change, and to develop the guidelines for the change management. External consultant was allowed to form a coalition-team with a senior researcher, five managers from various functions and six key expert employees from unit’s production-department. Team together investigated existing and past product performances, results and artifacts. In order to analyze problems effectively, they also visited and observed many successful manufacturing companies. Through the analysis of their observations, customer satisfaction surveys and previous performance data, team formed a common understanding of the problem. Team recognized the flaw in the existing product methodology and lack of shared knowledge among employees – due to which there were consistent and significant delays in product-delivery with poor product-quality. They came up with two page fact sheet to support their analysis. At this point, team began to realize the need for an alternative organization model and development methodology.

2. Develop a shared vision of how to organize and manage for competitiveness:

Once a problem is analyzed, coalition should align employees’ core tasks with vision of the organization, and lead them towards a task-aligned vision with redefining employee’s roles and responsibilities (Beer et. al, 1990). Objective of such new arrangements is to have better information-flow coordination pattern across all cross-functional departments. Moreover, these arrangements do not encounter much resistance as they do not cause any formal changes in systems and structure such as compensation or titles (Beer et. al, 1990). However, communications is essential to achieve such arrangement (Jones et al., 2004).

Developing vision and strategy is generally a messy and time consuming process that results into guidance for future, which is feasible, desirable, flexible, and focused (Kotter, 1996). In order to develop vision, team executed future workshop to focus on democratic and creative idea generation from the participants. Future Workshops, a user-driven and participatory design technique, is used to help participants play an important role in designing vision for future, by actualizing a common problematic-situation (Greenbaum & Kyng, 1991). This workshop is normally conducted in three phases: critique, visionary and realization phase (Jungk & Mullert, 1986). The participants, at Alpha, consisted of management team and carefully chosen key employees. In critique phase, participants formulated their critical views regarding existing shared values and working procedures. At the end of this phase, participants were asked to prioritize the most important issues considered the barriers for the unit’s development. In visionary phase, participants formulated the visions for unit’s future direction, which brought in new suggestions and ideas for business activities improvement. In realization phase, participants identified actions to realize the visions most effectively as a response to critical issues. Relevant inputs gathered from participants of this process can be utilized while preparing overall change implementation plan (Jones et al., 2004).

Based on cost-benefit analysis, future workshop and two-page factsheets, team carried out a SWOT analysis and developed a new organization model (refer fig-), along with a new methodology, concurrent development method, for product development and implementation. Intention of new model was to eliminate hierarchal and functional barriers to information sharing; whereas to adopt new product development approach to avoid delays and improve quality along with cost-competiveness of the product. Such organization-level changes do need an adequate support from senior management (Small & Downey, 2001). therefore proposal of these changes was proposed to senior management team at HQ. While they were delighted to notice unit’s pro-active and positive steps, they were not convinced with the new approach to resolve the critical issue as existing approach was working very well for rest of the organization. Eventually after few rounds of discussions, they got ready to lend their support and approved the proposal, despite their reservations.

New organization model

(Cross-functional Teams with their respective responsibility area)

3. Foster consensus for the new vision, competence to enact it, and cohesion to move it along.

Beer et al. (1990) feels that just simply helping employees develop a new vision is insufficient to make change successful. Employees need to understand the positive impact of new structure and approach to be committed to that vision. Therefore, it is vital to share and communicate the vision to employees in overcoming resistance to change and developing required competencies to make new organization work. Change process can be successful only when there are clear, concise and realistic change-plan and implementation-plan in place; otherwise process runs at risk of adding further resistance to change (Mathiassen et al., 2005). In order to communicate the vision to all employees, a conference with presentation and discussion was held. Senior management team from HQ along with all the employees, were in attendance. The change-plan with new structure and methodology, and implementation-plan with goals, objective, risks and mitigation plans, training plans, and milestone and measurement plans were also presented. Presence of senior management in the conference boosted the morale and confidence of unit’s management team. Subsequently, internal meetings took place and goals, strategy and vision were circulated.

Once new roles and responsibilities are defined, people need to foster the skills to make the new arrangement work. In fact, changes in the relationships due to these new roles, responsibilities will push people towards learning, and foster new attitudes and skills. Changed coordination pattern also increases sharing of information, employee collaboration and participation; this, in turn, reduces resistance level which arises as a result of incorrect information and rumours (Kotter & Schlesinger, 1979). Team took the help of human resource team, not only to make sure employees were clear about the changes, and their roles and responsibilities but also to understand the required skills and trainings for the employees. Required trainings were imparted to employees to develop their skills.

Beer et al. (1990) advocate replacing those managers who despite all the support and guidance do not want to or cannot change in order to function in new setup. Having said that such decisions can sometimes backfire as not only there is a threat of losing valuable skills and knowledge but also it can make other employees demoralized, that can hamper the change progress. Introduction of new model and development approach caused restructuring resulting into redundancy of staff in small number. Uncertainty created by the situation also made few employees depart during the transition process. Few managers and employees were replaced and few were given promotion. Few key employees including managers, who were very much accustomed to past bureaucratic culture could not find the new working model and culture suitable for them and subsequently, left the organization.

4. Spread revitalization to all departments without pushing it from the top.

With a new structure is in place for the unit, departments and functions do have to rethink about their authorities and roles in the organization. Effective interaction between them and new organization structure enables members of team to become effective by letting employees participate actively in team decisions (Beer et al., 1990). At Alpha, where managers of production department looked the most spirited and passionate about the changes, managers of engineering department were more hesitating. They had always been a dominant force at Alpha and these changes were perceived as threat to their authority. In the past, they always shown less concern whether production department could manufacture products based on their design specification. However, with new organization structure and method in place, engineering department had to collaborate with product department in product development activities. This actually forced them to re-visit their approaches to manage and organize their own department, and rethink over their roles.

Often when speedy change is required, leaders tend to force the issue throughout the organization; this generally short-circuits change-process. The best way is to let each functions and departments find their own way to the new organization (Beer et al., 1990). In case of Alpha, departments were encouraged to apply general concept of teamwork and coordination to their own situation. For nearly a year, engineering department had to suffer agony in implementing theses concept and accepting the new structure. Decision of their move to new structure was natural; since it was their own choice, team members showed commitment to learn the required attitude and skills.

5. Institutionalize revitalization through formal policies, systems, and structures.

In any change process, sequence of activities should be carefully considered as activities suited at one particular time tend to backfire, if initiated little too soon. This is especially applicable to activities related to changes in systems and structure. Leaders should institutionalize changes only when right employees are in place and new arrangements are up and running. Beer et al. (1990) argues that none of formal structure and systems is perfect but employee commit to them, as they work in structure and learn about required interdependencies. If the implemented change becomes part of the culture of organization then it is considered successful (Senior & Fleming, 2006). The unit’s revitalization was successful as it enabled employees to change their views about their roles and responsibilities. They actually became convinced that change would bring a difference. This eventually resulted into a striking improvements in value added per employee, gross inventory per employee, scrap reduction, quality, and profits. To their credit, business unit was able to achieve all these without further control system, compensation or restructuring. However, eventually when opportunity came, there were few change were made in the formal organization. For example, vice president of operation was asked to leave organization and that position was eliminated altogether.

6. Monitor and adjust strategies in response to problems in the revitalization process.

In order to sustain the benefits of changes and being able to adapt to dynamic competitive environment, an organization should know the effective use of continuous shared monitoring of the change process (Mathiassen et al., 2005). Keeping such measurement criteria provides multiple advantages, such as – i) it keeps people, with direct involvement in the change-process, motivated; ii) it gives management a sense of direction in which change-project is moving iii) it also depicts a relationship between achieved result and invested effort. Even after successful change implementation, it is essential to re-examine the original plan regularly and revise it with respect to current circumstances and situations (Senior & Fleming, 2006). Stating clear objectives and process measurements criteria explicitly in the implementation plan was very helpful. Measurements were gathered at the end of pilot-study and appropriate process benchmarking was set, after comparison with previous internal and cross-industry data. In order to monitor revitalization, several mechanisms were put in place. Internal surveys and feedbacks were introduced to monitor attitude and behaviour patterns. A monitoring team was formed to keep regular watch over the processes and plan for new challenges. This team consisted of managers and key members of respective functional teams and human resource and finance teams.

Outcomes and lessons

Outcomes:

Use of critical path model in present case proved to be an effective way to evoke organization renewal without actually enforcing it. Beer et al.’s (1990) believe that employee’s resistance to changes can be managed effectively through task-alignment approach. This turned out to be a key success factor in case of Alpha. Once core task aligned with organization’s vision, employees discovered that new structure and product-development method are more effective. They started willing to accept changes, which otherwise they may have resisted. Adoption of concurrent development method along with change in existing structure, improved not only speed of decision-making but also employee-participation and knowledge-sharing among functions and departments. This enabled company to reduce product-manufacturing and delivery time significantly; this, consequently, improved product-quality and cost-competitiveness and therefore, the profit. The problems associated with the new development method and structure is now believed to have eased with increase in employee’s familiarization of new structure, and development approach. Despite all that, change-project at unit cannot be entirely considered successful.

Beer assumes the approach of the changes through critical path model to be always top-bottom. However, the change-project in Alpha was initiated by unit head and carried out by his middle-management team with the help of an external consultant. One of the necessary steps was to gain approval and support from senior management teams of HQ, who was not roped in right from the word go. Negotiations with them caused notable delay in the implementation of the planned changes. The combined effect of not having senior management from HQ directly involved in the coalition, and resignations of senior researcher along with few key members of coalition while restructuring impacted the speed of the changes and its desired results. Although, change-project is claimed to be successful by the management team; but absence significant key performance indicators at the beginning for measuring the success, raise question mark over their claim. In fact, this change-project would be considered a failure if measured against traditional performance indicators, such as cost (in budget) and time (on time).

Present study raises a few reservations over the critical path model itself. Basic flaws with this model are the lack of provision for pilot-project, and feedback-loop (iteration) at each stage. Pilot-project is considered to be very handy while implementing new process, which enables people to view new aspects of the process. This approach also gives an idea to people how process will work in actual and assists convincing others, particularly management, about the benefits of new process (Borjesson & Mathiassen, 2003). At Alpha, pilot-project approach was employed effectively and it was successful, which convinced senior manager at HQ that the change-project was moving in right direction. Measurements gathered during pilot-project were also helpful in maintaining concentration and sustaining improvements. However, coalition did not realize the importance of feedback-loop at each stage, which caused uncertainty in employee’s mind, particular during restructuring. This resulted into departure of key employees, leaving long-term impact on the unit (Fodor & Poor, 2009). Being effective only at organization-level changes, the model either not considered or overlooked specific aspects of concurrent-development approach; this gives rise to need for a more specific and tailored framework to manage such process-level changes.

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