MANAGEMENT

Change management

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AGENDA

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Definition
Types of Change Who should Participate? Why we need Change Management ? Change management process Methodology selection criteria Key elements of successful organizational change What did Jack Welsh do?

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Who should Participate?

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Definition Change Management: activities involved in (1) defining and instilling new values, attitudes, norms, and behaviors within an organization that support new ways of doing work and overcome resistance to change; (2) building consensus among customers and stakeholders on specific changes designed to better meet their needs; and (3) planning, testing, and implementing all aspects of the transition from one organizational structure or business process to another.

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Individual change management

Understanding how one person makes a change successfully Organizations dont change, individuals do. No matter how large of a project you are taking on, the success of that project ultimately lies with each employee doing their work differently, multiplied across all of the employees impacted by the change. Effective change management requires an understanding for and appreciation of how one person makes a change successfully. Without an individual perspective, we are left with activities but no idea of the goal or outcome that we are trying to achieve.

Organizational change management

Understanding what tools we have to help individuals make changes successfully

While change happens one person at a time, there are processes and tools that can be used to facilitate this change. Tools like communication and training are often the only activities when no structured approach is applied. When there is an organizational change management perspective, a process emerges for how to scale change management activities and how to use the complete set of tools available for project leaders and business managers.

Why we need Change Management ? Why we need Change Management ?

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When the rate of change outside exceeds the rate of changing inside, the end is insight
Jack Welch Chairman & CEO General Electric CO.

Employees who go through a change are: More aware of what's changing and the all-important why of the change. More interested in participating in the change in order to achieve the objectives of the change. More knowledgeable about the change. More skilled in the new ways of doing business that the change is bringing. More comfortable with the change because they have the support of supervisors who provide positive feedback throughout the change.

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Change management process The change management process is the sequence of steps or activities that a change management team or project leader would follow to apply change management to a project or change. the most effective and commonly applied change, most change management processes contain the following three phases:

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Phase 1 - Preparing for change (Preparation, assessment and strategy development)

Phase 2 - Managing change (Detailed planning and change management implementation)

Phase 3 - Reinforcing change (Data gathering, corrective action and recognition) These phases result in the following approach as shown

MANAGEMENT Phase 1 - Preparing for change The first phase in methodology is aimed at getting ready. It answers the question: how much change management is needed for this specific project? The first phase provides the situational awareness that is critical for effective change management.

Outputs of Phase 1: Change characteristics profile Organizational attributes profile Change management strategy Change management team structure Sponsor assessment, structure and roles

MANAGEMENT Phase 2 - Managing change The second phase of process is focused on creating the plans that are integrated into the project activities - what people typically think of when they talk about change management. Based on the process , there are five plans that should be created to help individuals move through the ADKAR Model.

Outputs of Phase 2: Communication plan Sponsor roadmap Training plan Coaching plan Resistance management plan

MANAGEMENT Phase 3 - Reinforcing change Equally critical but most often overlooked, the third phase of The process helps project teams create specific action plans for ensuring that the change is sustained. In this phase, project teams develop measures and mechanisms to see if the change has taken hold, to the see if employees are actually doing their jobs the new way and to celebrate success.

Outputs of Phase 3: Reinforcement mechanisms Compliance audit reports Corrective action plans Individual and group recognition approaches Success celebrations After action review

MANAGEMENT Methodology selection criteria for ease of use: Easy to implement Easy to understand Easy to communicate to others Simple Practical Structured and systematic Logical Comprehensive and holistic

Key elements of successful organizational change 1. 2. 3. 4. 5. Committed and active participation of leadership Culture change Energetic involvement of an empowered and educated work force Effective communication and measurement Aligning human resources systems with the goals and objectives of change

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What did Jack Welsh do?

MANAGEMENT 115 Year History (1892) - only remaining company from original Stock Market Market Capitalization - 560 Billion Dollars Most Admired Company for third straight year in Fortune Worlds Most Respected Company for two years straight in Financial Times

Facts

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Organization

Plastics Capital Aircraft Engines

Power Systems

GE

Consumer Electronics

Medical NBC Appliances View from the CEO: If youre not #1 or #2 in your industry youre not long for GE

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It Wont Last

The web/eBusiness:

DISBELIEF - Why jump into this business when nobody makes money? Jurgen Hubbert, Daimler Chrysler Board member.

DENIAL - The money will be made in the software on the client - Microsoft
FEAR - I was afraid of it because I couldnt type - Jack Welch

Why Join the Bandwagon?

Reaction
# of Nodes on Internet
100000000 10000000 1000000 100000 10000 1000 100 10 1

D-69 D-70 D-71 D-72 D-73 D-74 D-75 D-76 D-77 D-78 D-79 D-80 D-81 D-82 D-83 D-84 D-85 D-86 D-87 D-88 D-89 D-90 D-91 D-92 D-93 D-94 D-95 D-96 D-97 D-98 D-99

Date

Log Plot of Internet Users vs. Time

Heres Why!

Microsoft "Gets It"

GE "Gets It"

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Schwab Results:

More Reality

In June 1998, Schwab's Web site handled about 600,000 secure transactions a day. In November 1999, less than a year and a half later:
The site handled well over 7 million secure transactions a day Two-thirds of their trades were conducted over the Web Schwab managed 263 billion dollars in online assets versus 28 billion dollars for e*Trade The company took in 4.7 million dollars a day in revenue versus Amazon's 3.8 million dollars a day

Source: Fortune Magazine, 11/8/99

Look at the potential outcome

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Its here to Stay

The Realization: VISIONARY - The Network IS the computer - SUN DREAD We are late to the game and are behind Microsoft - December 7, 1995 UNEASY - If we dont embrace it and make it as engrained as breathing - we may be taking our last breath - Jack Welch - January 1999

The Light Goes On!

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GE gets religion

Conclusion of Jack Welchs Annual Address to shareholders April 26, 2000 So ... to conclude ... Id like to remind you once more that there is very little ... if anything ... new in management today ... and that this "new economy" and "old economy" which we hear about incessantly are just labels invented by pundits.

There is however . . . something new and something very real ... that is changing the pace and scope of business as it has never been changed before. Any

company ... old or new ... that does not see this technology [eCommerce] as literally as important as breathing ... could be on its last breath.
But for those of us ... including GE ... who are capturing it ... are energized by it ... and see it as the greatest opportunity in our history ... the excitement is like nothing weve ever experienced ... and the rewards [of eCommerce] promise to

be greater than we can imagine.

The Internet truly makes the old ... young and the slow ... fast ... and what could be a better tonic than that? This is a wonderful time to be part of GE ... Ive never been more confident that our most exciting days lie ahead.

GE Gets Religion

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Initiatives

In Jack Welchs 20 year tenure, only 5 Corporate Initiates have emerged:

Workout

Globalization - 1985
20% Revenues from abroad when initiated 41% Revenues from abroad now

Product Services - 1995

$8B from services when initiated $17B from services now

Quality - Six Sigma - 1996 eBusiness - January 1999 And this is a Big One!

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It Appears that this is not a Winner Take All Market?

Approach

There is enough room for multiple companies to prosper to some extent GE has typically been a Fast Follower In this case GE was slow to recognize it, but is moving fast now. GE had to quickly muster support in order to get the momentum of this dinosaur to turn on a dime How did they do it?

Implement Corporate Change

MANAGEMENT The goal: to drive profit through leveraging technologies

Strategy

execute quickly (eTime) - help keep the startups at bay provide better service reduce cost = increase margin eBusiness (the web) provides an opportunity to seemingly integrate the diverse businesses of GE What a large company lacks in agility it can make up with capital.

Q: Where does a 500 pound Gorilla Sit? A: Anywhere it wants to!

GE has the resources and infrastructure to compete with eBusiness

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Paradigm Shift

Old Economy Comparisons Best In Class

Lockheed Aircraft
Maytag Washers Sony Televisions BASF Plastics

New Economy Comparisons Best In Class Yahoo! Amazon AOL

"There's no such thing as an 'old economy' and a 'new economy.' Commerce is the same as it was 500 years ago. People sell and people buy--whether it's from a wagon or the Internet." - Jack Welch

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Mission

Get everyone on same page (fast) Understand the value and the risk in eBusiness Eliminate Paper

CTQs
Quick to Market Reliable Profitable

Identify the processes that need change Dont simply webify - destroy your existing process and rebuild with new vision

Drive the change with purpose

eBusiness Strategy

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Focus on key emergent technologies Like Java, J2EE and XML standards as they solidify/integrate Directory service and Content management tools (database) b2b connectivity tools and broadband! Implementation Corporate wide eBusiness Training - provide Internet Mentors to business leaders DestroyYourBusiness.com Attract and retain the best staff - think outside the box Instill Fear - do it or die ... Educate the consumer Leverage the GE Brand Strategic Alliances (TradeOut.com)

Put Your Money Where Your Mouth Is

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Implementation

eBusiness has outgrown the label initiative at GE Changing the company to the core eBusiness has changed the DNA of GE forever by energizing and revitalizing every corner of the company eBusiness is not rocket science - it is simply the application of fairly elementary technology - initially this was not understood and this is why the dot.com companies led the charge instead of the highly resourced companies like GE. GE can leverage their 100+ year brand which is widely recognized (and must be protected) eBusiness is the final nail in the coffin of bureaucracy which is not tolerated in the GE culture

Its Become THE Way of Thinking

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Implementation

Putting the Pieces together:

Brand Leverage Privacy exploit

Security

Common Architecture

Customer Centric

risk ROI

Three Click vulnerability Rule

Revenue Generation Stickiness

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Performance

How

is GE doing on leveraging eBusiness?

Customer Service Typical cost to service a phone interaction with the client $5.00

Typical cost to service a web interaction with the client $0.20.

GE Appliances had 20 Million calls last year! You do the math! On-Line Auctions Inside GE auction transactions amounted to $200 million in 1999 and

will reach $5 billion this year. Last year transactions cost GE $50 apiece;
online the cost is $5 Market Share GE Power Systems capturing 20% more market share (70% total) partly due to web-based integrated turbine performance monitoring

Pretty Well!

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What Do You Think?

Will GE Prosper in the New Economy?
(b) Success but Shared (c) Total Failure

Vote

(a) Total Domination

(d) Too soon to tell

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Summary

Can GE succeed in eBusiness? Jack is a change implementer If anyone can change a corporate culture, its Jack Bureaucracy of larger companies tends to slow change, but Jack addresses this in his plan The change is being driven for the right reasons Cost, Quality, Speed not just because its a wave

They are investing in the technology

They have deep pockets. If Any Dinosaur can change its spots, GE can!

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Failures
Most Critical Failure of Changes

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Most Critical Failure Point of Change

1.

Resistance to change Dealing with resistance:

Consider different people Work with values and beliefs Understand and relate to needs and problems Tailor your message to your audience

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Critical Failure Points Of Change cont.

2. Lack of Well articulated vision (supported by staff) Clear communications Executive sponsor and/or change coalition

3.

Unrealistic expectations Believing dictating an executive vision translate into the new state!!! Change complexity Inadequate execution/project management skills Declaring victory too soon

4. 5. 6.

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Conclusion

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Conclusion

During his 20 years of leadership at General Electric GM. Welch increased the value of the company from $13 billion to several hundred billion.