The Internal Business Environment

1
The Internal Business Environment of an
Organization Leadership and Vision Direction
2
Strategic Leadership Three Keys of a
Exemplary High Performance Organization
1 What Are You Deeply Passionate About?
VISION DIRECTION
2 What Can You Be the Best In the World At?
3 What Are The Drivers of Your Economic Engine?
3
Five Levels of Exemplary High Performance
Organizations Level 5 Leadership
Exemplar Organizations
Good to OK Organizations
Level 5 Management Team (Good-to-Great
Companies) Level 5 Leader First Who Get the
right people on the bus. Build a superior
executive team. Then What Once you have the
right people in place, figure out the best
path to greatness.
A Genius with a Thousand Helpers
(Comparison Companies) Level 4
Leader First What Set a vision for
where to drive the bus. Develop a road map
for Driving the bus Then Who Enlist a
crew of highly capable helpers to make the
vision happen.
Source J. Collins, Good to Great, Harper
Business, 2001, p.47.
4
Five Levels of Exemplary High Performance
Organizations Level 5 Leadership
Great companies first got the right people on
the bus (and the wrong people off the bus) and
then figured out what direction (vision
direction) the bus would go. They got the right
people on board the bus\and the wrong people off
the bus, the right people in the right seats, and
then figured out how to take it some place great!
5
Five Levels of Exemplary High Performance
Organizations Level 5 Leadership
LEVEL 5 LEVEL 5 EXECUTIVE Builds enduring
greatness through a paradoxical Blend of
personal humility and professional will. LEVEL
4 EFFECTIVE LEADER Catalyzes commitment to and
vigorous pursuit of a clear and compelling
vision, stimulating a higher performance
standards. LEVEL 3 COMPETENT MANAGER Organizes
people and resources toward the effective and
efficient pursuit of pre-determined
objectives. LEVEL 2 CONTRIBUTING TEAM
MEMBER Contributes individual capabilities to
the achievement of group objectives and
works effectively with others in a group
setting LEVEL 1 HIGHLY CAPABLE
INDIVIDUAL Makes productive contributions
through talent, knowledge, skills, and good
work habits.
Source J. Collins, Good to Great, Harper
Business, 2001, p. 20.
6
Five Levels of Exemplary High Performance
Organizations Level 5 Leadership
Level 5 leaders channel their ego needs away
from themselves and into the larger goal of
building a great company. Its not that Level
5 leaders have no ego or self- interest. Indeed,
they are incredibly ambitious but their
ambition is first and foremost for the
institution, not themselves.
7
Five Levels of Exemplary High Performance
Organizations Level 5 Leadership
In over three quarters of the comparison
companies, Collins found executives who set
their successors up for failure or choose weak
successors, or both.
8
Five Levels of Exemplary High Performance
Organizations Level 5 Leadership
In over two thirds of the comparison cases,
Collins noted the presence of a gargantuan
personal ego that contributed to the demise or
continued mediocrity of the company
9
Five Levels of Exemplary High Performance
Organizations Level 5 Leadership
Ten out of eleven good-to-great CEOs came from
inside the company, three of them by family
inheritance. The comparison companies turned
to outsiders with six times greater frequency
yet they failed to produce sustained great
results.
10
Five Levels of Exemplary High Performance
Organizations Level 5 Leadership
Level 5 leaders look out the window to apportion
credit to factors out- side themselves when
things go well (and if they cannot find a
specific person or event to give credit to, they
credit good luck). At the same time, they look
in the mirror to apportion responsibility, never
blaming bad luck when things go poorly.
11
The Four Components of Successful Organizational
Transformation
Change Processes Needed
Action- Levers Required (How do you integrate?
Which ones produces the most economic value added?
The Motivation (dissatisfaction with status quo)
Vision Direction Setting (VDSP) 5 years
(How will we get there?)
Successful Organizational Transformation
(Why Change?/Need for Change?)
X

• Establish a Strategic
• Business Team and
• a Direction
• Charter a team
• to lead the transformational
  effort, which includes - Diagnosis/
• Assessment Vision
• of Future State
• - VDSP
• - Strategies and
• Deployment
• - Tactics
• - Organization
• Redesign
• - Metrics/Renewal
• - Yearly Action
• Plans

X
X
(What are we changing to?)

• Organization
• Structures/
• Capacity (17)
• Human
• Resources
• (14)
• Technology/
• Information
• Systems
• (14)
• Total Quality
• Management
• (16)

- VDSP - 12 Dimensions of Future
State (Use of the Wedge Process)
Key Assumptions Scope of transformational effort
is Global-- with potential for one Region to lead
implementation
Updated 4/28/99
____________ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA (forthcoming)
12
STRATEGIC BUSINESS PLANS STRATEGIC PLANNING AND
VISION DIRECTION
WHERE DO WE WANT TO BE 5 YEARS FROM NOW FROM NOW
?
VISION DIRECTION SETTING PROCESS

BREAKTHROUGH JOURNEY Thinking Out of the Box
DIFFERENT APPROACH THAN IN THE PAST
BUILD UPON OUR STRONG FOUNDATION
INVOLVE PEOPLE AFFECTED
FUNDAMENTAL CHANGE/PARADIGM SHIFT
NEEDED--NOT INCREMENTAL CHANGE
MATCH BUSINESS NEEDS AND PEOPLE NEEDS
Updated 3/18/99
Source B.A.Macy, Successful Strategic Change
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
13
Vision Direction Statement
Vision-Direction picture of the future
state-purpose, values, direction and framework.
It is dynamic and constantly evolving. It is not
words but the behaviors that associates see and
feel. It demonstrates the overall direction and
philosophy of the organization.
14
Vision Direction Statement

• Vision Direction is the difference between short
  term moves and long term change. Vision
  Direction transfers strategies you might have on
  paper into a way of life. Vision Direction
  empowers people to change. Vision Direction
  teaches the elephant to dance. Vision Direction
  paints a picture of where you want your
  organization to go and what you want it to be..
  
• James Belasco Teaching the Elephant to Dance

15
VISION SETTING DIRECTION PROCESS WHAT IS IT?

• Description of the reasons the organization
• exists and the major guidelines under which
• the organization can be expected to operate.
• Describes where the organization, the business,
• and worksite will be in the future (5 years).
• Tool and process for organization planning.
• Identifies a common purpose which engages/
• focuses everyones efforts.

Source B.A.Macy, Successful Strategic Change
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
16
Why is VDSP/Strategic Planning Useful?

• Each organization can accomplish its purpose
  most effectively
• by guiding the choices and actions of the
  individuals in it.
• People will invest creative effort and
  commitment to
• organizational objectives if they are aware of
  them and are
• allowed some individual choice on how to
  contribute to them.
• A direction setting process provides a clear
  description of
• what is important and general guidelines
  people should apply
• as they work to achieve intended results.
• With such guidelines, people become focused on
  what is
• important and are given freedom and
  flexibility in the way
• they respond.
• A direction setting process can be described
  as a 80 Percent
• Cutof the future state, a conceptual vision
  direction of the ideal
• future.
• It provides a mechanism for change!

17
VISION DIRECTION SETTING PROCESS WHAT IT DOES

• GIVES DIRECTION (SPECIFIC/VERY DIRECTIONAL!)
• GENERATES ENERGY

VISION -- WHAT IT IS

• A COMPELLING PICTURE OF THE DESIRED FUTURE
  STATE OF THE
• ORGANIZATION (PURPOSE, GOALS, DIRECTION, VALUES,
  
• CHARACTERISTICS, PRIORITIES, WHAT IT STANDS FOR
  ETC.)
• A FUTURE THAT IS NECESSARY, BETTER, DESIRED,
  ENDURING
• AN IDEAL -- BEYOND WHAT PEOPLE THINK IS
  POSSIBLE
• A BLUEPRINT OF WHAT THE ORGANIZATION WILL BE
  LIKE
• DYNAMIC, EVOLVING
• A CHALLENGE, AN INSPIRATION, A MORAL APPEAL
• CAPTURES THE IMAGINATION
• TOUCHES THE SPIRIT
• IDENTIFIES THE COMMON PURPOSE
• PROVIDES MEANING -- SOMETHING WORTHWHILE TO
  STRIVE FOR
• SHIFTS ATTENTION TO THE FUTURE

18
The Overall Wedge Model VDSP
Business Environment
Stakeholders
Balanced Scoreboard Measurements
XYZ Company
Vision Direction Mission Values
What Has to Change?
Critical Issues
Action Plan
External World
Objectives
Results Economic Value-Added
Environment
Industry

• Suppliers
• Customers (End Users)
• Distributors
• Competitors
• Benchmark Best Practices

Source B. A. Macy, Successful Strategic Change,
San Francisco, CA Berrett-Koehler Publishers
(forthcoming).
19
Strategic Planning Model The Wedge/ The Cake
The Vision Direction Setting
I.
II.

• The External
• Business
• Environment
• State of the Business/New Business Development
• Corporate/S.B.U.
• Relationships and Manufacturing World-Wide
  Picture
• Our Current Culture(s)/and Employee Relationships
• The Consumer and Our Competition
• Our Customers and Value-Chain Relationships
• Technologies
• Trends
• Innovation at Other Companies and High
  Performance Systems

Communication
1. Customers Their Expectations,
Our Expectations, Their Future
Expectations 2. Business Strategies,
Givens, and Goals 3. Needs Business,
Worksite, Teams and Individuals
Vision Direction Setting Process
4.Core Values and Philo- sophies/
Principles 5. Mission 6. Critical Business
Issues 7. Key Success Factors 8.
Techno- logies
BALANCED SCOREBOARD
III. Shared Vision Direction
9. External Relation- ships 10.
Expecta- tions of your
People - Perfor- mance -
Relation- ships at work
IV.
Strategy Development and Deployment
11. People Characteristics How Treated
How Utilized 12.Organizational Structures

• Yearly
• Objectives

• Yearly
• Action

• Yearly
• Review

RESULTS
Gap Analysis
Future Direction 5 years out
Strategies for Transformation
Development of Specific Action Plans
Source B.A.Macy, Successful Strategic Change
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
20
Vision Direction Setting Process Dimensions and
their Elements A Definition
Part 1 3 Dimensions (The Business
Environment) 1. Customer Their Specific
Expectations Our Specific Expectations Their
Future Specific Expectations. 2. Needs The
Business Unit, The Worksite, The Team, and
Individuals 3. Business Units and Worksites
Strategies, Givens and Goals Part II 5
Dimensions (The Internal Environment) 4. Mission/P
urpose a. Our basic business purpose - What we
must be in order to Survive and Prosper b. What
we do, for Whom, and How c. What makes us
Unique d. Our Claim on Resources e. What
produces Success f. What we want in the
Future 5. Core Values and Philosophies/Principles
of the Organization Core values and
philosophies of key stakeholders underpin each
decision made about the organization. Values
or beliefs express the things we care about,
consider the most important. They provide
guidance as to the goals that will be pursued
and the means that are acceptable/unacceptable to
use in reaching these goals. 6. Work
Expectations (Behaviors) of our People a. What
people must do so the Mission can be
accomplished b. Their Expectations

Standards, Responsibilities, c.
People (as Team Members/Citizens of the Unit)
Requirements, Expectations
21
Vision Direction Setting Process Dimensions and
their Elements A Definition

• Part II 5 Dimensions (The Internal Environment)
• 7. Critical Issues (facing the business in the
  future)
• What are the critical issues your business and
  organization will face in the next five years?
• 8. Key Success Factors, Business Objectives --
  Business, People and Society
• a. Goals Operations/Technical/Financial/Social
• b. General Strategies Priorities Competitive
  Positioning
• c. Markets Globalization
• d. Results required Level of Performance Time
  Frame
• e. Capital Investment Innovation New Product
  Development
• f. Joint Ventures/Partnerships
• Part III 4 Dimensions (Critical Drivers of the
  Internal Environment
• 9. Technology / Automation / Process Control /
  IS-IT Systems
• a. Expected Changes in the Future - Flexibility
• b. Rate of Change
• c. State-of-the-Art or Proven
• d. Flexibility Required
• e. Core Technology Automation Environment
  Energy

22
Vision Direction Setting Process Dimensions and
their Elements A Definition
Part III 4 Dimensions (Critical Drivers of the
Internal Environment 11. People in the
Organization a. How People can expect to be
Treated? - Employment Assurances/Income
Assurances - Safety Health Working
Environment - Equity/Fairness -
Pay/Benefits/Rewards - Personnel Policies -
Work Force Cultural Diversity -Hiring/Assessment
/Movement (New, Bids, Team-to-Team) -
Promotion - Status Difference - Trust -
Discipline - Support - Communications/Access
to Information - Uniformity/Difference -
Internal Community b. How People can expect to
be Utilized? - Participation -
Empowerment - Teamwork - Job Content
Flexibility Skills - Responsibility/Authority
- Decision-making/Problem Solving
23
Vision Direction Setting Process Dimensions and
their Elements A Definition
Part III 4 Dimensions (Critical Drivers of the
Internal Environment 11. People in the
Organization (continued) b. How People can
expect to be Utilized? (continued) -
Planning/Goal-setting/Track Performance -
Feedback - Risk-taking Innovation -
Training/Development - Investment
Operational Business
Technical People - Career
Development - Resources - Commitment -
Personal Goals aligned with Organization
Goals - Leadership - Enjoyment/Fun 12.
Organization Structures (Diagram your
Organization Structure in a Non-traditional
Manner - see attached questions for
hints/issues) a. Alignment Business, Product,
Process, Geography b. Centralization/Decentraliza
tion c. Groups/Boundaries/co-location d.
Self-Sufficiency - Teams (What degree of
self-direction?) e. Levels/Layers
24
Vision Direction Setting Process Dimensions and
their Elements A Definition
Part III 4 Dimensions (Critical Drivers of the
Internal Environment 12. Organization
Structures f. Classification (Wage,
Non-exempt, Exempt-Management, Professional
Staff) g. Numbers of People/Number of Jobs h.
Jobs/Flexibility - (Generalist vs. Specialty) i.
Teamwork/Self-managing Teams/Work Environment j.
Planning/Goal-setting/Measurement k.
Decision-making/Problem-solving l.
Responsibility/Accountability m. Financial
Reward Systems/Penalties - Recognition
Systems/Penalties n. Control Systems o. Rules,
Regulations, Contracts p. Innovation vs.
Risk q. Focused Leadership - Continuity r.
Renewal/Continuous Improvement/Change
25
An Example HPO and VDSP as a Business Strategy
Mission As a vital part of the success of the
organization, our mission is to produce and
deliver quality products as planned, without
incident and at the lowest sustainable cost.
Vision The organization will be the standard
of excellence in the industry.
Strategy 1
Strategy 3
Strategy 4
Strategy 6
Strategy 2
Strategy 5
Improve Reliability
Control Operating Costs to or Below Budgeted Amou
nt
Improve Key Work Processes
Communicate and Deploy our Vision
Direction (VDSP), Mission, Values, Business
Plan, and Focus Areas to all Employees with a
Sense of Urgency
Continue to Improve Safety Performance
Create a High Performance Work Place
Vision Metrics (Define Standard of Excellence)
Critical Success Factors
Target

• WES Vulnerability
  0 Have Committed
• Scores gt 15
  Empowered People
• OSHA Incident Rate lt1.0
  Protect People and the
• 
  Environment
• On-Time Shipments 100
  Meet Customer Needs and
• 
  Expectations
• On-Test Shipments 100
• Operational Availability 96.5
  Manage Assets Effectively
• Incident Costs (Including lt5 MM
  Increase Revenues
• LPO Costs)
• Operating Costs No. 1
  in Have Lowest Sustainable
• 
  Solomon Costs
• 
  U.S. Study

Strategy Metrics and Target for

• To be
• determined

• Functional
• Business Plans
• completed
• by 2/15/96
• Cross functional
• Plans completed
• by 3/15/96
• 1997 Business
• Plan completed
• by 12/15/96

• OSHA Incident
• Rate

• Operational
• Availability

• Total Expenses

• To be
• developed
• as part of the
• transformation
• plan

Driving Strategy
Critical Correlation
Moderate Correlation
26
Core Ideologies in the Visionary Companies
Clear and Concise Vision Direction

• 3M
• Innovation Thou shalt not kill a new product
  idea
• Absolute integrity
• Respect for individual initiative and personal
  growth
• Tolerance for honest mistakes
• Product quality and reliability
• Our real business is solving problems

• American Express
• Heroic customer service
• Worldwide reliability of services
• Encouragement of individual initiative

• Boeing
• Being on the leading edge of aeronautics being
  pioneers
• Tackling huge challenges and risks
• Product safety and quality
• Integrity and ethical business
• To eat, breathe, and sleep the world of
  aeronautics

27

• Citicorp
• Expansionism of size, of services offered, of
  geographic presence
• Being out front such as biggest, best, most
  innovative, most profitable
• Autonomy and entrepreneurship (via
  decentralization)
• Meritocracy
• Aggressiveness and self-confidence

• Ford
• People as the source of our strength
• Products as the end result of our efforts (we
  are about cars)
• Profits as a necessary means and measure for our
  success
• Basic honesty and integrity
• (NOTE This is the order from 1980s Ford MVGP
  document. At different points in Fords history,
  the order has varied.)

• General Electric
• Improving the quality of life through Technology
  and Innovation
• Interdependent balance between responsibility to
  customers, employees, society, and shareholders
  (no clear hierarchy)
• Individual responsibility and opportunity
• Honesty and integrity

28

• Hewlett-Packard
• Technical contribution to fields in which we
  participate (We exist as a corporation to make a
  contribution)
• Respect and opportunity for HP people, including
  the opportunity to share in the success of the
  enterprise
• Contribution and responsibility to the
  communities in which we operate
• Affordable quality for HP customers
• Profit and growth as a means to make all of the
  other values and objectives possible

• Merck
• We are in the business of preserving and
  improving human life. All of our actions must be
  measured by our success in achieving this goal.
• Honesty and integrity
• Corporate social responsibility
• Science-based innovation, not imitation
• Unequivocal excellence in all aspects of the
  company
• Profit, but profit from work that benefits
  humanity

29

• IBM
• Give full consideration to the individual
  employee
• Spend a lot of time making customers happy
• Go the last mile to do things right seek
  superiority in all we undertake.
• Johnson Johnson
• The company exists to alleviate pain and
  disease
• We have a hierarchy of responsibilities
  customers first, employees second, society at
  large third, and shareholders fourth (see the
  credo reproduced elsewhere in this book)
• Individual opportunity and reward based on merit
• Decentralization Creativity Productivity
• Marriott
• Friendly service excellent value (customers are
  guests) make people away from home feel that
  theyre among friends and really wanted
• People are number 1 treat them well, expect a
  lot, and the rest will follow
• Work hard, yet keep it fun
• Continual self-improvement
• Overcoming adversity to build character

30

• Motorola
• The company exists to honorably serve the
  community by providing products and services of
  superior quality at a fair price
• Continuous self-renewal
• Tapping the latent creative power within us
• Continual improvement in all that the company
  does in ideas, in quality, in customer
  satisfaction.
• Treat each employee with dignity, as an
  individual
• Honesty, integrity, and ethics in all aspects of
  business
• Nordstrom
• Service to the customer above all else
• Hard work and productivity
• Continuous improvement, never being satisfied
• Excellence in reputation, being part of something
  special
• Philip Morris
• The right to personal freedom of choice (to
  smoke, to buy whatever one wants) is worth
  defending
• Winning being the best and beating others
• Encouraging individual initiative
• Opportunity to achieve based on merit, not
  gender, race, or class

31

• Procter Gamble
• Product excellence
• Continuous self-improvement
• Honesty and fairness
• Respect and concern for the individual
• Sony
• To experience the sheer joy that comes from the
  advancement, application, and innovation of
  technology that benefits the general public
• To elevate the Japanese culture and national
  status
• Being a pioneer not following others, but doing
  the impossible
• Respecting and encouraging each individuals
  ability and creativity
• Wal-Mart
• We exist to provide value to our customers to
  make their lives better via lower prices and
  greater selection all else is secondary
• Swim upstream, buck conventional wisdom
• Be in partnership with employees
• Work with passion, commitment, and enthusiasm
• Run lean
• Pursue ever-higher goals
• Walt Disney
• No cynicism allowed

32
Strategic Leadership Three Keys of a
Exemplary High Performance Organization
1 What Are You Deeply Passionate About?
VISION DIRECTION
2 What Can You Be the Best In the World At?
3 What Are The Drivers of Your Economic Engine?