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Archive for IBP/S&OP:

November 30, 2010

By Michael Effron


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What’s Global? Aligning process with where things really happen

It’s a fairly common situation for a company to create an initiative to put in a global process (such as S&OP / Integrated Business Planning), only to abandon the effort after a brief attempt.  Why?  I believe that it has nothing to do with the process, it has to do with how the company is organized and how it really operates.

This is a common enough occurrence that I think it’s safe to generalize the underlying issue; companies confuse where they do business with how they do business.  Let me provide an example of how this works.  For background consider a consumer goods company, specifically a company that sells a product through various distributors and retailers but with a brand that is sold around the world and recognized by the end consumers.  Even though it’s the same brand globally there are local variations, be they package size, product dimensions, or labeling. When we look at the sales and marketing organizations for these type of businesses, they are invariably local or regional.  They need to be, because the local people best understand the culture and how that affects consumer behavior.  A review of the company organizational chart shows that we have local or regional General Managers driving the sales in their geographic territories.  Budgeting, business planning, and the quarterly business results are organized by these territories, and “rolled up” to the total (global) level.  Is this a global business?  Sure, they sell their products on six continents (possibly seven, although I’ve never heard of an Antarctica General Manager); but sales, marketing, and finance all operate locally first, manage issues which are primarily local in nature, and have limited global interaction.  Most importantly, the General Manager has a high degree of autonomy, at least within the confines of the budget.

Here an example of how the company confuses where they do business with how they conduct business: They create a new selling process in the U.S., which is highly successful.  They launch a global initiative to roll out this process globally, only to find that the Vietnamese G.M. is less than enthusiastic.  Why?  Because this new process does not fit with how selling is conducted in Vietnam, it doesn’t fit his sales organizational structure, and it doesn’t address the sales issues in Vietnam.  And if the company tries to force fit the new process into Vietnam, they’re likely to lose sales as people try to make the new process work.

We cannot generalize this example to mean that this company should not have any global standards or processes. For example, this same company may benefit from having a global Enterprise Resource Planning (ERP) system, but with the understanding of why selected processes are being standardized.  For example, a global ERP can support faster financial closings and financial reporting, global visibility of inventory to allow improved inventory management, and visibility of total purchases to support vendor negotiations.

Companies that best manage globalization make a conscious choice of what gets managed globally and what gets managed locally.  The key to success is aligning the process, the organizational structure, and the decision making points within the structure.  When these are aligned, a company reaps the benefits of scale and visibility that come from global processes, with the cultural and market understanding and responsiveness that comes from local processes.  If they are not aligned, the result is conflict and chaos.

November 19, 2010

By Michael Effron


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Change Management, IBP/S&OP, Learning

The (Re)Learning Organization: Beyond the Training Department

With all due respect to Peter Senge, I think that in many cases we don’t need a “Learning Organization” as much as we need a “Re-Learning Organization”. Please don’t misunderstand this and think that I don’t believe we should create Learning Organizations, I can be a die-hard idealist and I love the vision of

…organizations where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to see the whole together.” Peter Senge, The Fifth Discipline

But I think that this overlooks the time dimension of business.

Everything Changes. Everything Remains the Same

As I look back over the past 25 years, I realize how many things I’ve learned through a series of transformative business initiatives. Quality Improvement (what is now called Six Sigma), Problem Solving and Decision Making, S&OP/Integrated Business Planning (IBP). All of these were major corporate initiatives which provided extraordinary benefits.

And then we moved on. Some retired, some moved to other companies, some were downsized. And the corporation remained.

The belief seems to be that the learning remained with the company. But the reality is that the learning remained with the people, and the company only retained the learning as much as it retained the people, and perhaps even only when it retained the people in the same roles.

We see the symptoms of this all the time. “The process degraded.” “We used to be good at this.” “We stopped doing that years ago.” Is there any less need or opportunity for six sigma improvements, or integrated business planning? I don’t believe so, but those people moved on, and the organization lost the learnings and ability.

I think we forget that the things we learned were acquired over time through many projects and initiatives. I look back to how I learned Continuous Improvement. A corporate initiative was started, sponsored at the highest levels. It wasn’t for any noble reasons, it was because one of customers told our CEO that, compared to all of his other suppliers, we had the worst quality. This put the wind in our sails, and we were off on an important journey. An outside professional came in and taught a group of us the principles and mechanics. We started up some pilot projects, and each of us was given the time needed to complete them. More importantly, we learned through our mis-steps and our successes. Our professional returned and gave us more education, and we became internal experts who could train others as a part of their job. We could have received this training on day 1, but without the prior experiential learning we would not have been successful. And through our own trial and error, we truly learned how to both do and teach. We launched more projects to expand the knowledge, experience, and benefits until three years later we touched nearly every employee in the company.

And then I moved on into another role, and stopped teaching and coaching others in the process and techniques. The company stopped creating new internal experts, until finally the next generation of people had no one to teach them the language, the techniques, the mind-set, and the benefits. And the process faded away. Not because the processes and cultural improvements we put into place were no longer needed, we simply forgot to teach the new people what we had learned.

A Re-Learning Organization

I would posit that in this age of increased mobility and short tenures with companies, the biggest barrier to corporate success is the loss of what the company has learned. We need to create re-learning organizations. Of course it’s impossible to transfer all internal knowledge, but we need to identify those critical learnings that need to be sustained, transferred, and enhanced; starting with the learnings from business initiatives such as Six Sigma, IBP/S&OP, and Marketing Excellence. And who can identify these critical learnings and acquired knowledge? This clearly resides with the people doing the work, either the internal experts who lived through the initiatives, or the functional experts who have learned or developed the “tricks of the trade”.

To become a Re-Learning organization, our companies need to make a few key investments. Most importantly, they need to allow employees to spend time learning, from both the delivery and acquisition sides. At it’s best it would look like what Senge described, ” …organizations where people continually expand their capacity to create the results they truly desire…” But at a minimum, they need to set the expectation and provide the time for the experts to share their knowledge, and for all employees to learn in both formal and informal situations. Additionally, companies need to make their leaders accountable for the learning of their people. This should not simply be passed on to the training department to manage for everyone, the experiential knowledge resides in the minds of the functional employees and cannot be captured in a training manual or PowerPoint presentation. The functional leaders need to continually provide the opportunities for experiential learning, both within their function and cross-functionally. While we cannot continually create the implementation experience for everyone, we can provide the projects or events through with experiential learning will occur.

Re-Learning Realized

You might think that this is just idealistic thinking, but I’ve seen companies succeed with this, and experienced it personally as well. In one business, the S&OP process was sustained and improved, even as General Managers came and left. They had one individual was the torchbearer for over ten years, and he coached each new GM and any other new employee in the “way that the business run’s through S&OP”. In another business, the Six Sigma process was in use throughout every department even though the original implementation occurred many years earlier. Here the torch was passed to new members of the leadership team. These examples highlight the two elements that I see time and again in Re-Learning organizations: a deeply held corporate belief that the “things we learned and the way we do things” are integral to the business’ success; and a torchbearer who ensures that everyone is taught the key learnings when they join, and then applies those learnings in the course of their work.

Building a Re-Learning Organization isn’t difficult, it simply requires a clear view of what needs to be sustained, and the personal leadership and commitment to sustain it.