13.5 Change Management: The Cycle of Change

Most companies and their workers are averse to change, but not all. A few leaders have embraced change as a strategic weapon. What can we learn from these change leaders? Answer: Managers who refuse to settle for the status quo can reap remarkable benefits of new business practices. This reality has led many pundits to examine the change-management process. They all offer their own proven path. For instance, Table 13.2 shares guidance from two best-selling change gurus. Spencer Johnson focuses on developing a change mindset. John Kotter emphasizes an eight-step process for leading change.

Given our focus on leading operational change, let’s talk through a proven process we call the Cycle of Change. Why do we recommend you use the Cycle of Change? Answer: It recognizes an important reality: Change is a two-step process (see Figure 13.4). You first need to change mindsets. Only then can you effectively begin to change structures—and culture. The Cycle of Change combines the two sides of the story from Table 13.2. How does the cycle of change work? Here is a high-level overview.

Change occurs when a leader takes advantage of a “change event” and initiates a period of exploration and evaluation. During this time, the leader uses credibility drivers to capture people’s imagination and justify real change—say, the adoption of lean six sigma. Mindsets are now changing. As momentum for lean six sigma builds, managers target specific investments to translate momentum into structural enablers. The goal: Begin to embed lean six sigma into the culture of the organization. With a supportive infrastructure emerging and permission granted to proceed, people begin to feel safe to apply lean six sigma to more and more processes. Finally, learning loops are built to ensure that lean six sigma becomes an integral part of the culture. The five “stepping-stones” provide a proven path for change.

Before embarking on your quest for change, be sure to consider the warning sign that stands at the head of the proven path:

Now, let’s take a closer look at each of the stepping-stones.

Leadership

In his business classic Good to Great, Jim Collins introduces “Level 5 Leadership”—executives with the vision, will, and wisdom to lead change. Without Level 5 leaders, companies just don’t make the leap to greatness. They settle for remaining merely good. Why is Level 5 leadership a big deal? Only a company’s senior leadership can commit the resources and provide the emotional safe harbor to unleash proactive change. Since you cannot command change, persuasion in word and deed is critical. The power to persuade derives from a combination of position and passion.

Position

The probability of change increases with the stature of the manager asking for change. Success happens most when the call for change comes directly from the C-suite. Consider two examples.

1. Staying on Point. To redirect his firm’s energy away from turf protection toward customer value, one executive relentlessly asked, “What does the customer really care about?” Being held accountable to answer this question repeatedly led people to realize that business as usual just would not meet customer needs. They had to change to survive in the market.

2. Holding People Accountable. Another determined CEO espoused this philosophy: “No one can be allowed to put up walls around the sandbox!” He wanted people to start working across functions to create value. Everyone realized he was serious when a pair of rising stars who had built walls to secure their own influence and power were invited to leave the company.

Clout matters! Therefore, you need to seek senior sponsorship for your lean six sigma program.

Passion

Authentic passion, enthusiastically displayed, sends an irresistible invitation to join in. Leaders who are passionate about lean six sigma create and communicate the vision by example. They take advantage of every opportunity to teach lean principles, drawing on the power and persuasion of concrete results. This approach enables everyone to see and understand the power of lean six sigma. Leaders then hold people accountable for making lean six sigma happen.

As they weave personal responsibility into the fabric of the culture, astute leaders take steps to banish fears. If people are punished for trying something new (like accepting cost increases in their functional area that would lower total costs), they become gun-shy about any future lean six sigma collaborations. Does this sound familiar? It should. It is the principle of encouraging failure while demanding excellence. One seasoned manager noted, “If my best people are not failing from time to time, they are not trying enough new things!” Ultimately, by aligning measures with expectations, discipline and follow-through become companions to passion in your quest to implement lean six sigma. Never forget, enthusiasm is contagious.

Significant Emotional Events

Some mindsets are so tightly closed that even the most capable leaders struggle to open them. When you encounter such immovable mindsets, look for “significant emotional events” (SEE) to use as a lever. A significant emotional event is one that makes it obvious that the cost of not changing is greater than the cost of changing. SEEs catch people’s attention, bringing out the rational economist in almost everyone.

The most common SEE is a change in the competitive environment, typically the emergence of a new rival. Think Boeing’s battle with Airbus or Walmart’s war with Amazon. But other SEEs exist. For instance, new technologies may emerge (think EVs). Or government may impose new regulations (think ESG). The key is to spot the threat early—that is, before losing too much market advantage. If you wait until your company is forced to lay off workers, or worse, is on the brink of bankruptcy, your effort to change will be driven by the quest to survive and not the goal to excel. Your challenge is that if the threat is not imminent, people may not give credence to your warnings. Investing in your storytelling skills may help.

Now, a hint: You don’t always need to wait for an imminent external threat before taking action. You can create your own SEE. At one European supply chain leader, a financial stumble that was far from a crisis led the CEO to physically reorganize the organization for greater integration and efficiency. More than 180 managers moved offices and found themselves in a different environment surrounded by new people with whom they were expected to collaborate. This physical move opened eyes to what could be accomplished through new ways of working together. But not everyone was willing to adapt. The CEO stood firm and 40 people ended up leaving the company. This mini exodus drove the point home: Adapt or leave. You can use the following as proactive SEEs.

• Operating requirements imposed by a new or expanded alliance

• A highly demanding customer request

• The introduction of new or modified performance measures

• The adoption of a strategic benchmarking initiative

You might even use the training associated with the adoption of lean or Six Sigma as a SEE. One word of caution here: Leverage proactive SEEs selectively. Used too often, they may be perceived as manipulative and drive cynicism rather than change.

Credibility Drivers

A significant emotional event can open the door for collaborative change, but few people will walk through it on blind faith. They want real evidence that there will be a return on their risk. Here’s the point: You live in a “show-me-the-money” world. To gain C-suite support, especially from the CFO, you need to make the business case for lean six sigma with “concrete numbers.” Simply put, as the saying at Intel goes, “If you don’t have the numbers it’s only your opinion.” Opinions seldom motivate change, but they do invite resistance.

Importantly, the need to make a compelling case for change extends beyond the C-suite. Everyone wants to know how change will affect them. A savvy change leader put it this way: “We need to document what’s in it for them!” This is the WIIFTOP principle: What’s In It For The Other Person.

How can you create buy-in and move the change process forward both at the C-level and among the wider employee population? Consider these comments from perceptive change leaders. We will ask you a question when you finish reading.

• We have to create some wins!

• We need short-term wins to establish credibility. We have already helped maintenance and engineering meet their budget goals through improved collaboration. Now the maintenance V.P. is helping spread the word to other units that SCM can really help.

• Doing (proving) is more important than talking. Talking always results in cynics. We need results to drive the discipline to follow through.

• As a cost center, everything has to be justified based on cost savings even when many of the benefits will come from improved revenue generation that accompanies improved service levels.

• Everything comes down to credibility. We need a plan that others can buy into. Then we can motivate others to implement the plan with their own creativity and energy.

Here’s the question. What are your Top 5 takeaways? Take a moment to write them down. Here’s what we hope you have on your list.

1. You have to walk the talk.

2. You need to create early wins.

3. You need to speak the language of the C-suite. Specifically, how will your lean six sigma initiative affect the bottom line?

4. You generate momentum when others begin to spread the word. There is power in second and third witnesses.

5. You create real change when you show people how to succeed and let them go to work using their own creativity and energy. Change leaders don’t micromanage.

If you live these five takeaways, you will earn trust and establish the credibility needed to drive change.

Structural Enablers

Structural enablers are needed to transform early lean six sigma successes into enduring practice. When should you make the move from building credibility to establishing culture? Consider this advice: “When something goes well there are always a lot of people in line ready to take credit.” When you see the line starting to form, you know you can safely begin to build structural enablers.

Don’t underestimate the importance of structural enablers. Up to this point in the change journey, momentum for change has been building steadily. But long-term changes in behavior have yet to solidify. People still worry that the “new” program will prove to be a fad and the old way of doing business will return. To expect a change in behavior without a change in structure is the definition of insanity.

The question is, “What structures support the behaviors needed to win in tomorrow’s competitive environment?” No one-size-fits-all strategy exists. Table 13.3 highlights some common structural enablers. Note two common ingredients across these enablers.

1. Reward the Right Behaviors. You must modify measures to make lean six sigma safe. No matter how often executives talk about change or lean six sigma, regardless of how much training you provide, if your measures continue to promote the old way of doing business, the old behaviors will persist. Measures create and define the emotional safe harbor. You must recognize this reality.

2. Bring People Together. Your ultimate goal isn’t just to adopt a set of technical tools, no matter how cool they are. You are trying to change mindsets and behaviors. Your structural enablers must bring people together to evaluate progress to milestones, make adjustments as needed, and share success stories. It takes time to build the trust needed to make lean six sigma daily practice. Remember, enthusiasm and success are contagious.

Learning Loops

Learning loops—activities that drive learning, document its benefits, and can be replicated in multiple parts of the supply chain—help you embed lean six sigma into daily practice. They help you cultivate a continuous improvement culture.

For instance, pilot projects promote inquisitive thinking and build learning skills. With some structural tweaks, you can convert the concept into a pet project program. The idea: Invite everyone to identify a process that needs taming or improving. Task the project leader with building a team running their own improvement project. Pet projects are a perfect fit for lean six sigma—think DMAIC, plan-do-check-act, or kaizen burst. Running on a continuous cycle of ideate, improve, report, and celebrate, you build momentum as you improve operations everywhere.

You might employ benchmarking—both competitive and non-competitive—to identify learning loops you can tweak to fit your setting. For instance, Atlassian started an annual 24-hour competition. Employees are given 24 hours to work on anything they want. They have to deliver on their idea overnight. Guess what they called these brainstorming sessions? FedEx Days.

Do you see any opportunities to build learning loops in this story?

Here are four elements common to learning loops.

1. Leaders communicate that continuous learning is expected.

2. They provide training in basic learning skills.

3. They put their people in a position to successfully use these skills.

4. They measure and reward learning behavior and results.

Final thought: Learning loops feed the cycle of change, helping you keep today’s success from becoming tomorrow’s enemy.