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2011
Not long ago I attended a Webinar on applying “Emotional Intelligence” or “EI” in the implementation of ERP systems. The name of the organizer and presenters shall go undisclosed because it is not they who are the target of my disagreement. Rather, my disagreement is with the thrust of the application of EI.

Definitions

In the presentation, the following definitions were given:

·       ERP Change Management (CM) – refers to identifying, assessing and managing the elements that are needed to move an organization from its current state to a future state when ERP software is the transaction engine.  The goal is to realize ROI of the project.  The areas addressed include change strategy, leadership, envisioning, project team building, change history and readiness, benefits realization, stakeholder management, communications, approach to handling reluctance and sustaining commitment, Knowledge transfer, organization and business impacts, new skills and ways of working, organization restructuring, roles and responsibilities, alignment with HR processes and the enterprise strategy. [sic]

 

·       Emotional Intelligence (EI) – refers to the ability to recognize and understand emotions and the skill to apply this awareness to manage ourselves and others through transitions.  Emotional Intelligence is made up of 4 unique skills that cover how one recognizes and understands emotions, manages his or her behavior, and manages relationships.  These skills are self-awareness, self-management, social awareness, and relationship management. [sic]

Key points

Some pertinent points were brought in the course of the presentation, not the least of which were these:
  • ·       Only 30% of “change initiatives” succeed, while 70% of “change initiatives” fail
    • “It takes about five years to see ROI from a [typical] ERP implementation”
    • “Change can foster significant confusion for middle managers, which can spur anxiety and stress that impede or even paralyze decision-making”
    • “Middle managers need to implement change while managing their employees’ emotions, including anxiety, resistance and eager but inappropriate behavior”
    • “These managers face the challenge of grasping a change they did not design and negotiating the details with others, equally removed from the strategic decision-making”
    • “Complexity rises for these managers of change as work demands are modified and multiply, which can create conflicts”
    • “Lack of clarity renders new demands uncertain and frequently misunderstood; without clear understanding, managers can be seen as not taking action or taking the wrong action”

    These points all raised many, many questions in my mind, and I hope to speak of them in this article. However, here was the real kicker that came in response to a question at the end of the presentation:

    "A lot of ERP decisions are made on the basis of executive ego.... [Therefore], there are a lot of cases where the ERP [software selected] is a mismatch [for the firm]."

    Mind you: these statements – and, most notably, this final statement – is coming from two professionals serving companies of all sizes in industries including finance, health care, education, and manufacturing. And the presenter’s statement did not stop there. Examples were given in terms of “being the first in an industry,” or “having the biggest Peoplesoft implementation ever,” and more.

    Notice also that the presenter did not say, “Sometimes” or “occasionally”; rather, the statement made was that “[a] lot of ERP decisions are made on the basis of executive ego.” And, frankly, my own experience confirms this – if not the original purchase decision, at least the decision to carry on with a project even when the evidence may be almost overwhelming against the net result being a positive one for the firm undertaking a traditional ERP – Everything Replacement Project.

    It’s got to work

    At an international trade show I attended some years ago, I became involved in a conversation with an executive from a fairly large firm. I asked him if they were considering a new ERP system, at all. His response was, “Oh, no! We are just wrapping up an SAP implementation now – after a little over two years.”

    So, I said, “Well, you’re to be congratulated, then. There just aren’t a lot of companies that ever actually ‘wrap up’ a SAP project. It seems that they so frequently become ‘evergreen’ projects for SAP developers and DBAs.”

    To this, he chuckled. Then, with renewed earnestness he said, “Well, there are still a few things that aren’t quite right, but we’ve spent so much money already that it’s got to work!”

    This is telling, don’t you think? If ego did not initiate this ERP implementation, ego was certainly going to see it through. No executives in that company were going to admit that – after spending some millions of dollars – the ERP solution they selected was not going to work for them!

    Dispelling an old myth

    Who do you think started the myth that “people hate change” and “people resist change”? Do you think it was started by the people being accused of “resisting” and “hating,” or do you think it was started by those in power – monarchs, politicians, generals and executives – who wanted certain changes to occur, but were having some difficulty in getting “the people” to accept the changes set forth?

    I think you will agree with me that it was, most likely, the latter group and not the former that leveled the charge and created the myth.

    The following should dispel that myth once and for all – at least for my readers:
    The Change
    Scope of Change
    Comments
    Getting   married
    Monumental
    Most people embrace and look forward to this change.   They do not resist it. In fact,   they dream about it and even plan for   it.
    Having   children
    Monumental
    Here again, even though this is a huge change in their lives, most   people look forward to having children and many even lay out plans in advance   for childbearing.
    Announcement   that one’s salary will be doubled   starting next month
    Big
    This change will likely bring significant lifestyle   changes, yet I doubt that many would be found resisting this change.
    Announcement   that one’s salary will be cut in half   beginning next month
    Big
    The magnitude of this change is equivalent to the magnitude of the   change for doubling of one’s   salary, yet this change is likely to bring screaming resistance.

    The point is, people do not resist change. What people resist are changes about which they are not yet convinced the result for them will be positive. For example, in getting married – even though most candidates for marriage recognize that there may be some down-side to the marriage compact – they are convinced that the change will be a net positive for them in the long run.

    With this in mind, in our subsequent posts in this series, we are going to revisit the Key Points raised in the Webinar on “Emotional Intelligence.”

    Stay tuned.
    ©2010, 2011 Richard D. Cushing

    In an uncertain economy, most organizations become increasingly focused on today's problems. But economic uncertainty is more likely to increase than decrease over the next decade as economic superpowers struggle to hold onto their greatness in the midst of a sea of other nations growing in both consumption and production. The greater part of today's problems won't go away with increasing internal focus. They will be minimized, more than likely, by increasing your looking outward--up and down your supply chain.

     

    For the better part of three decades businesses have been building, developing and, from time to time, overhauling their internal technical infrastructure in order to become more and more efficient and effective at what they do. But the time has come to realize that the real ability to succeed is going to be found increasingly in the number of ways your data is connected and interactive across your supply chain, not in how much data you have about what is happening inside your company alone.

     

    Supply chain operations--even before they were called that--have always been more or less collaborative. However, far too many of such exchanges where hedged about with suspicion and distrust. Fear that one might be "taken advantage of" by some "bully" at one of the transaction or the other led to not infrequent misunderstandings and "divorces."

     

    Let's face it. In a business-to-business (B2B) exchange, both parties to the transaction have the same goal. If they are smart, that goal will be "to make more money tomorrow than they are making today." If they are not smart, that goal will be "to make more money today," in the absence of a view for tomorrow. Firms and executives with the latter view of supply chain exchanges will soon learn that they are running out of potential trading partners.

     

    Trust is the fundamental of collaboration

     

    An understanding, that for a supply chain relationship to remain reliable both trading partners must be making money, is fundamental. In cases where one trading partner is significantly stronger than the other, it may be in the long term interest of the stronger trading partner to seek out ways to help strengthen the weaker partner through collaboration. Helping a good supplier or a good customer become better--stronger, more profitable, more efficient, more effective--might mean that in a tough enonomy you don't have to waste time, energy and money looking for a replacement for that good vendor or customer.

     

    One easy and way to help strengthen the customer or vendor--along with the trading partnership--is to begin sharing data with such partners. Vendors that have near real-time data about your inventory levels and changes in demand for items in which they have a supplying interest are more likely to be able to supply on-time without incurring the high costs of overtime, excess shipping charges or needless inventory carrying costs. And, in today's world, making such data available to them--with appropriate security--is generally not a costly thing to do. Neither is necessarily costly to share with your supply chain partners what your firm might have learned about better inventory management or production practices.  Collaborating with your trading partners to negotiate better shipping rates or better prices on common supply items will not cost you much either.

     

    However, making an effort to do these things does mean building a "relationship," and not just signing an agreement. These relationships, and the data links you build with trading partners in the future, may be the very things that allow you and your firm to survive economic hard times while your competitors are falling by the wayside.

     

    Think about it.

     

    Tell me how you are collaborating today. Tell me about your good and bad experiences in attempts to build such collaborative relationships.

     

    I look forward to hearing from you.

    Many businesses with active and growing supply chains are tossed to and fro trying to decide whether their supply chain should emphasize efficiency or responsiveness. In some cases, this is due to the fact that they don't really understand the multiple dimensions of their demand. One good way to analyze your supply chain requirements is to compare total demand (units) with demand volatility (variance/average demand).

     

    FIG Demand-Volatility Analysis.jpg

     

    Once this analysis is done, it becomes pretty clear that, in most cases, your supply chain should not be homogenous. The requirement for responsiveness versus efficiency is not the same across your entire product line. In fact, it is likely that responsiveness is need most for the products falling in the high volume / high volatility quadrant. The need for efficiency is required most for those products that fall into the high volume  / stable demand quadrant in your analysis.

     

    Going beyond this, one might consider differing supply modes even for low volume / stable demand items versus those that are low volume / high volatility products. The latter might best be set to make-to-order, in some cases, where the supply chain does not involve long post-production delivery times.

     

    That being said, is there a way to rationally decide whether efficiency or responsiveness is the right answer for a specific product or product line?

     

    Yes, I believe there is, and the answer is found in a simple formula that can readily be applied.

     

    TOC ROI.jpg

    This formula is translated as: return on investment (ROI) is equal to the change in Throughput less the change in Operating Expenses divided by the change in Investment (including any increase or decrease in inventory). In this formula, Throughput is defined as revenues less only truly variable costs or TVCs. TVCs are restricted to those costs that vary directly (not indirectly) with changes in Revenues such as materials, outside services, shipping, commissions, duties and taxes. Any anticipated changes in indirect costs should all be including in the change in Operating Expenses.

     

    Using this formula, the management team can easily compare alternative scenarios for efficiency versus responsiveness if rational projections can be made about effects on Throughput. Granted, these will be estimates, but the entire management team should agree on the numbers being applied. Everyone from sales and marketing to finance should concur that the estimates are rational before being applied in the decision-making formula.

     

    If you have questions about how to do these analyses, please feel free to post there here on the Kinaxis Community.

    Sure. I'm a technology guy. But when I use the term "system" I use it in a much broader context. When I use the term "system" in a business context, I'm not just talking about the firm's hardware, software and data infrastructure. I'm talking about their organization as a whole working as a "system" of inter-related and (supposedly) coordinated parts.

     

    I watched with amusement as some of the entries to the "Your Job Description in Six Words" contest rolled in. It seemed painfully clear that many working in the supply chain field feel that their job is one of mediation--of trying to juggle competing demands while still making money for the company and keeping their jobs by not offending anyone with too much clout in the company. I got the distinct impression that supply chain folks are beaten regularly about the head and shoulders by the sales department, product developers, the marketing team, and finally the finance department when the numbers don't come in according to plan.

     

    The finance department wants lower costs, which might mean moving manufacturing off-shore. Meanwhile, the sales department wants lower lead-times and greater flexibility, which probably means keeping manufacturing in-house and possibly added costs to increase flexibility. Similar conflicts may arise between executives who want to trim the product line to reduce costs and manufacturing complexity while marketing complains that doing so will cause the firm to lose market share and sales revenues.

     

    These kinds of in-fighting occur all too frequently and many organizations struggle with a dysfunctional organizational system. Departments work together, at times, grudgingly--not with the kind of esprit de corps that makes it a pleasure be employed by and do business with a firm. Turnover may be higher just due to the constant wrangling and bickering that is present in day-to-day operations.

     

    Such a conflict might be reduced to a defined "problem" with conflicting "necessary conditions" using the Evaporating Cloud or Conflict Resolution Diagram (CRD) as in the figure below.

    ToC Conflict Cloud Example02.jpg

    Once the problem has been defined and diagrammed, the management team should then be asked to lay on the table--openly and without criticism--the assumptions each has for entities B, C, D and E. Furthermore, the team should articulate their underlying assumptions for each of the arrows in the "cloud."

     

    For example, for those who support the E-C-A path to succes:

    1. What assumptions make them believe that keeping manufacturing closer to home and making it more flexible will lead to increased sales revenues?
    2. In fact, the team should ask: Is keeping manufacturing close to home and making it more flexible even a necessary condition to a sufficient increase in sales revenues?
    3. What assumptions make supporters of this plan believe that simply increasing revenues will help the firm make more money?

     

    Similar questions should be raised as to the assumptions underlying the rationale for those who support the D-B-A path to improvement.

     

    Once these assumptions are on the table, each should be subject to examination as being logical and provable. For example, for the E-C arrow, what specific changes are understood to be included in making manufacturing "more flexible" and how much will these changes cost? Additionally, what evidence is available to indicate that investment in these changes will, in fact, result in more sales.

     

    It is not my purpose to reach a resolution and evaporate this cloud in this writing. In fact, even if I did, it would only apply in my hypothetical scenario and would not be applicable to any specif environment.

     

    That's just it. Every environment is different. But the Evaporting Cloud can be used to help unlock "tribal knowledge" and help you achieve breakthrough thinking. When a person or an organization faces a situation in which they are already convinced that it cannot change; they are blocked. However, putting the thinking down in black-and-white and laying out all of the assumptions (also in black-and-white) has been proven to help organizations achieve real and effective breakthroughs that have led many firms to profits beyond their expections.

     

    If you have questions about how to apply the Thinking Processes, contact me here at Kinaxis Community.

    RDCushing

    Defining the problem

    Posted by RDCushing Jan 19, 2011

    Too much fire-fighting and trial-and-error in business in general--but especially in the realm of supply chain management--is merely a symptom of management's failure to properly define the problem before setting out to create a solution.

     

    As Eliyahu Goldratt reminds us: "A problem is not precisely defined until it can be presented (logically) as a conflict between two necessary conditions."

     

    Managers and executives define "problems" as anything that isn't happening according to their desires, goals, plans or projections. But such a "problem" cannot be attacked except by fire-fighting and trial-and-error. Management, all too frequently, has no tool by which to reduce a problem to a logical conflict between to necessary condtions. In fact, more frequently than most executives and managers want to admit, they don't even know or understand the "necessary conditions" for achievement of their intended end. They have developed a goal in the absence of a theory. Yet, it is theory, and not "numbers" or "outcomes" that must drive decision-making.

     

    ToC Conflict Cloud Example.jpg

    Fortunately, Goldratt's Thinking Processes have given management a tool for reducing "problems" to a conflict between two competing prerequisites. That tool is variously referred to as an Evaporating Cloud or Conflict Diagram. Assuming that the whole management team has the same ultimate goal (the left-most entity in the diagram), then the conflict arises because there are competing means for achieving that ultimate goal. These competing means are placed in the center entities in the diagram.

     

    The parties to the conflict are further set apart by what are deemed to be the "necessary conditions" (right-most entities in the diagram) which are found to be in direct opposition to one another. The arrows in the diagram represent underlying assumptions. Even the lightning bolt between the two competing "necessary conditions" represents underlying assumptions. (It is possible to discover that apparently competing "necessary conditions" are not mutually exclusive at all, in some cases.)

     

    Once "the problem" is defined, reaching a resolution--"evaporating the cloud"--is achieved by full and honest discussions and a thorough examination of the assumptions underlying the arrows connecting the entities. Real breakthrough thinking--possibilities that no one in the organization had heretofore considered--can be achieved using this tool.

     

    If you have questions about how to put this tool to work in your organization helping to resolve supply chain (or other conflicts), contact me here at Kinaxis Community.