BetaCodexC2 - Case Study "Logoplaste" on Transformation


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Beyond Budgeting Change Case "Logoplaste" in Brasil

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BetaCodexC2 - Case Study "Logoplaste" on Transformation

  1. 1. Transforming an organization's management model from “command and control” to “Beyond Budgeting”: The Logoplaste case GERAL A Nossa Empresa Os nossos Parceiros Our Products Logoplaste throughout the World Logoplaste in numbers This white paper is based upon a public case presentation held on 21.02.2008 at the InterNews seminar “Beyond Budgeting” in São Paulo.
  2. 2. The company: Logoplaste Group Founded in 1976. 49 plants in Austria, Brazil, Canada, Czech Republic, France, Holland, Portugal, Spain, England, USA and Asia. 3rd largest container transformer in Europe. 2nd largest container transformer in Brazil employing 450 people. 1st in integrated operations in Brazil and Europe. Approx. 150,000 tons of raw material processed in 2007. 5.5 billions in plastic packaging sold in 2007 throughout the world.
  3. 3. Our organization in South America 2007: 8 plants
  4. 4. A selection of Logoplaste plastic packaging products in Brazil
  5. 5. The board's vision for the company's future “There is a need to grow, so that we do not disappear (...) The sheer size of this sector is a driving competitive factor.” (Alexandre Relvas, FIEP Conference, February 2002) Our goal: • “.. 15% annual growth rate in each country” • “A new contract every year, in each country” (Annual Report 2006) Logoplaste in the Future Transforming the model to achieve the board's goals: “Competitiveness – Growth – One Logoplaste”
  6. 6. Why should we change? • We are not regarded as a leading company within our sector in Brazil, today. • Our profitability has decreased over time (greater customer demands are not reflected in the price). • We are overly reactive to customer demands • We lack agility in responding to the market, resulting in missed opportunities. • “Paternalism” from Headquarters in Europe has created a comfort zone, excessive job stability and bureaucracy in the decision making process. • We have lost market space and have not developed the market. • Is our price too high? • Is our structure too expensive? • Are we efficient? • How long can we stand this? Conclusion: Given the historic results recorded by Logoplaste over the last five years, it is not possible to meet the goals set by the Board (15% per year), if we do not make significant changes.
  7. 7. Oct/07: How the story began... 10/17/2006 Seminar “Leading people and teams – new concepts for the 21st century” Participation: Managers Speaker: Niels Pflaeging – Director of the Beyond Budgeting Round Table
  8. 8. Our urgency: The world has changed! • Recently installed capacity at one of our units is Information Age already smaller than what the client needs • Continuous production re-scheduling Highly competitive, unpredictable • Constant changes in new project assumptions Abrupt/unpredictable change • Product life spans: from eight years to three years (with impact on investment) • Demand from customers for greater Short life cycles innovation on the part of Logoplaste Speed of Change • More complicated contract renewals Price pressure • More competitive electronic bids • R$ 1.5 MM in Technology and Change Investments in 1 year Disloyal customers • One project was passed on to our competitors by partner-customer Demanding employees • Lost 18MM PET containers from our customer • Electronic bids Transparency • Strike at one of our units (Nov/07) • Demand for “positions&salaries“ policy 1980 1990 2000 2010 2020 and 2030 more recognition • ERP Restructuring project • Internal and external audits
  9. 9. Today's Critical Success Factors (CSF) require “freedom” All are important today! Information Age Highly competitive, unpredictable Critical Success Factors Abrupt/unpredictable change Fast response Short life cycles Innovation Speed of Change Price pressure Operational excellence Disloyal customers Customer relationship Demanding employees Best place to work Transparency Ethical behavior 1980 1990 2000 2010 2020 2030
  10. 10. But we have gone down a different path: “Classic” and “alternative” paths for an organization's evolution Low degree Differentiation Classic path: of decentralization/ Stagnation within the Phase tayloristic model empowerment. Out of sync with today's critical success factors! Classic path: Alternative path: Bureaucratization and Transformation, This is our functional differentiation, based on radical path now! owed to growth and decentralization, application of leadership and process “tayloristic“ principles change. High degree of decentralization/ Alternative path: Extension of the empowerment. Pioneering Maintenance of an Integration decentralized Aligned with today's Phase empowerment and Phase model throughout critical success factors! confidence culture operations Foundation Time Scale – Several decades old increasing age of the organization
  11. 11. Critical Success Factors (CSF) Importance of management model: Most organizations use the “management model” that has been designed for efficiency....while the problem today is complexity*. * Multiple critical factors for competitive success that include efficiency Creating adaptive organizations: “The secret of success is not being able to predict the future and create an organization that prospers in the unforeseen future.” Michael Hammer
  12. 12. Traditional management processes from the command and control model are “straightjackets.” Strategy Strategy Strategic Learning cycle “Fixed” “Fixed” performance performance They conflict with our contract contract Critical Success Factors! Management control cycle Control Control
  13. 13. Our entire management model actually restricts performance Success factors Examples of non-alignment • Fast response • Delays caused by excessive planning processes • Innovation • Innovation is asphyxiated by central bureaucracy • Operations excellence • Budget mentality: ‘spend it or lose it’ • Close customer relations • Incentives created short-termism • The best people • Motivation is extrinsic rather than intrinsic • Ethical behavior • Individualism causes dysfunctional and even unethical behavior • Financial performance • Inferior financial performance When pressure increases, the problems get worse!
  14. 14. The Beyond Budgeting model: Rooted in science and in practice. Sciences: Practice: Thought leaders • Stafford Beer Industry leaders • Margareth Wheatley (selected) • Niklas Luhmann (selected) • Kevin Kelly • Ross Ashby • Joseph Bragdon • Douglas McGregor • … • Chris Argyris Complexity • Jeffrey Pfeffer theories Manufacturing • Stephen Covey • Viktor Frankl • Howard Gardner Social • Reinhard Sprenger sciences & HR Distribution • … • Peter Drucker Leadership & • Tom Peters Services • Charles Handy Change • John Kotter • Peter Senge Strategy & • Thomas Davenport Government performance & Not-for profit • Peter Block • … management • Charles Horngren • Henry Mintzberg • Gary Hamel • Jeremy Hope • Michael Hammer • Thomas Johnson Source: Niels Pflaeging/BBTN • …
  15. 15. “Command and control“ and budgetary management: widely recognized as a problem: BBRT membership between 1998 and 2007 • ABB • De Beers • Maxager • Softlab • ABC Technologies • DFW Airport • Mencap • Solver Inc. • ACCO Europe • Diageo • Millipore Corp. • Southco • ACNeilsen • Deutsche Bank • National Power • Standard Life • Accenture • Deloitte & Touche ERS • Navigant Consulting • Statoil • Alcan Packaging • DHL • Novartis • Stratature • Alstom • EADS • Omgeo LLC • T-Online • American Express • eNiklas • openBC (agora: XING) • TelecomNewZealand • Anheuser Busch • Ernst & Young • Park Nicollet Health • Texas Instruments • Archstone Consulting • EBRD Services • Thames Water • Armstrong-Laing • Exelon • Parker Hannifin • The World Bank • Andersen • Halifax • Pentland Group • ThinkFast Consulting • Ascom • Hammond Suddards • proDacapo • Time Warner Telecom • Barclays Bank • HON Comp. • Puget Sound Energy • TPG • BT Group • Housing Associations • Priority Health • UBS AG • Burmah Castrol • HP Bulmer • Resorts World • United Engineering • BG Transco • Hyperion • Royal Mail Forgings • Boots The Chemists • IBM-BCServices • Rugby Group • Unilever • Cadbury Schweppes • Ingersoll Rand • Sainsbury's • US Analytics • Charles Schwab • Interbrew UK Supermarkets • Vaisala Oy • CIBC • International Finance • SAS Performance • Valmet Corporation • CIMA • Johnsonville Sausage Management • Verisign • CITB • Kaiser Permanente • Schneider Electric • Wachovia Corp • Clariant International • Kingfisher • Schwan Food • Welsh Devel. Agency • Cognos • KPMG Consulting • Scottish Enterprise • West Bromwich • Coors Brewers • Mars Confectionery • Siemens Building Society • CorVu • Port of Tyne Authority • Sight Savers Intl. • Wright Williams&Kelly • CSIRO Livestock • MasterCard • SKF • ... Fonte:
  16. 16. Learning more about Beyond Budgeting: pioneering organizations we met, visited, researched or interviewed - Each one of these companies has developed its own, unique management model, according to its reality. - However, all of these organizations share the same principles for decentralized and adaptive leadership (“Beyond Budgeting principles“), including clearly defined values, relative performance contracts and result-orientation, aligned with the reality of the “Information Age.”
  17. 17. Critical success factors in today's world ½B@2010: An ambitious Transformation Program aimed at building the foundations for Logoplaste 2010 centred around 5 themes… Best for the community Company-oriented 6. Effective governance Market-oriented Best to invest in 7. Creation of greater sustainable value Think Differently/ Align Minds! Disruptively Best for doing business Innovate! 2. Close customer relations 3. Fast response Reshape the Way 4. Innovation We Organize! 5. Operations excellence Best place to work 1. Best people and teams Pursue Nurture our Commercial Talent! Aggressiveness! The common factor among pioneering companies: There is a conviction that stakeholders´ interests actually are united within a virtuous cycle, integrating today´s critical success factors within one mental model. LOGOPLASTE 27
  18. 18. Feb/07: Management workshop and Beyond Budgeting diagnostic February/2007 Workshop at Logoplaste Duration: 1 day. Participation: Directors and Managers. Workshop facilitators: Valeria Junqueira, César Souza, Niels Pflaeging. BBRT Diagnostic Survey conducted on-line.
  19. 19. A formula for change: How transformational change can be achieved DxVxS>R • Dissatisfaction • Vision • Strategy & Steps (change strategy and the first steps) • Resistance
  20. 20. The BBRT online diagnostic: assessing your perception of the firm, in relation to the “Beyond Budgeting” model
  21. 21. Our diagnostic survey results: A first ‘case for change’ (Step 1: “Create a sense of urgency”) Dissatis Strategy Re- f( -faction x Vision x & Steps )> sistance
  22. 22. Mapping the organizational culture – an analyses of necessary and desired changes made by the team Acquire Consolidate Eliminate Communication Initiative Accessibility Departmentalization Extension Customer solution Feudalism Closer relations with Service Provider Concept Communication failures customers (internal and Commitment to the external) company Reactivity Commitment Individual competencies Lack of commitment with Speed final overall result Focus on business Agility profitability Prima Donnas Innovation Pro-activity Culture = Habits, beliefs, values, modus operandi
  23. 23. How to change: Documenting the top management's commitment to change, early-on. References
  24. 24. Creating profound change, based upon a structured process that encompasses both organizational and individual change References 3. Beginning Organizational change process according to 2. John Kotter/HBS Neutral Zone 1. 2. 3. 4. 5. 6. 7. 8. Establish a Create a Communicat Create Generate Consolidate Anchor new Develop a sense of coalition that vision and e the change empower- short term gains and approaches urgency will guide vision ment and gains produce in culture strategy the program broad based more change action References 1. Individual change Ending process according to “Double Helix Transformation Framework“ William Bridges Source: Niels Pflaeging/BBTN
  25. 25. Mar/07: Managerial workshop “Building a vision“ Workshop “Building a vision for change” • Participation: Directores and Managers • Duration: 2 days • Consultants: Niels Pflaeging and Roberto Ebina
  26. 26. Managerial workshop “Building a vision“
  27. 27. Descriptive vision of what we think about as an organization: How we envision our company within 3-5 years • “We want a decentralized company, run by an inspiring group of leaders, people who can form new leaders to face uncertain situations which the future will certainly bring.” • “It will be one of the 10 best companies to work for and will make professionals feel attracted enough to want to work for it.” • “It has a fantastic and transparent information system that enables quick responses and ready solutions anchored to the desire to continually improve.” • “The people are happy. There is a culture of innovation and creativity, which serves as a market benchmark.” • “Our management model is talked about throughout the market as a benchmark to be copied. We are asked to bring this experience to other units in other countries and to our surprise the parent company as well.” • “People will enjoy working at Logoplaste.”
  28. 28. Questions raised by the participants • “Who will be the teams closest to the customers at Logoplaste? This is an answer that must be found over the short term as well as the level of autonomy they should have.” • “How do we connect the center and the outside, leading and not managing? This cannot be done by command and control.” • “How can we create dialogue and transparency among 100% of the people at Logoplaste? Without transparency, there is no change. Several measures refer to transparency.” • “How can we turn people who occupy space into the enterprising people they deserve?” • “How do we put an end to our own arrogance?“
  29. 29. Apr/07: Beyond Budgeting conference in São Paulo and visit from Robin Fraser (BBRT) at Logoplaste e • Conference: Presentations by BBRT directors related to the Beyond Budgeting concept, and case companies that have achieved success because “they apply a totally different model” (Toyota, Google, Egon Zehnder and Handelsbanken). • BBRT meeting ( with discussions on transformation hosted at Logoplaste´s head office in Brazil.
  30. 30. At Logoplaste Brazil, Beyond Budgeting gets a new brand: “Decentralize – Lead - Grow”, or DLC
  31. 31. Forming a Guiding Coalition that will lead the change initiative (Step 2: “Forming the guiding coalition”) “Make sure that a strong group can be relied upon to direct the first changes and who have leadership skills, availability to act, credibility, communication skills, authority and analytical competency.” John Kotter Members of the Guiding Coalition: June/2007: March/2008: 1. Andreia Gil 1. Andreia Gil 2. Carlos Reis 2. Carlos Reis 3. Eugénio Barroso 3. Eugénio Barroso 4. José Pilão 4. Hideko Teruya 5. Júlio Fontana 5. José Pilão 6. Oldecir Antunes 6. Júlio Fontana 7. Ricardo Fagionato 7. Morivaldo Souza 8. Silvio Carvalho 8. Oldecir Antunes 9. Valéria Junqueira 9. Paulo Finardi 10. Reginaldo Souza 11. Ricardo Fagionato 12. Silvio Carvalho 13. Valéria Junqueira
  32. 32. Jun/07: Putting a guiding coalition together The Guiding Coalition's mission: • Write a first draft of the “Change Manifesto” (“Version 1.00”). • Lead the transformation process, in order to assure success. • Involve and influence people to assure implementation of actions. • Initiate and support DLC Task Forces. • Create internal communication platforms to explain and represent DLC, and to align ideas. • Continuously measure “process temperature” and stand up to resistance.
  33. 33. Aug-Nov/07: Leadership development activities • Aug/07: Team Building Workshop Participants: Directors and Managers • Module I – Leadership self-awareness (Create self-awareness for devolved leadership) • Aug/2007: Managers and directors • Sep/2007: Supervisors and plant forepersons • Module II – Leadership returned and formation of high Performance teams (Understand and practice devolved leadership and envision the decentralized model) • Oct/2007 – Managers and directors • Nov/2007 – Supervisors and forepersons
  34. 34. Aug/07: Team-building workshop with full management team Julho/2007 Workshop Team Building Participants: Directors and Managers Objectives: • Create understanding of the group for the need to work as a team • Identify the first steps of change * Kotter
  35. 35. Jun/07 to Feb/08: Writing up the “Change Manifesto” (Step 3: “Define the change vision and strategy“) The document's structure and contents: 1. Urgency for change at Logoplaste do Brasil (or: “Why we need to change now!”) 2. Our vision for change (or: “What do we want to be”) 3. Business model and values that are consistent with our company (reason for being, limits etc.) (or: “What will guide us as a firm and as people”) 4. Our strategy for change (or: “What will we do”/“How will we get there”) 5. What will we do so that we will not fall back into the old model and so that the model continues to remain on the minds of people? (or: “How can we guarantee that this will work?”) 6. Final comments: What do we get out of this?
  36. 36. The change manifesto
  37. 37. The change manifesto: On hierarchy and human nature Theory X Theory Y “Why is it that every time “Motivation and the potential I need a pair or arms, there is to develop, a capacity to assume a brain that comes with it?” responsibility, all that is present in all people. (Henry Ford) It´s not the executives who induce these qualities.” (Douglas McGregor, Harvard Business School, 1960).
  38. 38. The change manifesto: Explaining the principles of a model beyond “command and control” Principles Do this! Not that! Customers and Customer focus Focus on the boss responsibility Responsible teams Centralization Leadership Performance and Performance culture Inspired by the past 6 devolved freedom Autonomy and responsibility Adherence to fixed plans leadership principles Governance and Clearly defined objectives and values Impose objectives transparency Open and shared information Restrict information Goals and Goals related to continual improvement Fiscal year fixed goals rewards Rewards related to company results Reward local fixed goals Processes Planning and 6 adaptive management down annual planning Continuous and inclusive planning Top controls process principles Compare performance against actuals Variations against fixed plans Resources and Resources on demand Annual budget allocations coordination Coordinate dynamic interactions Departmentalization Source: BBRT
  39. 39. The change manifesto: 10 guiding principles (or key values), in line with principle # 5 of the model 1) Decentralize: create a 6) Dialogue: Talk as equals to chain of collaboration and equals. Work as a team, share. empower people 7) Consult: Apprenticeship attitude, 2) Lead: Influence people to work you cannot know it all, all of the as a team and at their time. maximum capacity 8) Dare: Everything can be 3) Grow: company growth improved, risk, challenge depends on the individual surpass limits 9) Work with zeal: Happiness is 4) Be transparent: ethics in contagious; celebrate relationships, information and conquests. experience 10) Act as an entrepreneur: 5) Respect: Do not discriminate. feel as if you owned the Do not be biased. Paternalistic business, foresee problems attitudes are against our and opportunities. principles. te, in any situation.” tions by all people at Logoplas “To serve as a guide for all ac
  40. 40. The change manifesto: The firm as a “collaborative network” (with decentralized decision-making power and “devolved” leadership) Traditional model (supports efficiency) New model (supports complexity) (“Taylorism”) (“DLC”/“Beyond Budgeting“) Centralized Decentralized hierarchy, network, “command and “Sense and control“ Six critical respond“ success factors • Fast response • Innovation • Operations Strategy Strategy excellence Relative Relative Performance Performance • Close customer Contracts Fixed relations Contracts Dynamic processes Fixed Fixed • The best people Processes performance performance contracts Dynamic contracts • Ethical behavior Coordination Control Control
  41. 41. Sep/07: Spreading DLC with “tandem bicycles” (Step 4: “Communicate to achieve understanding and acceptance“) The Tandem Bicycle concept enables involvement of all persons in the change process, encouraging dialogue among the 450 people at Logoplaste in Brazil. * Kotter
  42. 42. Our change scorecard
  43. 43. Nov/07: “Breaking the pyramid” at one of our eight plants • Urgency for action in the unit is identified by DLC guiding coalition • 22/23 November – initial event held at unit with 19 people from different areas of the local team DLC - DESCENTRALIZAR, LIDERAR E DLC - DESCENTRALIZAR, LIDERAR E CRESCER • Transparency in relation to changes to be made CRESCER Nosso modelo de gestão é estruturado em células Nosso modelo de gestão é estruturado em células (by commercial director) auto-gerenciáveis e descentralizadas que regem auto-gerenciáveisseguintes princípios: regem através dos e descentralizadas que através dos seguintes princípios: • “Museum” exercise and Knowledge Turntables create 1º. Somos responsáveis pela Qualidade 1º. Somos responsáveis pela Qualidade urgency and vision for new model 2º. Somos intolerantes com o desperdício 2º. Somos intolerantes com o desperdício 3º. Somos responsáveis por cumprir o programa - assegurar a produção • 28 November – local guiding coalition meeting 3º. Somos responsáveis por cumprir o programa - assegurar a produção 4º. Somos responsáveis pelo que prometemos 4º. Somos responsáveis pelo que prometemos • group being formed by plant manager 5º. Seremos ágeis, simples e eficientes em todos os processos e combateremos 5º. Seremos ágeis, simples e forma de burocracia os processos e combateremos toda eficientes em todos toda forma de burocracia • outline of the new model is developed 6º. Trabalharemos como um verdadeiro time, mantendo espírito de equipe, 6º. Trabalharemos dinâmica e sinergia - “somos solidários” gerando como um verdadeiro time, mantendo espírito de equipe, gerando dinâmica e sinergia - “somos solidários” • Detailed preparation of future cell structure, 7º. Nos comprometemos a compartilhar experiência e desenvolver pessoas 7º. Nos comprometemos a compartilhar experiência e desenvolver pessoas 8º. Somos parte do problema e da solução including job analyses and functions during work sessions 8º. Somos parte do problema e da solução 9º. Nós praticaremos a melhoria continua e estimulamos o ambiente de 9º. Nós praticaremos a melhoria continua e estimulamos o ambiente de participação e criatividade - “nenhuma idéia pode ser censurada” (local guiding coalition) participação e criatividade - “nenhuma idéia pode ser censurada” 10º. Somos transparentes em todas as nossas comunicações 10º. Somos transparentes em todas as nossas comunicações • Weekly work meetings/follow-up by local guiding coalition 11º. Informações disponíveis com transparência 11º. Informações disponíveis com transparência (“on Tuesdays“), supported by coalition support group 12º. Somos francos e éticos em todas as nossas atitudes 12º. Somos francos e éticos em todas as nossas atitudes • Action groups against waste are being formed
  44. 44. “Breaking the organizational pyramid “ at a production plant: Designing a new, networked model for a 130-people unit • Unit (local) guiding coalition team develops new structure, helped by the central guiding coalition; • Members of other plants take part in the process; • At local coalition meetings, real examples from the plant are discussed in detail.
  45. 45. Designing the model in a production unit at a client site and making it work, by involving a local guiding coalition
  46. 46. Designing a networked organization structure for a 130-people unit – an example Shareholders Shareholders What characterizes a “cell”, “Team” Customer Customer within the model? Cell 5 (all cells within a unit) Cell 4 • It contains several functions, Former Former production roles and duties, which would production line No.6 line No.5 be traditionally separated into different departments. A cell integrates functions and roles Support Support • It offers and sells products cell I cell II (rest of former and/or services on its own, Banks Banks departments) and is independent in its decisions about them. Cell 1 Cell 1 Cell 3 Former serigr. Former serigr. • It is customer focused, in Support Former and Production and Production production that it responds to internal or line No.1 cell III line No.1 lines Nos.3/4 external clients, not to hierarchy. • It is held accountable by the company leadership and is Cell 2 responsible for it’s own Former value creation. production Market line No.2 Market • It applies the 12 Beyond Competition Competition Budgeting principles.
  47. 47. Jan/08: Foundation of further DLC Task Force begins (Step 5: “Empower all others to act”) • Task Force “Cell networks within the plant units” (“Break the pyramid” – create networks of highly autonomous teams responsible for results) • Task Force “Compensation systems” (reward success based on relative performance) • Task Force “Financial and non-financial reports” (promote open and shared information) • Other Task Forces (TFs) and Work Groups (WGs) to be created: “TF Cell Network in the main office“, “WG Waste reduction” at units and head office
  48. 48. Apr/08: Ready to put steps 4, 5 and 6 of the organizational change process into action • Publish the manifesto; • Prepare improvement plans at cells; • Run more “tandem bicycles“ • Attack waste; • Create on-line discussion forum. • Create rational system of variable Organizational change compensation; process according to • Eliminate some departments. John Kotter/HBS 1. 2. 3. 4. 5. 6. 7. 8. Establish a Create a Create Generate Consolidate Anchor new Develop a Communi- empower- short-term gains and sense of coalition that vision and approaches urgency will guide the strategy cate the ment and gains produce change broad-based in culture program more change vision action • Map and remove areas of resistance; • Create mechanisms to test new ideas • Create a network of cells and local coalitions for change. and solutions; • Install DLC Task Forces and work groups. • Practice waste elimination culture; • Make information accessible for decision making processes. • Leadership becomes challenging and • Transfer knowledge and technical competencies to the cells. is monitored.
  49. 49. Reinventing Logoplaste´s DNA If you want one year of prosperity, plant seeds. If you want 10 years of prosperity, plant trees. If you want 100 years of prosperity, plant people. Chinese proverb
  50. 50. GERAL A Nossa Empresa Os nossos Parceiros Our Products Thank you! Logoplaste throughout the World Logoplaste in numbers Maria Valéria Junqueira