Managing organizational change and improvement is one of the most complex tasks of leadership. Leaders need to understand the change process in order to lead and manage change and improvement efforts effectively. Leaders must learn to overcome barriers and cope with the chaos that naturally exists during the complex process of change.
Managers and other organizational leaders should assist workers and other stakeholders build effective teams by developing new organizational structures and creating a shared vision that focuses on mission accomplishment and developing new organizational structures and creating a shared vision that focuses on mission accomplishment and attainable objectives. When such inspired and informed leadership is applied, organizations can improve performance.
As noted by Harrison (1993) use of the process-oriented approach to managerial decision making with its strong managerial emphasis and its objectives-oriented outcomes is the model recommended for decisions with discernible levels of uncertainty attendant on the outcome. Such decisions include those made at middle and upper levels of management both in the private and the public sectors where the consequences are of high levels of significance to the total organization.
Included in this category are all decisions of a strategic nature and those involving appreciable commitments of resources directed towards the long-term enhancement of the corporation or institution. “The process model is ideal for these kinds of decision because it is forward looking in that it has a planning emphasis not apparent in the other models of decision making. The process model is oriented towards innovation and organizational change with a particular emphasis on long-term results.
It relies principally on the judgment of the decision maker, but not to the exclusion of computation or compromise to fit special decision-making situations” (Harrison, 1993). According to Alexa Michael (2009) “a company needs accurate, reliable and timely information on performance, which must flow up through an organization regularly. It should be simple, easy to measure and focused on the long term”.
One solution for managing organizational change and improvement according to David Blanchard (2009) “is developing a set of highly descriptive key performance indicators (KPIs) that include precise times, quantities and other numerical measurements so that everyone is on the same page about what it will take to achieve acceptable on-time, accurate and cost-effective performance levels”. Using a range of KPIs that include financial and non-financial measures to gauge how successful the business is in achieving its goals will improve its performance. The KPIs should be simple, easy to measure and focused on the long term.
A company also needs to address the issue of cash-flow management. Managing cash-flow variability tops the agenda for most companies. “Identifying and fixing friction points that hinder operating capital as it flows across the balance sheet from inventory and payables to accounts receivable” (Driscoll, 2009) is an organizational change critical to a company’s long-term viability. Another organizational change for improvement is the idea of Lean Performance Improvement. Successful lean performance improvement initiatives have front-line workers generating, processing and implementing ideas.
Using the high-performance idea system front-line employees drive the lean improvement process with regular and ongoing engagement with daily problems and opportunities. With successful organizational change a company can use this process-focused approach to build their own lean culture. Harrison (1993) tells us that “the components of the decision-making process for the process model are the functions of decision making which include setting managerial objectives, searching for alternatives, comparing and evaluating alternatives, the act of choice, implementing the decision, and following up and controlling the decision.
The process model with its managerial emphasis drawing selectively on the disciplines of economics, mathematics, statistics, philosophy, psychology, sociology, political science, anthropology and law. The process model’s objective-oriented outcome approach best allows for successful adaptation of organizational change leading to long-term success”. The implementation strategy for the organizational change that includes the introduction of key performance indicators (KPIs), lean performance initiatives and cash-flow management will be both top-down and bottom-up.
Clear communication that brings employees of all levels on board with the changes being made and how it affects them and the future of their company and job must be made. Ensuring that all stakeholders understand that they have a say in the success of their company and therefore increased success for themselves is paramount. The KPIs will be both financial and non-financial. KPIs will be used to monitor factors that are known to create value within the business.
KPIs will help ensure that the following things are in place, “products and services that are attractive to consumers both now and in the future, clear objectives that are communicated properly to the workforce, desires for continuous improvement, useful management information and effective financial control, efficient services and distribution, good, well-informed managers, and regulatory compliance with minimum disruption to organizational routines” (Michael, 2009). Developing and using a checklist to monitor and asses these key performance indicators will be done.
The checklist will be a series of questions that properly answered will help determine whether or not the company is getting value from their business and will eliminate a problem identified by Roger Chevalier (2009) in his article about analyzing performance where part of the problem with the performance was that “expectations for performance are unclear”. Answering the questions yes or no for both now and in the future will help look at the factors that can improve or destroy the value of the business.
Questions such as, “spreading your buying/selling contracts too widely over time, hostage to one or two buying/selling contracts or customers/suppliers, sure your purchase/sales order books are firm and go forward far enough, buying/selling on a growing/declining trend in real terms, buying/selling any products at a loss, using cross-selling and up-selling techniques to improve sales, monitoring whether your purchases arrive on time and are of the right quality to meet your manufacturing schedules, satisfied that your suppliers’ terms, and your own terms to customers, are competitive, aware of the financial implications of your pricing policy, loyal to good customers/suppliers, scheduling orders to obtain better terms, developing your competitive position, fostering your company’s reputation and brand values, developing your business processes to create more value, enhancing staff skills to improve your competitive advantage” (Michael, 2009).
Another strategy to implement that overlaps with the key performance indicators will be the lean performance improvement initiatives. “A successful lean implementation will result in various operational and financial improvements. Operational improvements include higher quality and productivity as well as lower nonproductive capacity and lead times. Some financial improvements realized from a successful lean implementation include increased cash flows, lower inventory levels, and lower costs” (Searcy, 2009). Successful lean performance improvement initiatives generate significant front-line involvement in identifying and implementing opportunities for improvement.
As noted by Robinson and Schroeder (2009) in these initiatives ideas are integrated into everyday work, the emphasis is on small ideas, front-line performance metrics focus ideas on what is important, and both managers and workers are held accountable for their roles in the idea process. The strategy for implementing change with regard to the issue of cash-flow management will focus on forecasting as the key activity to improve. The forecasting of cash outflows and cash inflows both need to be accurate. According to Mary Driscoll (2009) “the bent of the typical finance function which tends to be accounting-oriented, concentrated on the accurate recording of journal entries and the consolidation of data from across the enterprise for statutory and management reporting”. Also according to the article by Driscoll (2009) “the key to cash-flow forecasting was more accurate demand forecasts”.
Consideration of successful measurement techniques with the key performance indicators (KPIs) will be whether or not the business added value. Use the KPIs to ensure that the selling price covers costs of production and promotion. Use the KPIs to help the business work more closely with customers and suppliers to ensure a competitive advantage (Michael, 2009). Successful measurement of the lean performance improvement initiatives can be achieved by measuring employee morale and productivity. “Pyromation decided to integrate problem-identification and idea-generation into the regular work of front-line employees. Idea boards were set up, supervisors were trained in idea-meeting facilitation, and weekly shop-floor idea meetings were scheduled.
In this way, front-line workers were given the opportunity to use the tools and techniques of lean production that they had been taught. The resulting stream of improvement ideas made an enormous difference. In two years, productivity increased by a third, lead-time was cut by 60 percent, and late deliveries were reduced by 70 percent” (Robinson and Schroeder, 2009). Successful measurement of the strategy for implementing change to cash-flow management will result in ensuring that “all managers understand that, in addition to the importance of earning a return on investments, the company needs steady cash flow to support operations and our credit position” (Driscoll, 2009).
Ensuring the accuracy of cash in-flow estimates will require greater cooperation between management in getting speedy and precise analyses regarding booked sales that can be counted on as income and asking about sales pipelines, pricing, marketing effectiveness and channel viability. The internal revenue growth assumptions will need to be examined closely to ensure accuracy. If the internal numbers do not match industry outlooks the companies position will need to be reevaluated to ensure that it is not taking on a risky position. Managing organizational change and improvement requires leaders themselves to change. The leaders will have to bring in all stakeholders within the company into the management process.
The leaders that overcome the barriers that traditional leadership throughout industry has always had in place will succeed in developing new organizational structures that create a shared vision focusing on the mission of the business. The shared vision in turn will improve the performance of the business which in turn increases the viability of the business. Working with the process model today’s leadership can eliminate the old management style of top-down leadership that did not value or effectively utilize the experience and front-line vision of its front-line employees. The process model can also be effectively used within the upper management as they improve the cash flow management of the business.
Going beyond the traditional role of the accounting office and interacting with management from sales and production will enable cash flow analysis that carefully examines cash in-flow as well as cash out-flow creating a more solid financial picture of the business. This enhanced view of the balance ledger will enable the business to be better protected financially during turbulent business cycles.
Identifying Key Metrics in Performance Measurement of Organizational Change ultimately involves more than just examining numbers on a data sheet. Those kinds of metrics, numbers on a data sheet, are valuable, but only within the context of the environment that they come from. The metrics that measure the human element are still the most important. The key performance indicators (KPIs), the lean performance improvement initiatives and the cash flow analysis all still require the human element to be useful.