Table of Contents
Basically, there are three reinforcing elements that define a fair process: engagement, explanation, and clarity of expectation. Whether people are shop floor employees or senior executives, all of them look for these elements.
Engagement
It means involving individuals in the strategic decisions that affect them by asking for their input and allowing them to refute the merits of one another’s ideas and assumptions. Engagement communicates management’s respect for individuals and their ideas. Encouraging refutation sharpens everyone’s thinking and builds better collective wisdom. Engagement results in better strategic decisions by management and greater commitment from all involved to execute those decisions.
Explanation
It means that everyone involved and affected should understand why final strategic decisions are made as they are. An explanation of the thinking that underlies decisions makes people confident that managers have considered their opinions and have made decisions impartially in the overall interests of the company. An explanation allows employees to trust managers’ intentions even if their own ideas have been rejected. It also serves as a powerful feedback loop that enhances learning.
Expectation
Clarity requires after a strategy is set, managers state clearly the new rules of the game. Although the expectations may be demanding, employees should know upfront what standards they will be judged by and the penalties for failure. What are the goals of the new strategy? What are the new targets and milestones? Who is responsible for what? To achieve a fair process, it matters less what the new goals, expectations, and responsibilities are and more that they are clearly understood. When people understand what is expected of them, political jockeying and favoritism are minimized, and people can focus on executing the strategy rapidly.
“The effective execution of a plan is what counts and not mere planning on paper.” – J.R.D. Tata
A Real Story of Two Plants
How do the three elements of fair process work to affect strategy execution deep in an organization? Consider the experience of an elevator systems manufacturer we’ll call Elco that was in transition. At the time, sales in the elevator industry were in a steady decline.
With domestic demand falling, Elco set out to offer buyers a leap in value while lowering its costs to stimulate new demand and break from the competition. In its quest to create and execute a blue ocean strategy, the company realized that it needed to replace its batch-manufacturing system with a cellular approach that would allow self-directed teams to achieve superior performance. The management team was in agreement and ready to go. To execute this key element of its strategy, the team adopted what looked like the fastest and smartest way to move forward.
It would first install the new system at Elco’s Chester plant and then roll it out to its second plant, High Park. The logic was simple. The Chester plant had exemplary employee relations, so much so that the workers had decertified their own union. Management was certain it could count on employee cooperation to execute the strategic shift in manufacturing. In the company’s words, “They were the ideal workforce.” Next, Elco would roll out the process to its plant in High Park, where a strong union was expected to resist that, or any other, change. Management was counting on having achieved a degree of momentum for execution at Chester that it hoped would have positive spillover effects on High Park.
The theory was good. In practice, however, things took an unpredicted turn. The introduction of the new manufacturing process at the Chester plant quickly led to disorder and rebellion. Within a few months, both cost and quality performance were in free fall. Employees were talking about bringing back the union. Having lost control, the despairing plant manager called Elco’s industrial psychologist for help.
In contrast, the High Park plant, despite its reputation for resistance, had accepted the strategic shift in the manufacturing process. Every day, the High Park manager waited for the anticipated meltdown, but it never came. Even when people didn’t like the decisions, they felt they had been treated fairly, and so they willingly participated in the rapid execution of the new manufacturing process, a pivotal component of the company’s new strategy.
A closer look at the way the strategic shift was made at the two plants reveals the reasons behind this apparent anomaly. At the Chester plant, Elco managers violated all three elements of fair process. First, they failed to engage employees in the strategic decisions that directly affected them. Lacking expertise in cellular manufacturing, Elco brought in a consulting firm to design a master plan for the conversion. The consultants were briefed to work quickly and with minimal disturbance to employees so that fast, painless implementation could be achieved. The consultants followed the instructions.
When Chester employees arrived at work they discovered strangers at the plant who not only dressed differently—wearing formal business attire—but also spoke in low tones to one another. To minimize disturbance, they didn’t interact with employees. Instead, they quietly hovered behind people’s backs, taking notes and drawing diagrams. The rumor circulated that after employees went home in the afternoon, these same people would swarm across the plant floor, snoop around people’s workstations, and have heated discussions.
During this period, the plant manager was increasingly absent. He was spending more time at Elco’s head office in meetings with the consultants—sessions deliberately scheduled away from the plant so as not to distract the employees. But the plant manager’s absence produced the opposite effect. As people grew anxious, wondering why the captain of their ship seemed to be deserting them, the rumor mill moved into high gear. Everyone became convinced that the consultants would downsize the plant. They were sure they were about to lose their jobs. The fact that the plant manager was always gone without any explanation—obviously, he was avoiding them—could only mean that management was, they thought, “trying to put one over on us.” Trust and commitment at the Chester plant deteriorated quickly.
Soon, people were bringing in newspaper clippings about other plants around the country that had been shut down with the help of consultants. Employees saw themselves as imminent victims of management’s hidden intention to downsize and work people out of their jobs. In fact, Elco managers had no intention of closing the plant. They wanted to cut waste, freeing people to produce higher-quality elevators faster at a lower cost to leapfrog the competition. But plant employees could not have known that.
Managers at Chester also didn’t explain why strategic decisions were being made the way they were and what those decisions meant to employees’ careers and work methods. Management unveiled the master plan for change in a thirty-minute session with employees.
The audience heard that their time-honored way of working would be abolished and replaced by something called “cellular manufacturing.” No one explained why the strategic shift was needed, how the company needed to break away from the competition to stimulate new demand, and why the shift in the manufacturing process was a key element of that strategy. Employees sat in stunned silence, with no understanding of the rationale behind the change. The managers mistook this for acceptance, forgetting how long it had taken them over the preceding few months to get comfortable with the idea of shifting to cellular manufacturing to execute the new strategy.
Master plan in hand, management quickly began rearranging the plant. When employees asked what the new layout aimed to achieve, the response was “efficiency gains.” The managers didn’t have time to explain why efficiency had to be improved and didn’t want to worry employees. But lacking an intellectual understanding of what was happening to them, some employees began feeling sick as they came to work.
Managers also neglected to make clear what would be expected of employees under the new manufacturing process. They informed employees that they would no longer be judged on individual performance but rather on the performance of the cell. They said that faster or more experienced employees would have to pick up the slack for slower or less experienced colleagues. But they didn’t elaborate. How the new cellular system was supposed to work, managers didn’t make clear.
Violations of the elements of fair process undermined employees’ trust in the strategic shift and in management. In fact, the new cell design offered tremendous benefits to employees—for example, making vacations easier to schedule and giving them the opportunity to broaden their skills and engage in a greater variety of work. Yet employees could see only its negative side. They began taking out their fear and anger on one another. Fights erupted on the plant floor as employees refused to help those they called “lazy people who can’t finish their own jobs” or interpreted offers of help as meddling, responding with, “This is my job. You keep to your own workstation.”
Chester’s model workforce was falling apart. For the first time in the plant manager’s career, employees refused to do as they were asked, turning down assignments “even if you fire me.” They felt they could no longer trust the once-popular plant manager, so they began to go around him, taking their complaints directly to his boss at the head office. In the absence of a fair process, the Chester plant’s employees rejected the transformation and refused to play their role in executing the new strategy.
In contrast, management at the High Park plant abided by all three elements of the fair process when introducing the strategic shift. When the consultants came to the plant, the plant manager introduced them to all employees. Management engaged employees by holding a series of plantwide meetings, where corporate executives openly discussed the declining business conditions and the company’s need for a change in strategic course to break from the competition and simultaneously achieve higher value at a lower cost.
They explained that they had visited other companies’ plants and had seen the productivity improvements that cellular manufacturing could bring. They explained how this would be a pivotal determinant of the company’s ability to achieve its new strategy. And they announced a proaction-time policy to calm employees’ justifiable fears of layoffs. As old performance measures were discarded, managers worked with employees to develop new ones and to establish each cell team’s new responsibilities. Goals and expectations were made clear to employees.
By practicing the three elements of fair process in tandem, management won the understanding and support of High Park employees. The employees spoke of their plant manager with admiration, and they commiserated with the difficulties Elco’s managers had in executing the new strategy and making the changeover to cellular manufacturing. They concluded that it had been a necessary, worthwhile, and positive experience.
Elco’s managers still regard this experience as one of the most painful in their careers. They learned that people on the front line care as much about the proper process as those at the top. By violating fair processes in making and rolling out strategies, managers can turn their best employees into their worst, earning their distrust of and resistance to the very strategy they depend on them to execute. But if managers practice fair processes, the worst employees can turn into the best and can execute even difficult strategic shifts with their willing commitment while building their trust.
(Excerpt is from one of the outstanding books ‘Blue Ocean Strategy’ by W. Chan Kim and Renée Mauborgne).
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