Articles

Companies lose money because they treat pollution control and plant operations as separate concerns. But it costs less in the long run to make plant managers true partners.

A collective corporate memory can permeate processes, products, services and even distributed digital networks.

This article analyzes survey data to explore how companies with specific supplier development programs overcame common pitfalls in assisting their suppliers improve their performance. The authors provide a process map for deploying supplier-development initiatives. After identifying critical commodities and suppliers, a cross-functional team meets with top managers at the supplier firms to discuss areas of improvement as well as key metrics and cost-sharing mechanisms needed to evaluate the success of the effort. Lastly, firms need to monitor and modify their supplier development strategies, as appropriate. The survey data indicate that organizations generally experience three types of pitfalls, mostly in the final stages of the process. Supplier-specific pitfalls stem from a lack of initial commitment. Companies can avoid these by using evaluation systems that compare measurements and performance among suppliers, holding kaizen events at supplier sites, identifying cost-saving opportunities through target pricing, and designating a supplier employee to ensure that buyer-supplied training is put into practice. Tying a supplier's performance improvement to receiving future orders is a particularly dramatic way to get the attention of managers at a supplier. Some buyers also offer their resources to suppliers, such as providing personnel support for some period of time to improve operations or building training centers for supplier use. Buyer-specific pitfalls also stem from a lack of commitment. Consolidating purchases to one or a few suppliers is one approach to creating the volume needed to justify investing in a supplier-development effort with the remaining suppliers. Examining how these suppliers impact the quality of products or using total-cost-of-ownership data can yield further proof of the benefits of supplier development. Buyer-supplier interface pitfalls originate in the areas of trust, alignment, and communication. Although written contracts may be important, some buyers rely more on close relationships rather than on contracts to build trust. Others use "expectation road maps" to tell suppliers where they are going and better ensure buyer/supplier alignment. Financial incentives, "designed in" supplier products, and expected contract renewal are also incentives for gaining a supplier's commitment to a supplier-development effort.

Responsibility audits are a management tool for demonstrating the potential qualitative and financial benefits of mirroring core values and ethics in day-to-day practice. Waddock and Smith argue that corporate financial performance and socially responsible practices are positively correlated. They outline a responsibility auditing process that improves both the bottom line and a firm's stakeholder relationships with owners, employees, suppliers, customers, local communities, and government entities. Companies typically overlook the hidden costs of problematic or less responsible practices. The authors cite examples of how operating responsibly often saves money (in overhead, employee turnover rates, insurance costs, and other non-value-added expenses) and may even create profitable new opportunities. Eight companies beta tested the authors' responsibility audit by comparing their operating practices with their formally stated vision, values, and mission. All uncovered deficiencies in four operating areas: employee relations, quality systems, community relations, and environmental practices. The audit process consistently revealed that when a company adopted proactive, responsible practices, it reaped measurable improvements in efficiency and productivity, lowered legal exposure and risks to the company's reputation, and reduced direct and overhead costs. By creating an adaptive and proactive corporate culture from the top down, operating responsibly becomes a core business strategy.

Strategic alliances are assuming increasing prominence in the strategy of leading firms, large and small. Yet many alliances fail to meet expectations because little attention is given to nurturing the close working relationships and interpersonal connections that unite the partnering organizations. This case study follows the strategic alliance between two Fortune 500 firms (referred to as Alpha Communications and Omega Financial Services) as they developed a cobranded product. It explores the social architecture of the alliance and identifies the communication patterns that united the participants & #8212; and the beliefs that divided them. The researchers gathered data from the entire network of alliance participants, including the core team and a cadre of senior executives in the two firms. The result is a vivid and comprehensive portrait of the intricate web of relationships that formed in this alliance and the flow of communications within and across the partnering organizations. The interviews in the study revealed, for example, that fears of ulterior motives preoccupied managers on both sides, leading to a lack of trust. There was also a perceived imbalance in the degree of importance that each partner assigned to the alliance. One appointed senior managers, the other lower level managers, which led to significant pacing issues. Although managers in both firms agreed that the alliance made sense, inattention to the inner workings revealed bothersome incompatibilities. The firms’ different personnel structures also contributed to high levels of frustration. Omega used a centralized approach to control the outward flow of information, whereas Alpha used a decentralized approach. The researchers’ findings suggest that positive personal connections are crucial to the success of a partnership. Initial negotiations and senior management advocacy set the tone for the alliance, galvanizing support and promoting effective interpersonal ties. A well-integrated communication and work-flow network is required within and across the firms, so firms must carefully select team members who will match in rank and specialization those from the partnering organization. Regularly auditing the evolving ties between the organizations is valuable in gauging alliance health.

Today's vast array of web applications for supply-chain integration, salesforce automation, work group collaboration -- and the sale of everything from equities to automobiles -- makes it perfectly clear that information technology has evolved beyond the role of mere infrastructure in support of business strategy. In more and more industries today, IT is the business strategy. Unfortunately, many CEOs are ill-equipped to manage effectively in the Information Age. The problem has less to do with IT literacy than with a range of behaviors and attitudes that cause such CEOs to shirk their IT responsibilities. By their actions, many CEOs send negative signals about the role of information technology to other leaders in their organization who then repeat the behavior. Companies with such leaders frequently fail to reap business advantage from information technology. The authors describe seven types of CEOs, their behaviors and attitudes toward IT, and explain why all but one are decidedly unfit to lead companies in the Information Age. Only the "believer CEO" is ready to play a constructive role in his or her company's use of information technology. Believers understand that IT enables strategic advantage and demonstrate such beliefs in their daily actions. Believers are involved in IT decision making and are proactive in addressing IT problems and opportunities. They seek advice from a variety of sources, study the IT strategies of competitors, and set examples for others managers in their company to follow. The authors provide many examples of believer CEOs -- John Browne of British Petroleum, Ralph Larsen of Johnson & ; Johnson, Jack Welch of General Electric, Toshifumi Suzuki of Seven-Eleven Japan, and Ian Robertson of Land Rover, among others. They describe how each infused his organization with a positive attitude toward IT and contrast their actions and beliefs with those of the six failing archetypes. They explain how these believer CEOs played a critical role in their corporate IT strategies, how they crafted IT-savvy organizational cultures, and how these actions benefited their businesses. Realizing that many CEOs will see their current attitudes reflected in those of the six failing archetypes, the authors prescribe a variety of methods for leaders to address their shortcomings and master the techniques of believers.

When faced with a global IT infrastructure transition project, Xerox managers decided to launch a knowledge-sharing initiative called the Transition Alliance. When fully functional, the Alliance comprised fifty IT professionals responsible for managing 70,000 desktop workstations, nearly 1,200 servers, and networking hardware on five continents. Storck and Hill observed that community members provided high-quality, validated solutions; handled unstructured problems well; and dealt effectively with new developments in hardware and software. The authors also point out that the motivation for learning and developing at an individual level seemed greater in this community structure than in other organizational forms, which has important implications for the longer-term job performance of the participants. The Alliance was more than simply a group that met occasionally to discuss common issues related to a single functional or professional area. It had a defined relationship to formal organizational objectives yet was not formally required to report back to headquarters on its activities. Within the Alliance, the communication repertoire was built upon the leadership training required for all Xerox employees. Work processes that developed within the Alliance supplemented those used elsewhere in the organization. Handling action items, creating meeting agendas, and developing other processes were evidence of the self-directed nature of the group and provided a context for communication. Storck and Hill identified six guiding principles that were instrumental to Alliance success and are applicable whenever circumstances require organizational learning: -- Design an interaction format that promotes openness and allows for serendipity. -- Build upon a common organizational culture. -- Demonstrate the existence of mutual interests after the initial success at resolving issues and achieving corporate goals. -- Leverage those aspects of the organizational culture that respect the value of collective learning. -- Embed knowledge-sharing practices into the work processes of the group. -- Establish an environment in which knowledge sharing is based on processes and cultural norms that are defined by the community rather than other parts of the organization.

As companies rapidly expand the use of outsourcing, executives are discovering that the management of outsourcing projects requires a new blend of leadership qualities. Firms involved in outsourcing are seeking managers with capacities for lateral leadership -- the ability to negotiate results "outward" across boundaries rather than issue orders "downward" through a hierarchy. The authors interviewed 54 managers and surveyed 423 managers working at diverse firms and organizations from 1997 to 1998, and they present their findings in this article. Companies are looking for four specific capabilities in managers responsible for outsourcing initiatives: -- Strategic thinking. The ability to understand whether and how to outsource in ways that improve competitive advantage. -- Deal making. The ability to broker deals in two directions simultaneously -- securing the right services from external providers and ensuring their use by internal managers. -- Partnership governing. The ability to oversee the relationship proactively to ensure service quality and financial benefit for both sides. -- Managing change. The ability to anticipate resistance to change and to surmount it constructively. Managers employed at large and small companies in both the manufacturing and financial services sectors consistently stressed the importance of all four capabilities. Whether hiring anew or promoting from within, managers are willing to pay a significant premium for these skills. Two-thirds said they would pay at least 6 percent additional for each capability, and one-third were prepared to pay 11 percent or more. The authors point out that lateral leadership of outsourcing initiatives works best when top management is solidly supportive and when companies have built a finely honed system to quantify results and pinpoint accountability. For companies that are increasing their outsourcing of services and products, this new blend of leadership skills requires novel ways of recruiting and developing managers because relatively few possess the full repertoire of lateral capabilities required for effective sourcing.

A company's sales workforce must be able to present their products and services using state-of-the-art personal computer technology. To communicate effectively with the company's main office, a salesforce working in the field must also be able to collect and transmit order data from remote locations. The authors studied how a company combined salesforce automation with a telecommuting program to create two new business strategies designed to improve organizational performance. The authors not only describe a successful "telework" program, but they also provide a framework for conducting a cost/benefit analysis. They conclude that the start-up cost of the telework program was high because the IT infrastructure was not current; however, the direct costs and savings offset each other within 3 to 4 years. In addition, they report that ongoing costs declined rapidly, depending on the number of new teleworkers joining the organization. The telework program enhanced accountability because the new software applications allowed managers greater oversight of employee activities. Productivity also increased. After learning how to increase the speed and accuracy of internal operations, the salesforce spent more time with customers and generated more sales. By integrating0 technology into business processes, the telecommuting program also spurred organizational adjustments and cultural change. Gradually, business managers adjusted policies and procedures to conform to the program's technical and business needs. They shifted from managing by attendance to managing by results, which depended on a reliable IT infrastructure and technical tools for communicating with their employees. The telework program quickened the pace of IT adoption at this company by linking IT improvements to the organization's mission and survival. This mobilized the salesforce, the information systems staff, and middle managers to adapt to and accept the new business environment.

Even the best-intentioned senior managers may find it difficult to translate aspirations into action, when molding a more market-driven company. Although the underlying principles and prescription of generic change programs offer valuable guidance, a firm must tailor its own change program to the particular challenges it faces in understanding, attracting, and keeping its valuable customers. In this article, Day discusses six conditions that ensure change-process success. He uses the experiences of four corporate change programs (Fidelity Investments; Sears, Roebuck and Co.; Eurotunnel; and Owens Corning) and post-audits of some failed change initiatives to illustrate this change model and explain the necessary conditions for a firm's durable shift to a market orientation. Two pressures initiate a firm's change process: (1) its inclination to focus inwardly and become remote from its customers and unresponsive to competitive challenges; and (2) external market, technology, and competitive forces that pull the business out of alignment with its present market. The interplay of these forces leads to one or more of the following triggers for change: market disruptions that threaten a firm's business model, continuing erosion of market alignment that results in a market disadvantage, strategic necessity, or intolerable opportunity costs. Successful change programs have six overlapping stages: 1. Demonstrating leadership commitment. A leader owns and champions the change, invests time and resources, and creates a sense of urgency. 2. Understanding the need for change. Key implementers understand market responsiveness, know the changes needed, and see the benefits of the initiative. 3. Shaping the vision. All employees know what they are trying to accomplish and understand how to create superior value. 4. Mobilizing commitment at all levels. Those responsible have credibility and know how to form a coalition of supporters to overcome resistance. 5. Aligning structures, systems, and incentives. Key implementers have the resources they need to create a credible plan for alignment. 6. Reinforcing the change. Those responsible know how to start the program and keep attention focused on the change and benchmark measures. Any program to create a market-driven organization must begin quickly but be sustained over many years. Fidelity's approach, which took five years to reach 60 percent completion, resulted in increased customer-retention rates and a doubling of "share of wallet" -- two results that would justify and sustain any firm's change efforts.