Change Management and S&OP

Some years ago, I spoke with a gentleman from Ford Motor Company’s Lean Supplier Institute whose job it was to help Ford suppliers implement Lean Manufacturing. We were talking about making meaningful changes, and he said something I’ve remembered all these years, “The hard stuff is the soft stuff.”

Bingo! What he was saying is that the difficult parts of making change (the hard stuff) are not machinery or computers or software. Not at all. By far the bigger challenges are people’s attitudes, perceptions, mindset – the soft stuff.

Let me present two hypothetical Sales & Operations Planning (S&OP) project leaders, both of whom are bright, hard working and have a good track record. In describing the implementation plans at Company A, Alex the project leader says:

“We’re doing the software search right now. That’s going to take about three months, and another three months to fit it into our business and get the reports just the way we want them. Then we’ll start to involve the Supply Chain people, because they’re the primary users. We want to get that part of the process working really well before we try to bring the Finance people in to tie the financials into S&OP.”

Now let’s hear from Company L’s project leader, Lee:

“Implementing S&OP is primarily a head game; it depends so much on what’s in the minds of the people, primarily the top management group. We’re going to involve them at the outset, explain what this S&OP stuff is all about and that it won’t work without their continuing hands-on participation. Our goal is to get their commitment at the outset; only with that will we get the participation of the other essential groups.”

Priorities – The ABCs

The S&OP effort comprises three major elements: software tools, data and process, and mindset of the people involved. We can prioritize them by the classic Pareto ABC approach, just as we do with items in an inventory: the A items are really important, the Bs are the ones in the middle and C perhaps stands for cheap. The A items are given more attention, because of their importance.

And yes, C may mean cheap, but it can also mean “Can’t do without.” If you need a Class C component to make a shipment but don’t have one, then that item becomes important. Ditto for Class C products that are in the line because they’re needed by some of the company’s best customers.

So here’s the ABC approach applied to implementation:

• C – Computer, primarily the software tools
• B – Data and process
• A – People: the mindset issue

They’re all essential, but the A item –people – is by far the most important. Thus it follows that most of the implementation effort should be devoted to the people. Most means more than half.

In the Spring 2010 issue of BONEZONE I listed a number of popular myths about S&OP, one of which was, “S&OP is really simple. We’re just going to get the spreadsheets working and then we’ll have S&OP.”¹ We just saw an example of that mindset in the person of Alex from Company A. Let’s ask ourselves, what is Alex focusing on, the A item, or the B or the C?

Then let’s ask the same question about Lee, from Company L. Upon what is she focusing?

Okay, those were easy – Lee is focusing on the people, while Alex’s priority seems to be software and data.

Now for what might be a less obvious question. Which company has the higher chance for success with Executive S&OP? The answer clearly is Company L. Lee seems to understand the challenge very clearly.

People’s mindsets must be changed, and the only ones who can make that change are the people themselves. External pressure doesn’t really work. I’m reminded of a cartoon showing a sign on an office wall:

Employee floggings will continue until morale improves.

People will need help with the new initiative, whatever it may be. They must be given the opportunity to understand, appreciate and internalize. To buy in.

News flash! – change comes hard. Of course it does, and we all know that. We humans all have our own WIIFMs (What’s In It For Me?), comfort zones and sacred cows. We need help in making changes…some of us a lot of help and others, not as much.

In a business context, change means changing the way we do our jobs. We refer to it as organizational behavior change.

The organization and its individual components – the people – need to change the way they run the business.

• Let’s examine those potential people problems that can be split into two categories: individual and organizational. Individual people problems include:
  • Aversion to change
  • A schedule that is too busy – or a perception of such
  • Reluctance to share information and control
  • Discomfort with S&OP, as it may make them no longer THE experts

Organizational problems include such elements as discomfort with accountability, lack of discipline/self-discipline and conflict aversion, among others.

Change Management for Executive S&OP²

One finds good news and bad news when comparing the change management task in general to the specifics of Executive S&OP.

The good news is that far fewer people need to change – specifically, only those who will be hands-on with the Executive S&OP process. In a company of average size, this could mean two, three or four dozen people, far fewer than what’s required for Six Sigma, Lean Manufacturing or ERP, for example.

The bad news is that, included in the group of a few dozen people who need to change are the folks at the top – the executive group. Often, change comes harder to these people than others, and I’ll address that issue in just a bit.

Let’s close this section with a quiz, the first part of which you won’t have much trouble with.

Question 1:
Q. What are the three most important things in buying real estate?
A. Location, location and location.

Question 2:
Q. What are the three most important things in implementing Executive S&OP?
A. People, people and people.

So how does one address this people issue? How do you answer the WIIFM question, how do you turn off the “yeah-buts” and convert them into “yes-ands”? Let’s start at the top.

Getting the Executive Group On Board

The change issue can be particularly difficult for some top management people. This sounds backwards; after all, one would think that they would be the most open to changes that would improve the company.

And sometimes that’s the case. Sometimes the executives as a group are highly positive, enthusiastic and engaged. In this case, they’re operating based on logic. But in other cases, emotion trumps logic. Feelings get in the way.

One reason for top management reluctance is that they have more emotionally invested in their jobs. They’ve worked hard, achieved, are now key players in the future success of the enterprise, are well compensated and have nice perks: cars, admins and so forth.

In the words of my co-author and colleague, Bob Stahl, “So here’s a group of men and women who have a track record of success; they’re holding important positions in the company and are responsible for major parts of the business. Getting them out of their comfort zones and accepting, willingly and enthusiastically, a new way of managing major elements of the business – that’s the challenge.”³

Two primary ways to implement Executive S&OP are:

1.  Build it and they will come. This means to design it first, get the mechanics working and then try to sell it to top management. This approach has a relatively low probability for success.
2. Hold the high ground.This refers to involving top management at the very outset of the implementation and throughout. This approach will probably succeed.

The high ground here is the top management group, and most of all the leader of the business. If you can convince him or her of the value of Executive S&OP, your task will become much easier.

Remember Lee, the project leader from Company L? She said, “We’re going to involve (the top management group) at the outset, explain what this S&OP stuff is all about, and that it won’t work without their continuing hands-on participation.”

This is best done via an Executive Briefing at the very outset of the project. Covering this in detail is beyond the scope of this article, and for more about it please refer to pages 78-80 in Sales & Operations Planning: The How-To Handbook. (See References at the end of this article.) While you’re there, you may also want to check the diagram on page 75, which shows the total implementation process.

And as you proceed, you’ll be able to discard the myth that says, “We’ll never get S&OP to work – we don’t have enough teamwork.” As we noted in my last article, teamwork is not a prerequisite for a successful implementation. It’s a byproduct.

Tom Wallace is a teacher and writer who specializes in Sales & Operations Planning.

References

1. Wallace T. “Nine Naïve Notions about S&OP,” BONEZONE Volume 9, Issue 1, Spring 2010.

2. Executive S&OP is the aggregate, volume planning element within the overall set of Sales & Operations Planning processes, as opposed to Operational S&OP that refers to the mix tools such as master scheduling, plant and supplier scheduling, MRP, advanced planning systems and so forth. In this article, I use S&OP and Executive S&OP interchangeably.

3. Wallace, T. and Bob Stahl, Sales & Operations Planning: The How-To Handbook, 3rd Edition. T F Wallace & Co., 1999. Page 69. Save Supplier