20121010_Green_Campus_Booklet_v_print pln.pdf

The Green CampusTurning Energy Efficiency into A Source of Competitive Advantage

McKinseyCapability

CenterGREENCAMPUS

1

FOREWORDDriven by rising energy costs and the pressing need to save our environment, the energy efficiency agenda is making its way into the Boardroom of many corporations.

Equally important, energy efficiency also offers a real op-portunity to build a source of competitive advantage for the corporations that master the capabilities, management systems, and tools required to transform this area of "con-tinuous energy improvements" into a part of the corporate culture or DNA.

Seen from this angle, "Green is the next Lean" and can gener-ate the next S-curve of value generation, while contributing to brand building through environmental citizenship.

However, green transformations, like all other transforma-tions, are easier said than done. The fact is that most transfor-mations fail to sustain impact. In response to this, McKinsey has launched the Green Campus in collaboration with the Government of Singapore to help corporations build pre-cious capabilities needed to drive substantial energy efficien-cy improvements that can be scaled and sustained across the organization. This is achieved not by classroom training, but through "learning by doing" in a unique experiential environ-ment situated in a live refinery on Jurong Island - the Green Campus.

McKinsey is truly excited to help corporations take advan-tage of "Green as the next Lean" wave and build a sustain-able competitive advantage through the capability offerings at the Green Campus.

1

Mads LauritzenMcKinsey Green Campus Global Leader

2

New energy challenges are arising…

2

It is no news that oil prices will continue to rise amid the fast growing demand from emerging economies and risk of unstable supply, posing a significant cost impact across many industries.

If we sum up the annual energy costs of the world’s top 10 energy-intensive industries, it will be a bill amounting to USD 1.8 trillion.

This is more than the GDP of India –the 9th largest economy in the world!

020406080

100120

1995199619971998199920002001

+2% p.a.

20022003200420052006200720082009

World oil prices$/barrel (real terms in 2009 $)

2010201120122013201420152016201720182019202020212022202320242025

It is no news that oil prices will continue to rise amid the fast growing demand from emerging economies and risk of unstable supply, posing a significant cost impact across many industries.

If we sum up the annual energy costs of the world’s top 10 energy-intensive industries, it will be a bill amounting to USD 1.8 trillion.

This is more than the GDP of India – the 9th largest economy in the world!

New energy challenges are arising…

Successfultransfor mations

35

Failedtransformations

65

Impact achievedMin Max

10 20 30 40

Achieved energy savings % of total energy costs

Industrysector

Steel

Chemical

Pulp and paper

Mining

0

0

20

40

60

80

100

120

1995 2000 2005 2010 2015 2020 2025


+2% p.a.

3

By implementing energy efficiency improvements, companies can reduce energy costs by at least 10-15%.

This makes energy efficiency a strategic initiative worth over USD 300 billion!

At the same time, the corresponding CO2 reductions can reach 1.8 gigatons, which translates to a potential 4% reduction in global greenhouse emissions.

…making energy efficiency a strategic imperative in this decade

3

Unit of measure

* FootnoteSource: Source

Text

Achieved energy savings in % of total energy costs with payback of up to three years

0 10 20 30 40 50

Industry sector

Food and beverage

Oil refining

Steel

Coal mining

Chemicals

Pulp and paper

Glass

Aluminum

Cement

Metal ores mining

…making energy efficiency a strategic imperative in this decade

At the same time, the corresponding CO2reductions can reach 1.8 gigatons, which translates to a potential 4% reduction in global greenhouse emissions.

By implementing energy efficiency improvements, companies can reduce energy costs by at least 10-15%.

This makes energy efficiency a strategic initiative worth over USD 300 billion!

4

However, Green Transformationsare extremely difficult to sustainHowever, most efforts fail, as companies underestimate what it takes to realize this and maintain the improvement. Often at the heart of the failure is an insufficient focus on the non-technical aspects of transformation.

This leaves CEOs to wonder…

1090Failedtransformations

Successful transformations

How do I establish a substantial, scalable, and sustainable transformation approach?

1. Not enough leadership capacity

2. Lacking capabilities and knowledge

3. Poor accountability and performance dialogues

4. Misalignment of aspirations across organization

5

McKinsey has developed an integrated transformation model

5

“The technical processes, decision support tools, systems and resources that create value”

Management system

“The formal performance management tools and systems (e.g., metrics, meetings, roles) supported by the right organization structure to drive results ”

“The right people with the right skills, mindsets, behaviors and ownership, both individually and collectively”

Technical system

People system

6

As lasting Green capabilities are best-built in an experiential environment…All empirical studies and research suggest that adults will best build lasting capabilities through “learning by doing” in a natural yet risk-free environment.

CxO

Changeleaders /

Mid-managers

Change agents / Frontline managers

Frontline

Learning by

Knowledge by

Hearing

Books and PowerPoint

10%

Seeing

Simulations and games

32%

Doing

Pilot for a lean transformation

65%

Doing

Shop floor training

65%

McKinseyCapability

CenterGREENCAMPUS

Knowledge retained from different learning approaches

77

…the Green Campus uses a live refinery setting to teach participants

8

A snapshot of what you will see when you visit McKinsey’s Green Campus in SingaporeThe Green Campus leverages the Chemical Process Technology Centre, which is wholly managed and operated by Petrofac Training Services.

Package 2: Heat Exchangers

• Create understanding of impact of circuit design and maintenance on heat transfer efficiency

• Demonstrate impact on parameters by changing flow

Package 3: Distillation

• Understand requirements to maximize profits by optimal distillation

• Understand operational costs & tradeoffs required to achieve this

8

9

Package 1: Furnace

• Create understanding of waste in energy transfer in furnace

• Demonstrate levers to improve furnace efficiency

• Conduct live, interactive changes to realize impact

Package 5: Air Compressors

• Create understanding of waste in compressed air production and consumption

• Conduct live tests, monitor impact on power usage

Package 6: Fin Fans

• Introduce concepts to optimize usage of fin fans

Package 4: Cooling Water System

• Introduce elements of pumping system design

• Demonstrate levers to improve pumping efficiency

9

10

The learning experience at Green Campus is brought to life…

SOURCE: Source

Comprehensive toolbox and training modules

Resource Efficiency Deployment Engine (RedE) web-based system

Real-life case on transformational journey

Realistic role-plays

Interactive Green Campus iPad apps

Comprehensive toolbox with 21 training modules across technical, management, and people systems

Proprietary Resource Efficiency Deployment Engine (RedE) web-based system with close to 100 energy saving levers

Real-life 2-year transformation business case accelerated over the curriculum

Cross-functional role-plays of 8 key organization appointments to simulate real-life scenarios

2 custom-made iPad apps to provide interactive learning on 6 plant systems in the Green Campus

11

...through a suite of experiential and interactive learning tools

Proprietary database of energy saving levers

Instant estimation of energy and CO2 savings

Detailed explanation on how to execute lever

End-to-end project management of initiative

Example: RedE database system

Successfultransfor mations

35

Failedtransformations

65

Impact achievedMin Max

10 20 30 40

Achieved energy savings % of total energy costs

Industrysector

Steel

Chemical

Pulp and paper

Mining

0

0

20

40

60

80

100

120

1995 2000 2005 2010 2015 2020 2025


+2% p.a.

0

12

A typical day in Green Campus…

09:00 am 10:00 am 11:00 am

03:00 pm 06:00 pm 08:00 pm01:00 pm

Check-in with Omco’s CEO and track progress against 30% energy efficiency target

“Go and see” concept – applying technical con-cepts at the plant to iden-tify energy losses

Use role-plays to learn communication & collabo-ration skills needed to drive effective change management

Syndicate plan of action, launch corrective actions, and drive performance dialogues

Pool together best prac-tices, share key lessons learnt, and build relation-ships with colleagues and faculty

Participate in lecture to learn how to identify and quantify energy losses on the shop floor

Practice concepts and consolidate new knowl-edge with interactive apps, polls, and quizzes

0

13

…is filled with interactive and practical learning sessions

09:00 am 10:00 am 11:00 am

03:00 pm 06:00 pm 08:00 pm01:00 pm








09:00 am 10:00 am 11:00 am

03:00 pm 06:00 pm 08:00 pm01:00 pm








14

Accreditation of fieldwork leads to lasting results

GreenGreenPractitionerPractitioner

0-6 months0-6 months

GreenGreenExpertExpert


Sr. ExpertSr. Expert


GreenGreenArchitectArchitect

36+ months36+ months

• Practicing• Learn by doing

following an expert

• Teaching• Coach others

without leading

• Maintaining• Mentor larger

group of experts and maintain knowledge

• Architecting• Design

integrated people and transformation programs

The Green Campus energy efficiency certification system is a structured pathway to ‘black belt’ level that consolidates learning at every stage and ensures lasting results of Green Transformations.

15

GreenGreenPractitionerPractitioner


GreenGreenExpertExpert


Sr. ExpertSr. Expert


GreenGreenArchitectArchitect

36+ months36+ months

• Practicing• Learn by doing

following an expert

• Teaching• Coach others

without leading

• Maintaining• Mentor larger

group of experts and maintain knowledge

• Architecting• Design

integrated people and transformation programs

Profiles of our expert faculty

Dr. Mads Lauritzen, Expert Principal, BangkokMads has over the past 13 years led some of McKinsey’s largest operations transformations globally, and today heads McKinsey’s South East Asia Operations practice. Mads is the Global Leader of McKinsey’s Green Campus.

Dr. Pieter Hoek, Senior Expert, SingaporePieter brings deep expertise accumulated over 25 years with Shell, Thai Oil and Alliance Refining Co. He was a founder of the energy efficiency program at Thai Oil from 1999. He also led the Global Business Process Standardization initiative for Shell’s manufacturing supply distribution.

Dr. Ken Somers, Senior Expert, AntwerpKen has served clients across all industrial sectors, including refineries, steel makers, and specialty chemicals producers across Europe, Middle East, North America and China. He leads Green Transformation knowledge development within McKinsey.

Khoon Tee Tan, Principal, JakartaKhoon Tee is one of the leaders of McKinsey’s Lean Operations Practice in Asia. Over the past 9 years, he has led a wide range of client engagements across industries and throughout Asia and Europe on topics of performance transformation, lean operations improvement, and growth strategy.

Harsh Choudhry, Specialist, IndiaHarsh is a Specialist Consultant with McKinsey's Energy Efficiency service line. Energy and sustainability have been his focus for the last 5 years. During this time he has completed several energy efficiency projects aimed at plant improvements, company strategies and government policy, across Asia, Europe and USA.

Markus Hammer, Senior Knowledge Expert, LisbonMarkus is responsible for managing the global Resource Productive (a.k.a. Green) Operations service line. He has delivered distinctive solutions and insights on operations topics such as lean, green and capability building to clients world wide. He is one of the top-authors on McKinsey’s Operations Extranet and a member of McKinsey’s global Model Factory management team.

Thomas Koch Blank, Expert Associate Principal, StockholmThomas Koch Blank has helped multi-national companies especially in the basic materials and mining industries, to improve their energy efficiency, both at a company level and through industry wide effort.

Bryan Siow, Engagement Manager, SingaporeBryan has over 12 years of refining and petrochemical experience. He led many transformations for several large downstream clients. He is part of McKinsey’s global Oil and Gas practice. Prior to McKinsey, he worked for ExxonMobil.

16

The Green Campus draws on a wealth of Green expertise and know-how...

Research on transformational change Experience with transformational change

% of transformation programs by industry100% = 2,400

Other

Energy

Financialinstitutions

Pharma/healthcare

Technology

Consumergoods/retail

Travel andlogistics

Auto and assembly

4,000 Executives surveyed providing input on transformational change attitudes and practices

Transformational change engagements reviewed to distil lessons learned in the past two years

Interviews conducted with clients and experts, including people in learning, human capital/HR, strategy, operations, and sales/marketing

Tours of globally advanced learningcompanies completed

Years dedicated to developing andrefining our understanding

2,400

300

20

2

McKinsey has a long track record in Green Transformations. In fact, Green Transformations are our largest area of activity globally. Over the past 5 years, Green Transformations alone account for 28% of our activities or more than 500 projects, a significant portion of which took place in Asia.

Power generation Waste treatment

Large scalefood processing

Metals processing Large scale beverage producers

Pharmaceuticals

PetrochemicalsGas processing

District cooling

Oil refining

17

Our Green Campus can help companies of all sizes across the process industry succeed in their Green Transformation journeys.

Power generation Waste treatment

Large scalefood processing

Metals processing Large scale beverage producers

Pharmaceuticals

PetrochemicalsGas processing

District cooling

Oil refining

17

...to meet the needs of various industries

18

Curriculum offerings can be tailored to different levels of participants…

CXO

Change Leaders/

Middle Managers

Frontline Force

Multinationals / Asian Tigers

Small & medium enterprises (SME)

1-day “Excite and Engage” program11

225-day end-to-end “Kick-start”training

336-12 month “Learn, Connect & Activate” program

Did you know?With energy transformation, a small-sized steel company with annual revenues of SGD ~16 million can expect annual potential energy savings in the order of SGD 450,000

17x

Estimated program cost1

27

Potential energy savings

450

Energy savings vs. program costSGD thousands

CASE EXAMPLE

1 Per pax cost estimation is based on “Learn, Connect, & Activate” SME program; actual cost may vary with the size of transformation, number of change agents sent for program, and total number of participants per class

19

…starting from the top:CxO training example

19

CxO Green Ops “Excite and Engage”1109:00 Welcome address, agenda for the day, objectives and expectations

09:15 Safety briefing and ground orientation

09:30 Introduction to Green Campus: what is the imperative of energy efficiency?

10:15 Understanding how Technical Systems fit in the overall transformation

10:30 Load curve module - Theory

10:45 Green Campus plant walk and participant role-plays

11:15 Load curve module – Synthesis, presentation, feedback

11:30 Performance dialogues module - Theory

11:45 Participant role-plays on performance dialogue and providing feedback

12:00 Performance dialogues module – Synthesis, presentation, feedback

12:15 Lunch

13:00 Transformation design module - Theory

13:15 Real-life transformational business case

14:00 Transformation design module – Synthesis, presentation, feedback

14:30 Wrap-up and next steps

15:00 Departure

…starting from the top: CxO training example

20

21

Best practice toolkit on technical systems...

T12

7

Theoretical limit is the minimum amount of energy required theoretically for a system to function

Design limit Des ign losses

Theoretical limit

Operational losses

Actual consumption

? Where am I today?

? Where should I be?

? How far can I go?

? What are the driving forces behind the gap?? How do I quantify and close this gap?

Energy consumption per year

Theoretical limit of a system is its energy consumption in a hypothetical situation where all the energy input is transferred to and used by its end objective i.e., no energy losses

SOURCE: McKinsey

ILLUSTRATIVE

T3: Theoret ica l limit

T2 T3

T5 T6

8

Across the 3 avenues, we must then search for the 9 distinct causes of energy loss

? P rocessing at higher level th an re quired e .g. , en ergy co nsume d in p rocessing be yond qual it y re qu ire ment s7. Over p rocess in g

? Repr oces sing of off‐s pec mater ial s e.g. , faul ty oper ations lead in g to p ro ducts b eing fed back int o pro du ct io n cycle

8. Re pr ocess in g

? Energy con sumption while p rod uction is s to pp ed e.g., air com pre ssor ru nning even a ft er plant sh ut down

5. Ener gy int en sive downt ime

? Ine ffic ie nt tran sfe r fr om on e m edium/ lo catio n to an oth er e .g. , h eat lo st in non ins ul ated p ip e4. Tran sfe r los s

? Low recover y o f unused en ergy e.g. , hot fl ue gas re lea sed i nto t he atmosph ere

9. Low re cover y

? U nnece ssary los s o f en ergy du rin g s to rage e.g., l on g dur atio n ofs tor age of heat ed mate ria l in non in su late d st orage tan ks

6. Exce ss iv e Sto rag e

? Ine ffic ie nt conve rsion fr om one e ner gy form t o a no ther .e.g, i nef fic ien t furn ace ope ration res ul ti ng in wast in g fu el

3. Con ver sion ineff ic ie ncy

? U sage of su b op tim al type o f en ergy for pr oces s e.g., die sel u se d i ns tead o f gas in fur nace, ga s wi th low he at co nte nt used

1. Sub optima l energy sou rce

? U sage of raw m ateri al s wh ich la ck req uired qual iti es e.g. , low qual ity or e u se d in b last fu rnace , air com pressor taking in ho t air

2. Sub optima l ra w mat erial

Lo sses

SYSTEM

OUT

IN

SOURCE: McKinsey

T4: Energy loss framework

T4

9

Load curves can be of two types and each serves different purposes

…deviations resulting f rom specific events in time:Used when there is minimal deviat ion in throughput over t ime

…deviations resulting from sub‐optimal operation:Used when there is substant ia l deviat ion in throughput over t ime

Theoretical load curve

1

2

3

Energy intensityt SRF/100 ton feed

Feedton

1601501401301201101000

Sample data point s

SOURCE: McKinsey

Time‐based load curve is useful to spot… Throughput‐based load curve is suitable for…

0

1

2

3

Date

Aug 1Jul 1Jun 1May 1Apr 1Mar 1

Energy intensityt SRF/100 ton feed

Footnote: ‐ SRF refers to S tand Refining Fuel, a unit to measure energ y typically used in the re fining industry

T5: Load curve

T8 T9T7

11

Simplified example of pinch analysis: Current state

Reactor200°C

Feed

A = Steam

B = Cooli ng water

Product

80°C 90°C

0

50

1 00

1 50

2 00

2 50

100 200 300 400 500 600 700 80 0

Heat conten tkW

Temperatu re°C

ProductF eed

? Representing the above on a graph:– X axis i s used t o show the quantity of heat being put int o

or removed from p rocess– Y axis i s used to sh ow change i n temperature of process

s tream? The Feed (green ) is heated from 80°C to 120°C and req uires

400 kW of heat? The Pr oduct (orange) is cooled from 200 °C to 90°C an d

requires 200 kW o f heat to be taken away fr om it? Since no heat i s be ing exchanged , both l ines are kept

ind ependent on the x axis

? Steam is used to h eat up Feed to from 80°C to 20 0°C? After the reaction in reactor, cool ing water is used to co ol

down Prod uct fr om 200°C to 90°C? Energy r equir ed in th e heating s tep can be taken from th e

cooling step!

A = Steam sys tem duty

B = Cool ing water duty

SOURCE: McKinsey

T7: Pinch analysis

17

A typical energy contract has four important elements – price, duration, off‐take commitment and supply guarantees

E lectrici ty priceH SFO 180 price

Vari ab le componentBase load take‐or‐pay

Demand

0.5‐2 years 5‐20+ year s2‐5 years

Short Medium Long

Price

Duration

Off‐take commitment

USD/MWh

Supply guarantees

T o t a l d e m a n d

U t i l i t y t r i g g e r si n t e r r u p t i o n c l a u s e

T i m e

P o w e rM W

O w n s p a r e

c a p a c i t y

U t i l i t y ’ s

c a p a c i t y

SOURCE: McKinsey

T12: Contracts

Energy value chain

Current state analysis

Theoretical limit

Load curve Process parameter analysis

Network loss analysis

Motor analysis

Contracts

Pinch analysis

Energy loss framework

Create energy consumption baseline along energy value chain

Identify minimum level of energy consumptionMap and quantify

energy as it flows through system

Identify energy losses Quantify operational losses (distillation column as example)

Quantify losses due to sub-optimal control of key para-meters (furnace as example)

Quantify losses due to sub-optimal reuse of heat (heating network as example)

Structure and optimize contracts

T10

16

Demand profiles are mapped versus cost curves by energy type to identify potential to energy cost

Demand profile

175 MW is sufficient 90% of the t imesteam is requiredMW

0255075100125150175200225250275300

Time, percent 100% = 365 days

More than 175 MW need only 10% of the time

Less than 110 MW need 50% of the t ime

Cost analysis

Boiler 2

Boiler 1

50Boiler capacity

MW

Four boilers are suf ficient to generate 175 MW of steam; 7 boilers in operation

Comparing utilities demand over time with the utilities cost curve makes it possible to reduce cost (e.g., shutting down boilers)100 350150 4003002502000 50

Cost/Output€/MW

Maximum demand of 250 MW

Boiler 3

Boiler 4

Boiler 5

Boiler 7Boiler 6

SOURCE: McKinsey

T11: Cost curveCost curveQuantify losses due to energy demand-supply mismatch (cooling systems as example)

Quantify losses in distribution networks (compressed air system as example)

Quantify losses due to inefficiencies in motors and their applications

T11

15

Minimizing unit price of energy requires iteration across utility mix, supplier choice and pricing negotiation

Approach to reduce unit price of

energy

How much to pay?

Where to buy from?What is the sourcing model?What are the select ion criteria?

Current stateHow much energy is required and where is it used?

What to use?What type and qualit y?Do we buy the utilit y or generate it ourselves?

How much to pay?How to opt imize exist ing cont racts?How to negotiate new contra cts?

1

2

3

SOURCE: McKinsey

T10: Energy sourcingEnergy sourcingDetermine right sourcing strategy

3

The energy value chain is a framework to help track energy through a system in a systematic and exhaustive manner

Purchase

Make up

Transportation

Consumption

Sales

Interaction

? … purchased from utility companies?

? … transformed from one form to another e.g ., natura l gas to steam?

? … transported and distributed f rom source to end uses?

? … consumed by its f inal end users?

? ... which is either generated or purchased by plant sold/resold outside?

How is energy…

? … resulting from one process shared with another process?

SOURCE: McKinsey

T1: Energy value chain

T1

4

Follow a step by step process along the energy value chain to create the energy consumption baseline

? Trace energy flow through the value chain to build a visual guide

? Create individually for each purchased ut ility

Map Quantify

Task

End product ? Energy flow diagram – similar to a process flow diagram, but tracking energy instead of a process

? Create an energy balance accounting f or each step in the energy value cha in

? Create indiv idually f or each purchased utilit y

? Energy flow quantification –waterfall chart

? Consolidate quantification for all utilities into a single structure

? Create across unit or plant

? Utility matrix –spreadsheet based ca lculator

SOURCE: McKinsey

Consolidate

2 3

? Describe what happens with energy a t each step of the value c hain

? Create individually for each purchased utility

? Qualitat ive descr ipt ion –descriptive statements

Describe

0 1

Green Campus module

? Current sta te analysis

? Current state analysis

? Current state analysis

? Energy value chain

T2: Current state analysis

SOURCE: McKinsey

Best practice toolkit on technical systems

22

Energy performance review

Performance monitoring Implementation road map

Performance dialogues

Transformation design

21

Management and people systems can be diagnosed using the 9 dimensions of the Energy Performance Review…

3 clusters of healthElements of the Energy Performance Review

Direction

External orientation

Innovation & Learning

AlignmentAre people at all levels aligned around the organizat ion’s vision, strategy, culture and values?

ExecutionHow does the organization execute in accordance with its strategy? Can the organization perform essential tasks with its current capabilit ies and motivat ion level?

RenewalHow does the organization understand, interact, respond, and adapt to its situation and external environment?

Account‐ability

Coordination and control

Capabilities Motivation

Leadership

Culture &Climate

SOURCE: McKinsey

M2: Energy performance rev iew

20

Through the curriculum, you will experience a complete, accelerated “4 by 3” energy efficiency transformationGreen campus will dem onst rate ….

…along 3 holistict ransforma tion d im ensions

…an end‐t o‐end 4 ‐st ep energy e fficiency t ransforma tion…

Prepa re

“Bu ild basel ine ”

Imp lemen t and su sta in“P ulse‐che ck imp lementat ion p ro gress”

Diagno se

“Ident ify losses, de fine l evers”

De sign

“Des ign tr ansform ation ro ll ‐ou t”

SOURCE: McKinsey

? Diagnose e ner gy losse s? Ide ntify and quantify

impr ovement leve rs

T echn ical system

? Infu se continuous impr ovement mindsets

? Tr ain righ t employe e behavior s

People system

? Manage with the right KP Is

? Sust ain t hrough stru ct ured performance dialogues

Managem ent system

M1: Transformation design

22

Performance monitoring covers KPI metrics, targets and workplace visualization in performance management

SOURCE: McKinsey

Focus of module

Effective performance management

Improved performance

Set direction and context

Action plans

Correctiveactions,rewards,and con‐sequences

Performancemeetings anddialogues

Budget, KPIs, and targets

Performance tracking and visualization

M3: Performance monitoring

23

The ‘will’‐ and ‘skill’‐level of the organization, and urgency of change can influence implementation strategy

Wil l

Skil l

Capable

Novice

What is the level of capabil ity and performance in the organization?

How ali gned is l eadershi p, how “on board” is middle management and how open wi ll the front‐l ine be to change?

Resi stant Wil ling

Immediate

Long‐ term

UrgencyHow urgently is change needed?

Organiza tion is in immediate need of change

TurnaroundOrganiza tion has convic tion, but needs help to change quick ly

Rally the team

Streng then the teamOrganiza ti on must improv e and has conviction and time to do so

Organization must i mprove for future good, but lack s convic tion

Rebuil d for the future

Organi zation is capabl e to improve now but la cks conv iction

Get back in the game

O rganization i s capable but does not hav e the conviction or rea l pressure to reach the next level

Rec omm it to excellence

O rganization is skilled and committed and must exec ute now

Take the f ield

Organiza tion has the skill and commi tment to drive toward long‐term success

Olympic training

M4: Implementation roadmap

24

Tracking mechanismPerformance dialogue

Operations Manager

Weekl y MonthlyD aily

Operator

Shift

Level

Within shift

Shif t sc oreboard

Dai ly scoreboard

Weekl y sc oreboard

Shift Kic k‐off / Start Meetings

Daily line management rev iew

Wi thin shift dialogs

Within shif t scoreboard

Area Manager

12

3

Cascading performance di alogue

Monthly scoreboard

Monthly performance review

Week ly performance review

Daily meeting at plant level

3

4

EXAMPLE

Shi ft Supervi sor

On‐the ‐go performance dia logue

Shift performance dia logue Dai ly / week ly root‐cause probl em solv ing meeting

Monthly performance dia logue with operations manager

1 2 3 4

F requenc y

Performance dialogues should be cascaded to all levels,to support the achievement of KPIs

SOURCE: McKinsey

M5: Performance dia logue

M2

M4

M1

M3

M5

Develop insights on management and people system diagnostics

Design effective KPIs, targets and performance dashboards

Prioritize and sequence initiatives to draw up transformation workplan

Develop system and practice coaching employees

Understand overall transformation framework: technical, management and people systems

SOURCE: McKinsey

Best practice toolkit on management systems...management systems...

23

...management systems...

21

Management and people systems can be diagnosed using the 9 dimensions of the Energy Performance Review…

3 clusters of healthElements of the Energy Performance Review

Direction

External orientation

Innovation & Learning

AlignmentAre people at all levels aligned around the organization’s vision, strategy, culture andvalues?

ExecutionHow does the organization execute in accordance with its strategy? Can the organization perform essential tasks with its current capabilities and motivation level?

RenewalHow does the organization understand, interact, respond, and adapt to its situation and external environment?

Account‐ability

Coordination and control

Capabilities Motivation

Leadership

Culture &Climate

SOURCE: McKinsey

M2: Energy performance review

22

Performance monitoring covers KPImetrics, targets and workplace visualization in performance management

SOURCE: McKinsey

Focus of module

Effective performance management

Improved performance

Set direction and context

Action plans

Correctiveactions,rewards,and con‐sequences

Performancemeetings anddialogues

Budget, KPIs, and targets

Performance tracking and visualization

M3: Performance monitoring

23

The ‘will’‐ and ‘skill’‐level of the organization, and urgency of change can influence implementation strategy

Wil l

Skil l

Capable

Novice

What is the level of capabil ity and performance in the organization?

How aligned is l eadership, how “on board” is middle management and how open wi ll the front‐l ine be to change?

Resi stant Wil ling

Immediate

Long‐term

UrgencyHow urgently is change needed?

Organization is in immediate need of change

TurnaroundOrganization has convic tion, but needs help to change quick ly

Rally the team

Strengthen the teamOrganizati on must improve and has conviction and time to do so

Organization must improve for future good, but lacks convic tion

Rebuild for the future

Organi zation is capabl e to improve now but lacks conv iction

Get back in the game

Organization i s capable but does not have the conviction or real pressure to reach the next level

Recommit to excellence

Organization is skilled and committed and must execute now

Take the field

Organization has the skill and commi tment to drive toward long‐term success

Olympic training

M4: Implementation roadmapCommunication and influencing techniques

Continuous improvement

Conflict management

Learn storytelling and influence model to motivate organization

Learn best practices in sustaining ongoing transformation impact

Practice resolving conflicts

30

In all interactions, we need to be cautious of two forms of potential conflicts – overt and covert

High Passive –“I don’t really matter”▪ Don’t express needs, opinions or feelings▪ Don’t speak up even as others violate

their rights▪ Avoid conflict even at own discomfort

Assertive –“Take control of your own life”▪ Respect needs, opinions, and feelings of

others▪ Maintain rights of both parties whenever

possible ▪ Deal with conflict in healthy ways

Passive aggressive –“I don’t know what matters”▪ Deal with needs, opinions and feelings by

not dealing with them▪ Respect rights of others but dislike it,

often secretly sabotaging process ▪ Avoid conflict but quietly resents others

Aggressive –“You don’t really matter”▪ Don’t respect needs, opinions or feelings

of others▪ Have tendency of violating others’ right▪ Willing to risk conflict to address

personal discomfort

Low

Low High

Degree ofcooperation by others

Acknowledge of conflict by others

Overt conflictCovert conflict

Constructive debate

May turnpassive‐aggressive

Important to recognize and prepare for both covert and overt conflicts

Positive relationship, no conflict

Four forms of interaction:

SOURCE: McKinsey

P2: Conflict management

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The influence model encourages mindset and behavior shift by putting in place the elements an individual need for change

“I will change my behavior if …”

Mindset and Behavior Shifts

Role‐modeling“I see superiors, peers and subordinates behaving in the new way”

Fostering understanding and conviction“I know what is expected of me –I agree with it, and it is meaningful”

Developing talent and skills“I have the skills and competencies to behave in the new way”

Reinforcing with formal mechanisms“The structures, processes and systems reinforce the change in behavior I am being asked to make”

SOURCE: McKinsey

P3: Communication and influencing techniques

33

Continuous improvement elements

Next, we look at some of the structures you can put in place in your organization to accomplish these CI activities

CI elements Examples of activities

? Embed CI principles in leadership roles, such as rigorous problem solving, and receptiveness to improvement ideas from all levels of the organization

? Train leaders to be strong coaches

Developleaders

1

? Set up defined escalation pathways to implement new improvement ideas from within the organization

? Bring external innovation and new ideas into the organization? Embed improvement and innovation mindsets in organization’s ‘DNA’

Instill CImindsets2

? Set up academy to codify and share best practices that are established in the line, and build capability in the organization through both formal and on‐the‐ job training

? Provide on‐the‐ job coachingand feedback

Sustain capability‐building

3

? Link financial rewards to improvement targets, or provide cash prizes for solutions to problems or new ideas for improvement

? Celebrate and recognize good ideas through non‐financial means, e.g. career progression opportunities, awards, peer recognition, networking opportunities, etc

Rewardachievement

4

SOURCE: McKinsey

P4: Continuous improvement

SOURCE: McKinsey

22

Best practice toolkit on people systems

30

There are 2 best practice methods for identifyingthe root cause

“5 Whys”

Description Typical application

? Start with problem statement and break it down into logical sub‐components for analysis

? Synthesize findings from each sub‐components for final solution

? Encourage more thorough analysis of the root cause, starting from a blank sheet

? Suitable for new problem when relatively little is known about it

2 ways to structure

What

How

Issue tree

? Start with a problem definition and drill down on the most important issues by asking “Why”, in order to recognize and address root causes

? "5 Whys" is the simplest problem‐solving tool and can be used immediately on the shop floor

a

b

P1:Root cause problem solving

P1

P3

P2

P4

Root cause problem solvingDiagnose key drivers and develop solutions

...and people systems

24

NEA Li Yen Tan, Head of Energy Efficiency Programme Office [email protected]

EDB Kelvin Goh, Assistant Head [email protected]

Petrofac Paul Jones, Country Manager, Singapore [email protected]

McKinsey & Company Mads Lauritzen, Partner [email protected]

For questions and inquiries please visit our website www.greencampus.mckinsey.com or contact:

McKinseyCapability

CenterGREENCAMPUS

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20121010_Green_Campus_Booklet_v_print pln.pdf

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