3ed technical meeting presentation

Sustaining Quality and

Operations Excellence

Laws of Physics for Successful Quality and

Operations Transformation

Date: May 2012

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ABSTRACT

As industry leaders, we still see more than half of our quality and

operations excellence initiatives "fail" (or, more precisely, because we

rarely acknowledge failures -- quietly and politely fade into irrelevance and

obscurity),

.....but years of successful experience and empirical data from industry

leaders have also established, beyond reasonable doubt, the key factors

and their interrelationships, as reliable and predictable as the "laws of

physics", for sustained success and performance improvement in quality

and operational excellence. What can we learn from the successes of

industry leaders?

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“Laws of Physics” for Sustained Quality and Operations Excellence (OE)

1. Be clear and aligned on “the destination” (i.e., with meticulous alignment to enterprise

vision, mission, strategic objectives, targeted performance and practices)

2. It‟s a “Transformation” -- Design and implement “holistically” (i.e., with balanced

and complete attention to the technical processes and systems, management systems,

and organizational capabilities and behaviors)

3. Approach Quality and OE “systemically” (i.e., based on thorough accounting for

interdependencies in related processes and systems)

4. Go to “the work” to make the change (i.e., the only change that matters -- “go deep”,

to the line level)

5. Adults “learn by doing” (i.e., Employ adult learning principles and concepts in training

and capability-building.)

6. “Have a pre-flight checklist and flight plan….and follow it.” (i.e., Design and

implement programmatically -- with attention to key enablers and key success factors)

7. Leaders must “LEAD” (i.e., with active, visible support and role modeling)

Text

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Operational Excellence (OE) focuses on simultaneously driving continuous performance improvement in Quality, Efficiency, and Time

Quality

Operational

Excellence

Time Efficiency

Timeliness of delivery

▪ Process cycle times, e.g.

asset turnarounds,

establishing new contracts,

implementing a new

practice across assets, ….

▪ Event response times, e.g.

asset trips, well

interventions

▪ Etc…

Quality of Outcomes

▪ HSE performance, …

▪ Asset reliability and integrity…

▪ Conformance to Product

specifications, …

▪ Etc…

Efficiency in Delivery

▪ Process Efficiency, e.g.

reduction of waste,

cycle times, WIP, etc.

▪ Economic

Efficiency/Profitability

▪ Labor Productivity

▪ Equipment Utilization

▪ Total Cost of

Ownership

▪ Energy Efficiency

▪ Overheads

▪ Etc…

1 Be clear and aligned on “the destination”

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Implementing management systems to deliver “sustained competitive advantage”

requires more aggressive approaches to standard-setting and programmatic

implementation

Excellence

Efficiency

Business

Competitive

Requirements

Legal &

Regulatory

Compliance

Risk

Mitigation Minimum

Standards? Loss

Reduction

Value

Preservation

Sustained

Competitive

Advantage

Imp

ac

t

Value

Creation

Programmatic Implementation

Targeted

Impact? Programmatic Implementation

allows achievement of:

• Higher level of

standardisation (e.g.,

practices, procedures,

tools, methods, application

of best practices, etc.)

• Higher consistency and

completeness in

implementation (e.g.,

enablement, performance

management, change

management, etc.)

1 Be clear and aligned on “the destination”

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“Business Transformations” are fundamental changes that penetrate deep within

an enterprise and lead to substantial and sustained performance improvement

Transformation is a conscious transition to a

sustainable way of working at a higher level

of business performance, based on fundamental

shifts in

▪ Ambition

▪ Mindset and behaviors

▪ Capabilities, systems, and processes

Requires integrated program

and dedicated leadership: not

business as usual

Not just

incremental

improvements –

a quantum leap

Financial and

operating

performance

Crosses a threshold;

new levels of

performance

maintained over time

Organizational and

individual skills and

competencies

2 It‟s a “Transformation” -- Design and implement “holistically”

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10

5

52

28

6

Don‟t know

Not successful at all

Somewhat successful

Very successful

Extremely successful

Large-scale performance transformations are very challenging and most do not meet

their objectives due to incomplete/non-holistic approach

Only 34%

of company

executives

considered their

transformations

successful

SOURCE: July 2008 McKinsey Quarterly Performance Transformation Survey

Successful

Unsuccessful

How successful was the transformation overall in reaching the targets your company set?

Percent of respondents from executive survey (N = 2,994)

It‟s a “Transformation” -- Design and implement “holistically” 2

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Unsuccessful performance transformations often result

in minimal impact, at the cost of valuable time and resources

0

5

10

15

20

25

0 12 24 36 48 60

Duration Months

Cumulative improvement % of COGS

Successful

transformations

Unsuccessful

transformations

▪ Unsuccessful transformations

result in lost impact…

– E.g., by as much 15% of COGS

over several years1

– Benefit in first 15-18 months

requires focused initial wave

– Longer-term benefits from

continuous improvement

▪ …and require large amounts of

time and resources that could

have been used elsewhere2

– Average of 5 months from

discussion to implementation

– 80% affected large portion of

company

– 80% strongly involved CEO or

business unit leader

– 30% of executive staff directly

involved

15%

1 Impact from successful transformations from direct company experience and research of operationally excellent companies. Impact from unsuccessful

transformation illustrative only and not drawn from source work

2 Select results from McKinsey Quarterly survey

SOURCE: McKinsey Operations Practice; July 2008 McKinsey Quarterly Performance Transformation Survey

It‟s a “Transformation” -- Design and implement “holistically” 2

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1-3 years

Common failure modes in large-scale improvement programs

Business

results

Failure to launch

▪ Stuck in diagnostics –

leaders unable to align on

what to do, where to start

▪ Managers not held account-

able for performance

▪ Employees resistant

Time

<10

100s

<50

1,000s

Network

10,000s

Failure to sustain

▪ No change in day-to-day behaviors

▪ Change agents – not the line –

leading the change

▪ No capability upgrade at the site level

▪ Improvements not baked into budgets

Failure to scale

▪ Multiple bottom-up efforts with

competing methodologies and

no overarching blueprint

▪ Limited leadership capacity

▪ Waning focus from senior team

Sites involved

People involved

It‟s a “Transformation” -- Design and implement “holistically” 2

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It‟s a “Transformation” -- Design and implement “holistically”

Technical

Components

Management

Infrastructure

Components

Organizational

Components

Technical

Components

Management

Infrastructure

Components

Organizational

Components

Technical

Components

Management

Infrastructure

Components

Organizational

Components

Related Technical components

• Processes and Practices,

• Procedures

• Methods, tools, and technology

• Facilities and equipment

• ….

Related Management Infrastructure

Components

• Resources and budgets

• Performance measures,

monitoring, and reporting

• Reliability Continuous

Improvement

• …

• Reliability Management Principles

and Practices Competency and

Capability Building

• Maintenance QA Training and

Competency

• Contractor Management

• …

Technical

Components

Management

Infrastructure

Components

Organizational

Components

Alignment with

overall vision, strategy and

objectives (KPIs)

Leadership Commitment and Support

(Active, Visible, Engaged)

Reliable and sustained delivery of the

targeted business objectives and benefits

requires

2

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Measure

stakeholder

value/delivery of

outcomes

Set direction and

context

Execute and

manage

performance

and health

2. Create

realistic

budgets and

plans

5. Ensure

rewards,

consequences

and actions

4. Hold

robust

performance

dialogues

1. Establish

clear metrics,

targets, and

accountability

3. Track

performance

effectively

▪ Business – Take

corrective actions

▪ Individual– Ensure

appropriate rewards

and consequences

▪ Business – Review

business performance

and risks

▪ Individual – Review

talent and individual

performance

▪ Business – Choose

metrics and set

targets

▪ Individual – Agree to

performance contract

▪ Business – Create

budgets and plans

▪ Individual – Build

capability

▪ Business – Track unit business

performance and health

▪ Individual – Track individual

performance

Business

Individual

Formalized Performance Management processes and objectives must be

part of every holistic, sustainable Business Transformation

It‟s a “Transformation” -- Design and implement “holistically” 2

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Integrated Quality and Operations Management Systems (OMSs) are a natural

evolution of Quality Management Systems, developed to drive long-term sustainable

excellence in Operational Integrity (i.e., Safety. Reliability, Environmental

Compliance), Quality, and Efficiency

SOURCE: McKinsey

Operations Management Systems (OMSs) are

deliberately designed to provide or promote

▪ Targeted levels of operational performance

▪ Common standards, guidelines, processes and

practices, organizational capabilities, methods

and tools in all company areas

▪ Internal and external best practices

▪ A holistic, systemic framework for sustaining

and continuously improving performance

▪ Create a common language and culture of

operatingl discipline and excellence

Operations

Management Systems

(OMSs) are the

response of industry

leaders to stakeholder,

competitive, and

regulatory demands for

dramatic, reliable, and

sustained

improvements in

operational

performance

Approach Quality and OE “systemically” 3

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Operations Management Systems can be viewed as a layered “elements”,

deliberately designed, integrated, and implemented to align, drive and sustain

targeted performance, processes, and practices at all levels

Expectations & Standards

Core

Processes

Support

Processes Enablers

Operations

Objectives

Operations

Performance

Priorities

Detailed Operating Processes,

Procedures & Practices

Expectations & Standards

Day to Day

Line Operations

OMS Design &

Implementation

Approach Quality and OE “systemically” 3

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Integrated Operations Management Systems can be viewed as a hierarchical structure

of interdependent elements or subsystems

Level 1

Level 2

Level 4

• Core Business

Elements (e.g.,

HSSE, Mgt, Asset

Integrity Mgt, Asset

Reliability Mgt,

Energy Mgt, Control

of Work, Production

Optimization, Capital

Project development)

• Supporting Elements

(e.g., Training, Perf.

Mgt., Procurement,

Supply Chain Mgt.,

IT & Document Mgt,

Performance Mgt.)

- Performance Priorities – e.g., HSE, Efficiency, Optimization, Reliability, Facilities Integrity, Production, etc.

- Key enablers – e.g., People, Plant, Processes, Technology, Leadership, etc.

- Operating Principles – e.g., Lean, Continuous Improvement, Six Sigma, Total Plant Reliability, etc.

Specification of Technical Standards

associated with Level 3 Elements

• Recognition for

Excellence

• Premier company

• Risk Mgt Discipline

• Continuous

Improvement

Culture

• Efficiency

Level 3

Level 5 Formal and informal Procedures and

Practices on Level 3 and 4 Elements

Aspirations/ objectives (linked to vision), e.g.,

Basic elements, e.g.

Functional and technical elements, e.g.

Element – A subsystem or a

combination of Management,

Organizational, and Technical

Infrastructure components and

capabilities (i.e., processes, practices,

competencies, mindsets, behaviors,

systems, etc.) which deliver business

results in a particular area of the

system

Different levels of elements

Source: McKinsey

Approach Quality and OE “systemically” 3

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There are a few important principles to understand with regard to Quality and Operations

Management System design and implementation

▪ By nature, management systems need to cover all company

processes (“elements”), in one holistic system; they are therefore

complex, with many interdependencies

▪ Management systems in the oil & gas arena look different on the

highest level but in reality they are very similar in terms of scope

and many common elements

Management

System

Design

Management

System

Implemen-

tation

▪ Having a management system that drives sustainable,

competitive advantage, beyond compliance to e.g. safety

standards requires that “you go deep” to address the required

elements

▪ Implementation on an element-level needs to be holistic, i.e. to

cover 1) the technical system, 2) the management structure around

it as well as 3) the mindsets & capabilities to be sustainable

▪ Such implementation therefore require a well-architected

programmatic approach over a longer period of time (3 years to

build internal capability)

3A

3B

3C

3D

3E

Source: McKinsey

Approach Quality and OE “systemically” 3

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91%

69%

79%

23%

8% 9%

43%

32% 37%

7% 0%

6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

OperatingIncome

Sales Total Assets Employees Return OnSales

Return onAsset

Firms with Structured OE

Control Firms

Ref: Kevin B. Hendricks, Vinod R. Singhal, 2000

15

The Benefits of Formalized, Structured Quality and Operations

Management Systems

Approach Quality and OE “systemically” 3

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Quality Management System Framework Illustration - EFQM

Balancing Enablers and Performance Results (i.e., keys to reliability

and sustainability) and Performance

Approach Quality and OE “systemically” 3

Leadership

People

Policy &

Strategy

Partnerships

& Resources

Processes Customer

Results

People

Results

Enablers Results

Innovation & Learning

Society

Results

Key

Performance

Results

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Quality Management System Illustration - EFQM

Objective: Create a continuously reinforcing system of performance

drivers and enablers leading to sustained high levels of operational

excellence

Approach Quality and OE “systemically” 3

Results

Orientation

Customer

Focus

Leadership &

Constancy of

Purpose

Corporate

Social

Responsibility

Partnership

Development

Continuous

Learning &

Improvement

People

Development &

Engagement

Fact-based

Management

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The importance of Systems Analysis and Systems Thinking --addressing complex

interdependencies

Increase

Asset

Reliability

Improve

Tech Services

Performance

Improve

Maintenance

Performance

Improve

Reliability

Knowledge

Management

Improve

Engineering

Performance

Improve

Operations

Performance

Improve

Operations

Training

Improve

System

& Equipment

Criticality

Analysis

Increase

Tech Services

Capability

Improve

Project

Development

Standards

Improve

Cross

Functional

Design

Review

Improve

Lifecycle

Cost

Analysis

Improve

Design

Operability

Increase

Tech Services

Capacity

Raise

Condition

Monitoring

Stds

Raise

Materials

& Parts

Standards

Increase

Cross

Functional

Reliability

Teamwork

Improve

ERS & EDMS

Enablement

Improve

Condition

Monitoring

Technology

Improve

Condition

Monitoring

Increase

Inherent

Design

Reliability

Raise

Operating

Standards

Raise

Maintenance

& Repair

Standards

Improve

Failure

Analysis

Increase

O M & T

Failure

Intervention

Improve

Construct

& Commission

QA

Accelerate

Reliability

Continuously

Improvement

Improve

Engineering

Design

Standards

SIMPLIFIED

Source: McKinsey

3 Approach Quality and OE “systemically”

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OMS Framework – Oil and Gas Industry Illustration

Source: ExxonMobil

„Exxon Mobil‟s OIMS framework establishes common worldwide expectations for controlling operations

integrity risks inherent in its business‟

„Each operating unit must have in place properly designed and documented management systems that

address all the expectations set out in the OIMS framework‟

“Assurance of

operations integrity

requires

management

leadership and

commitment visible

to the organisation

and accountability

at all levels”

Annual internal assessments and 3–5

yearly external assessment of

management system „status‟ (design and

deployment) and „effectiveness‟

(conformance, execution, impact)

Driver Operations Evaluation

Supported by 64 “expectations”, 256

detailed guidelines on best practice

implementation and 27 common

systems

• Risk assessment and management

• Facilities design and construction

• Information/documentation

• Personnel and training

• Operations and maintenance

• Management of change

• Third-party services

• Incident investigation and analysis

• Community awareness and emergency

preparedness

Management

leadership,

commitment and

accountability

Operations integrity

assessment and

improvement

3

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Operations Management Systems often look different at the highest

levels i.e. the “superstructure”

3

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However, overall system scope and content is

very similar…..

Core Business

Elements

Support

Elements

Basic

Elements

• HSSE

• Ops Integrity

Mgt

• Asset Integrity

& Reliability

• ….

• IT and

Document Mgt

• Supply Chain

• Technical

Services

• ….

• Leadership

Behaviors

• Competency

Mgt

• Continuous

Improvement

• ….

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

XOM RDS CVX

X

X

X

X

X

X

X

X

X

BP

ILLUSTRATIVE, NOT EXHAUSTIVE

Any variances linked to

business performance

imperatives, priorities, and

context at the time of

system design and

implementation

3

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… and at the lowest levels, they are even

more similar

• Any variances linked to business

performance imperatives, priorities, and

context at the time of system design and

implementation

• Control of

Work

• Process

Hazard

Analysis

• Reliability

Improvement

• IT and

Document Mgt

• Contractor

Management

• Procurement

• MOC

Leadership

Review

• Required

Safety

Training

• Employee

Feedback

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

XOM RDS CVX

X

X

X

X

X

X

X

X

X

BP

X

X

X

Core Business

Elements

Support

Elements

Basic

Elements

ILLUSTRATIVE, NOT EXHAUSTIVE

• Similarities reflect

industry‟s inherent asset

intensivity, technical

complexity and risk profile

3

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Addressing OMS implementation at the lowest level is necessary to impact the actual

work practices and behaviors …….

Implementing an

OMS requires

“going deep”, e.g.

• Cascade company vision

and targeted

performance

expectations (e.g., KPIs)

to lowest levels

• Break down

organizational silos and

facilitate cross-functional

collaboration

• Drive standardization on

internal and external best

practices across

"The actual day-

to-day Work"

"The Defined System“

that is put on paper as a

central, formalized and

maintained system

4 Go to “the work” to make the change

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….which has some implications related to implementation strategy and approach

"The actual

day-to-day

Work"

"The

Defined

System

"

- Engage at the line level

- Define and drive

standard practices

- Cascade objectives

and expectations

- Link efforts to top-level

company performance

- Thorough and

rigorous Change

Management approach

- breaking through

organizational silos

- Leadership alignment

and commitment on

objectives and

aspirations

- closed loop

continuous

performance

improvement

4

You want to… Which requires… Implementing an OMS

- Deeply collaborate

across functions

- Objective, application

of best practices

Go to “the work” to make the change

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For each element “successful implementation” (i.e., sustained performance at the target

level) requires a holistic, integrated approach

Technical

Components

Management

Infrastructure

Components

Organizational

Components

Alignment with

overall vision, strategy and

objectives (KPIs)

Leadership Commitment and Support

(Active, Visible, Engaged)

Reliable and sustained delivery of the

targeted business objectives and

benefits requires

4 Go to “the work” to make the change

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A holistic approach to an individual element illustrates the depth of integration and

alignment required across elements to achieve sustained results

Technical

Components

Management

Infrastructure

Components

Organizational

Components

Technical

Components

Management

Infrastructure

Components

Organizational

Components

Technical

Components

Management

Infrastructure

Components

Organizational

Components

Related Technical components

• Asset Condition Monitoring

• Inspection Management

• Maintenance Management

• Asset Reliabilty Improvement

• ….

Related Management Infrastructure

Components

• Inspection and Maintenance

Budgeting and Planning

• Reliability Performance Monitoring

and Reporting

• Reliability Continuous Improvement

• …

• Reliability Management Principles

and Practices Competency and

Capability Building

• Maintenance QA Training and

Competency

• Contractor Management

• …

Alignment with

overall vision, strategy

and

objectives (KPIs)

Leadership Commitment and

Support (Active, Visible,

Engaged)

4

E.g., “Asset Reliability

Management”

Go to “the work” to make the change

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70%

10%

72%

32%

85%

65%

Typical learning center

▪ Realistic learning

environment in which

managers and change

leaders are trained to lead

operational transformations

▪ New tools and skills are

presented and immediately

applied in real-life settings

of a work place

▪ Learning center designed for

lean service operations

and manufacturing,

covering private and public

sector institutions

Learning

by …

"I hear and I forget,

I see and I remember,

I do and I understand"

Confucius

SOURCE: McKinsey

Adult learning methods employ experiential, physical learning environments (model

workplace)

Recall

after

3 weeks

Recall

after

3 months

Seeing Doing Hearing

Adults “learn by doing” 5

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Capability-building must employ adult learning approaches (e.g., “field and forum“)

SOURCE: McKinsey

Prepare Diagnose Design Plan Review Implement

1 2 3 4 5 6

4 days 2 weeks 2 weeks 2 week 14 weeks

Coaching Coaching Coaching Coaching

Applying lean

diagnostic tools

Idea generation

and problem solving

workshops

Continued cycles of

improvement

Plan for implement

ation of improve-

ments

Implement and

optimize improve-

ments

Forum 1 Lean Basics and tools

Forum 2 Analysis and problem solving

Forum 3 Planning

Forum 4 Imple-menting

Forum 5 Refine/ Sustain

▪ Prepare for

diagnostic

phase

▪ Understand key

issues and possible

impact

▪ Find solutions for

key issues and

prioritize

▪ Prepare for roll-out

phase (incl.

organizational

changes)

▪ Implement changes

and engrain new

way of working

▪ Keep continuous

improvement loop

alive (do not revert

to old situation)

Continuous

Example of forum

Lead business

▪ HSE processes and standards

▪ Work permitting planning ▪ Maintenance policies ▪ Operating standards

Lead self

▪ Time management

Lead others

▪ Problem-solving – 7-step problem solving – Root-cause problem solving – Value driver mapping

▪ Interviewing – Listening and asserting

▪ Workshop facilitation

Lead change

▪ Creating and communicating story for change

ILLUSTRATIVE Adults “learn by doing” 5

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| 29 SOURCE: CiP, McKinsey

Objective

▪ Learning of lean principles in a real-life production environment

▪ Experience of significant change through application of lean tool in a realistic production environment

Set-up

▪ End-to-end production of a pneumatic cylinder with a machining center and an assembly line with 8 work stations from raw material to quality tested product

▪ Up to 10 line technicians in operation (trained staffed of the Technical University)

Process

▪ Clients observe a non-optimized workflow at the beginning of the session

▪ Step-by-step teaching and immediate application of performance improvements measures in the work flow

▪ Final target state fully optimized with nearly 100% productivity increase and a reduction of 50% in inventory and required space

Pneumatic cylinders

From industry partner

Bosch Rexroth

McKinsey Learning Center Darmstadt Example: Learning by experience in a real

production environment with real products

A real production environment ...

With real products …

Adults “learn by doing” 5

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IC

PPE

The need to “go deep” in each element and, at the same time, cover the full system a

programmatic approach

Management system concept

Best practices to build a

management system is to work

at business processes/element

level

Program concept

Pilot

Wave 1 Wave 2

Wave 3

▪ Few

elements to

scale up the

program and

build the

competences

to replicate

▪ One element on

which test the

optimization/

improvement

methodology

▪ Complete the management sys-

tem working on all the elements

of QG

Program Management Office

Overall concept

Development and implementation of QGMS means optimize/ improve

every single element of Qatargas business process universe

Purchas-

ing

“Have a pre-flight checklist and flight plan….and follow it.” 6

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| 31 SOURCE: McKinsey

Programmatic Capability Building ensures sustainability by creating

your Change Champions to lead the improvement initiatives and carry forward the

design and implementation principles

Change champion

Pilot

▪ Coaches lead the

improvement efforts,

client‟s Change

Champions participate in

initial pilot with peers and

supervisors

Wave 1 and 2

▪ Change Champions

move into leading role for

increasingly significant

improvement areas

▪ Coaches support and

provide feedback

Wave 3

▪ Change Champions

support multiple

improvement areas,

supervising team leaders

and front-line staff

▪ Coaches provide

feedback

“Have a pre-flight checklist and flight plan….and follow it.” 6

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Formalized Program Management methods and tools are required

SOURCE: McKinsey

▪ Compiled and tracked optimally

by the PMO

▪ Ongoing numbering to ensure

consistency and ability to

reference

▪ Regular tracking of project

progress via estimate

completion time

▪ Consistent, transparent tracking

of budget allocation

to work streams is key

▪ Compiled and tracked by the

PMO

▪ Covers only main issues

▪ "Traffic light" logic to trigger

necessary action

Issue matrix

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Low: Keep in mind

Medium: Action required

High: Urgent measures

required

Risk Factor

(Importance = Impact x Probability)

Red

Gre

en

Low(1) High(4)

Impact

Sta

tus

C

ISSUE MATRIX

Source: Team

5b

Yello

w

B

A

Issue report

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Issue report

Source: McKinsey

5a

Issue

A Software delivery

B Promotorallocation

C Product booking perfor-mance

Description

• Delivery of release 1.0 delayed by two weeks

• Allocation of qualified promotorsdifficult

• Average time to book a product is to high (>10 min)

Proposed measures

• Continue test on alpha release

• Set up contingency plan• Allocate additional

resources to testing

• Launch internal campagin for promotorrecruiting

• Reach out for outsource partners

• Assess process speed-up potential within IT and process description

• Transfer tasks to Back Office

Date

10/20/06

10/14/06

10/01/06

Deadline

10/21/06

10/25/06

11/25/06

Deadline(new)

11/04/06/

-

-

Responsible

J. Westin

T. Cochran

L. Hersh

Risk matrices

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Low: Keep in mind

Medium: Action required

High: Urgent measures

required

Risk Factor

(Importance = Impact x Probability)

Hig

h(4

)Low

(1)

Low(1) High(4)

Importance

Urg

en

cy

A

BC

D

E

RISK MATRIX

Source: Team

4a

Quality and Risk reports

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Risk report – project risks and proposed measures

Source: McKinsey

4a

Responsible

Overall project

leader

Workstream

leaders

Sales and

Distribution

Technical

Wokrstream

Project Office

Description

• Product Roadmap

interferes with new

governmental

regulation plans

• Insufficient project

management and

progress control

• Legal danger to

product sales by

loopholes in distributor

contract for Points of

Sale

• Cities obstruct cable

construction works by

delaying permissions

• Integration of

employees

• Competitors are

pushing quickly to

market

Proposed measures

• Set up meetings with regulatory

board

• Review project plans/milestones

• Revise contracts and set up a

task force for negotiations with

distribution channels

• Initiate talks with political leaders

• Check project plans for speed-up

potential

• Launch marketing campaigns

Date

10/30/06

10/31/06

11/15/06

12/15/06

ongoing

Issue

Regu-

latory

Environ-

ment

Project

manage-

ment

PoS

contracts

Construc-

tion Per-

missions

First

mover

advan-

tage

A

B

C

D

E

Progress Reports

Resource Reports

Explicit tracking of program

quality & risks …

… existing and resolved

issues …

… and project-wide resources

“Have a pre-flight checklist and flight plan….and follow it.” 6

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1

2

3

4

5

6

7

8

John Kotter‟s Critical Success Factors to Sustained Performance

Transformation

Establish a sense of urgency

▪ Examine market and competitive

realties

▪ Identify and discuss crises, potential

crises, or major opportunities

Form a powerful guiding coalition

▪ Assemble a group with enough

power to lead the change effort

▪ Encourage the group to work

together

Create a vision

▪ Create a vision to help direct the

change effort

▪ Develop strategies to achieve that

vision

Communicate the vision

▪ Use every vehicle possible to

communicate the new vision and

strategy

▪ Teach new behaviors by the

example of the guiding coalition

Empower others to act on the vision

▪ Get rid of obstacles to change

▪ Change structures that seriously undermine the vision

▪ Encourage risk taking and non-traditional ideas,

activities, and action

Plan for, and create, short-term wins

▪ Plan for visible performance improvements

▪ Create those improvements

▪ Recognize and reward those involved in

improvements

Consolidate improvements and produce still more

change

▪ Use increased credibility to change systems,

structures, and policies that don‟t fit the vision

▪ Hire, promote, and develop employees who can

implement the vision

▪ Reinvigorate the process with new projects, themes,

and change agents

Institutionalize new approaches

▪ Articulate the connection between the new

behaviours and corporate success

▪ Develop the means to ensure leadership

development and succession

Leaders must “LEAD” 7

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Lead

others

Lead

business

Lead

self

Effective

leadership

Leadership dimensions

▪ Understand your value needs and system of beliefs and how it influences your behavior

▪ Take accountability and regulate behaviors to create change

▪ Manage energy and attention

▪ Develop strong support network

▪ Leave one‟s comfort zone and commit to opportunities

▪ Use personal vision to motivate self

▪ Inspire and motivate to action

▪ Turn difficult situations into

learning moments

▪ Build relationships and networks

▪ Foster collaborative leadership

and decision making

▪ Engage organizational support

▪ Create energy to sustain change

▪ Develop the business vision and

strategy

▪ Examine operational implications

▪ Align the BU strategies with the

overall corporate strategy

▪ Create environment for higher

performance

▪ Communicate inspiring vision

through stories

▪ Define leadership strategies to

shift the broader dynamics

Leaders must “LEAD” 7

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Required Leadership behaviors

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”

Mindsets and

behaviors

▪Align management processes (including

strategic, operational, and people planning

and review, 360° feedback, performance

dialogues, and personal development

plans) and systems with the desired

leadership behavior

▪Set up individual and organizationwide

performance goals necessary to reach or

exceed aspirations

▪Motivate individual and group

performance and align employee interest

with the organization‟s objectives, through

financial and nonfinancial incentives and

consequence management

▪Other specific interventions tailored to the

client‟s context

Leaders must “LEAD” 7

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| 36 36 Source: Organizational Health Index database mining effort (N = 60,000)

Companies with top quartile leadership characteristics have measurably better

performance

1 Leadership measured as an element in the Organizational Health Index database

Likelihood that top quartile leadership1 has

above-median EBITDA margin performance

%

▪ The likelihood that a company with top-

quartile leadership has above-median

EBITDA margin is 59%, suggesting it is

a key contributor to financial

performance

▪ Companies with top-quartile leadership

are 1.8 times more likely to outperform

on EBITDA margin, compared with

companies with bottom-quartile

leadership

59

33

Bottom

quartile

Top

quartile

1.8x

Leaders must “LEAD” 7

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Organizations that invest in developing leaders through business

transformations are ~2.5 times more likely to succeed

Source: McKinsey Quarterly transformational change survey, January 2010

1 Unweighted data

Note: Because of rounding off, totals might not add exactly to 100%; data weighted by proportion of world GDP, following McKinsey Quarterly

weighting standards

Not at all 15 59 23 3

A little 7 65 26 3

Somewhat 3 53 39 5

A great deal 1 36 52 11

x 2.4

To what extent, if at all, did your company invest in developing leaders through

the transformation?

%, N = 2,0471

Degree of transformation success

Somewhat successful

Extremely successful

Very successful

Unsuccessful

Leaders must “LEAD” 7

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▪ Use influence model to

design interventions

▪ Construct portfolio of

initiatives to “move the

needle” on practices

▪ Diagnose organizational

health outcomes and

practices

▪ Analyze relative

emphasis of practices

Organizational Health

Assessment

Area of focus

Architect Programmatic

Cultural Change

Successful approaches to Cultural Change (i.e., values, mindsets, and

behaviors) are fact-based and link aspirations to Program Architecture

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Skills required for change

“…I have the skills

and opportunities

to behave in the

new way.”

Understanding & Conviction

“... I understand

what is being

asked of me and it

makes sense.”

Role modeling

“…I see my leaders,

colleagues, and staff

behaving differently.”

Reinforcement mechanisms

“…I see that our

structures, processes, and

systems support the

changes I am being asked

to make.”

“I will change

my mindset and

behavior if . . .”

SOURCE: Scott Keller and Colin Price, ‘Performance and Health: An evidence-based approach to transforming

your organization’, 2010.

Use the influence model to design interventions that address

FROM TO shifts along the four leversJ

Cultural Change

Engineering

▪ Focus efforts on most

critical practices for a

given archetype

▪ Identify current

activities to address

critical practices and

highlight activity gaps

Leaders must “LEAD” 7

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“Laws of Physics” for Sustained Quality and Operations Excellence (OE)

1. Be clear and aligned on “the destination” (i.e., with meticulous alignment to enterprise

vision, mission, strategic objectives, targeted performance and practices)

2. It‟s a “Transformation” -- Design and implement “holistically” (i.e., with balanced

and complete attention to the technical processes and systems, management systems,

and organizational capabilities and behaviors)

3. Approach Quality and OE “systemically” (i.e., based on thorough accounting for

interdependencies in related processes and systems)

4. Go to “the work” to make the change (i.e., the only change that matters -- “go deep”,

to the line level)

5. Adults “learn by doing” (i.e., Employ adult learning principles and concepts in training

and capability-building.)

6. “Have a pre-flight checklist and flight plan….and follow it.” (i.e., Design and

implement programmatically -- with attention to key enablers and key success factors)

7. Leaders must “LEAD” (i.e., with active, visible support and role modeling)

Text

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Thank You.