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© 2007 Harrington Institute
LOS CINCO PILARES DE LA
EXCELENCIA ORGANIZACIONAL
JAMES HARRINGTON
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© 2007 Harrington Institute
The Five PillarsThe Five Pillars
Organizational ExcellenceOrganizational Excellence
Dr. H. James HarringtonCEO, Harrington Institute
San Jose , Cal. USA
07, Harringtontute, Inc.
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© 2007 Harrington Institute © 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
Organizational Excellence (OE)is the process of building an
organization thatEXCELS!
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
The Pi llarsThe Pillars
of of
Organizational ExcellenceOrganizational Excellence
, Harrington Institute,14th Oct 2003 - Dubai
Structured, Innovative Management
Performance Excellence
Value to all Stake Holders
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© 2007 Harrington Institute, Harringtone, Inc.
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© 2007 Harrington Institute © 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
Element IElement I
Process ManagementProcess Management
, Harringtonte, Inc.
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© 2007 Harrington Institute
Two Approaches of Two Approaches of
Process ManagementProcess Management
• Micro-level Approach
• Macro-level Approach
, Harringtonte Inc.
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© 2007 Harrington Institute
MicroMicro-- level Approachlevel Approach
• Continuous Improvement• Ten to fifteen percent per year
• Area Activity Analysis
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© 2007 Harrington Institute
MacroMacro-- level Approachlevel Approach
• The Fine Methodology – Phase I. Define the process.
– Phase II. Confine the process.
– Phase III. Refine the process.
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© 2007 Harrington Institute
Process ManagementProcess Management
TypicalTools/Approaches
• Process Qualification
• Process Controls
• Problem Solving
• Six Sigma
• Continuous Flow
• Business ProcessImp.
• Inspection and Test
• ISO 9000/14000
• Information Systems• Active Based Costing
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© 2007 Harrington Institute © 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
Element II
Project ManagementProject Management
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
Project ManagementProject Management
“Processes define how we operate.Projects are the way we improve
processes.”
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
Typical ProjectsTypical Projects
• TQM
• Process Redesign
• New Information Technology
• Market Analysis
• Alliance Partnership
• Customer Future Needs Analysis• Six Sigma
© 2007, HarringtonInstitute, Inc.
Wh d 35 t 65% f th TQMWh d 35 t 65% f th TQM
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© 2007 Harrington Institute
Why do 35 to 65% of the TQMWhy do 35 to 65% of the TQM
projects fail?projects fail?
• Costs more than planned
• Missed schedule
• Poor quality
• Risks were not managed
• Rejected by the target users
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© 2007 Harrington Institute © 2007, HarringtonInstitute, Inc.
Only 26% of Projects were successful(on-time/on-budget)
40% of all IT projects fail or are cancelled
$75 billion spent by US firms on cancelled projects
26% of projects will cost 190% of their originalestimate
Over 60% of the projects do not produce theprojected R.O.I.
Standish Group International,Chaos report 1999
Project & Program
Issues/Solutions
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© 2007 Harrington Institute
Benchmarks“World class organizations complete nearly
90% of their projects within 10% of budget andtime estimates.”
“I.S. organizations that establish enterprisestandards for project management, including aproject office, cut their major project costoverruns, delays, and cancellations by 50%.”
Gartner Group,August 2000 © 2007, Harrington
Institute, Inc.
T P t fTen Parts of
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© 2007 Harrington Institute
Ten Parts of Ten Parts of
Project ManagementProject Management1. Integration Management
2. Scope Management
3. Time Management4. Cost Management
5. Quality Management
6. Human Resource Management7. Communications Management
8. Risk Management
9. Procurement Management
10. Organizational Change Management
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© 2007 Harrington Institute
Element IIIElement III
© 2007, HarringtonInstitute, Inc.
Change
Management
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© 2007 Harrington Institute
More ProjectsMore Projects
fail due tofail due tolack of changelack of change
managementmanagementthan anythingthan anything
else.else.
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© 2007 Harrington Institute
“ “Some 50% to 70% of Some 50% to 70% of reengineeringreengineering
attempts fail to deliver theattempts fail to deliver theintendedintended
dramatic resultsdramatic results” ”
• Hammer & Champy1993 page 217
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
Change ManagementChange Management
“Research confirms that as much as 60% of change initiatives and other projects fail as a
direct result of a fundamental inability tomanage their social implications.”
Gartner Group
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
The Magnitude of IT Driven ChangeThe Magnitude of IT Driven Change
First-OrderMagnitude
Tasks Affected
Second-OrderMagnitude
People Affected
Third-OrderMagnitude
Structure/CultureAffected+ +
Culture Technology
Structure
People
Technology
Tasks
© 2007, HarringtonInstitute, Inc.
Source: O’Hara, Watson & Kavan
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© 2007 Harrington Institute
The Change Management SystemThe Change Management System
• Defining what will change.
• Defining how to change.
• Making the change happen.
© 2007, HarringtonInstitute, Inc.
Get a Clear View ofGet a Clear View of
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© 2007 Harrington Institute
Get a Clear View of Get a Clear View of
Where You Need To GoWhere You Need To Go
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
Defining How to ChangeDefining How to Change
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
Change is a ProcessChange is a Process
CurrentState
TransitionState
FutureState
3. Implementation Architecture
1. Motivation 2. Vision
Three Prerequisites for Change
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
Clarifying the Vision: PurposeClarifying the Vision: Purpose
Why is thischange
necessary?
What's in it for me?
Why is itimportant to my
organization?
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute © 2007, HarringtonInstitute, Inc.
Element IV
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© 2007 Harrington Institute
Know ledge ManagementKnow ledge Management
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
Knowledge ManagementKnow ledge Management
“When a person dies,a library is lost.”
© 2007, HarringtonInstitute, Inc.
Knowledge Workers
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© 2007 Harrington Institute
Knowledge Workers New hires require 2.5 months to be fully effective
Knowledge management system will reduce it by 30%
At a loaded cost of $200,000/yr that is $12,500
The cost to keep them current is going up 20% per year
Fortune 500 Knowledge Deficito1999 - $12 billiono2007 - $52 billiono1999 - cost to provide knowledge workers was $5000
each ( now it is $8,000 )Knowledge
ManagementMay-Oct
© 2007, HarringtonInstitute, Inc.
l d kK l d T k T F
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© 2007 Harrington Institute
Know ledge Takes Two FormsKnow ledge Takes Two Forms
Tacit knowledge –
undocumented intangiblefactors embedded in individual
experiences Explicit knowledge –
documented and quantified
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
Know ledge Management SystemKnow ledge Management System
InformationWarehouse KnowledgeWarehouse
DataWarehouse
Analysis/Selection
Analysis
USE
RS
Inputs Inputs Outputs/Users
© 2007, HarringtonInstitute, Inc.
K. M. Road MapK. M. Road Map
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© 2007 Harrington Institute © 2007, HarringtonInstitute, Inc.
pACBF's Knowledge Management Road Map
Phase 0 Phase I Phase II Phase III Phase IV
Requirement Infrastructure KM System Analysis Deployment Evaluate and
Definitions Evaluation Design & Development Improve
Activities Activities Activities Activities Activities
1. Prepare 3 Year 4. Analyze Existing 6. Benchmark Best of 12. Deploy Using a 14. Evaluate
KM Vision Infrastructure Class Results-Driven Incremental Performance,
Statement Methodology Measure ROI and
5. Align KM and 7. Design KM Continuously Improve
2. Develop KMS Business Strategy Infrastructure 13. Manage Change Culture
Specification and Reward Structure
8. Audit Existing
3. Prepare Project KM Assets and Systems
Plan9. Design KM Team
10. Create the KM
Blueprint
11. Develop the KM System
ProcessProcess – –based Know ledge Mappingbased Know ledge Mapping
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© 2007 Harrington Institute
g pp gg pp g
ProcessProcess
• Phase I – Create the knowledge map.
• Phase II – Analyze the map.• Phase III – Apply the map.
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© 2007 Harrington Institute © 2007, HarringtonInstitute, Inc.
Element VElement V
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© 2007 Harrington Institute
Element VElement V
Resource ManagementResource Management(Assets Management)(Assets Management)
© 2007, HarringtonInstitute, Inc.
Resource ManagementResource Management
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© 2007 Harrington Institute
Resource ManagementResource Management
• People
• Materials
• Money• Time
• Space
© 2007, HarringtonInstitute, Inc.
Some of the things that need to beSome of the things that need to be
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© 2007 Harrington Institute
Some of the things that need to beg
considered in resource managementconsidered in resource management
are:are:
• Good Governance
• Staff Resources
• Product and Service Mix• Suppliers and Alliance Partners
• Financial Status• R&D
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
Boards need to be watchdogs,Boards need to be watchdogs,not lapdogs.not lapdogs.
© 2007, HarringtonInstitute, Inc.
RESOURCE MANAGEMENTRESOURCE MANAGEMENT
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© 2007 Harrington Institute
RESOURCE MANAGEMENTRESOURCE MANAGEMENT
• Outsourcing
• Empowerment
• Training• Activity Based Costing
• Just-in-time• Acquisitions
• Skills Inventory
• Product Planning• Strategic Planning
© 2007, HarringtonInstitute, Inc.
Impact of Pushing/ Pull ingImpact of Pushing/ Pull ing
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© 2007 Harrington Institute
Impact of Pushing/ Pull ingImpact of Pushing/ Pull ing
© 2007, HarringtonInstitute, Inc.
Organization ChartsOrganization Charts
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© 2007 Harrington Institute
(Old and New Look)
© 2007, HarringtonInstitute, Inc.
TopMgmt
Middle
Management
First LevelManagement
Employees
Employees
First LevelManagement
Middle
Management
TopMgmt
Hierarchical Organization Chart(Old Look)
Upside-Down Organization Chat(New Look)
Preferred Organizational ModelPreferred Organizational Model
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© 2007 Harrington Institute
Preferred Organizational ModelPreferred Organizational Model
© 2007, HarringtonInstitute, Inc.
RESOURCES
EXTERNAL CUSTOMERS
EMP
LOYEES
FIRST
LEVEL
MGT
MIDD
LE
MGT
TOP
MGT
The Three Purposes
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© 2007 Harrington Institute
The Three Purposes
of Business Planning
Directions
ActionsExpectations
© 2007, HarringtonInstitute, Inc.
Business Planning Elements and Timing
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© 2007 Harrington Institute
Business Planning Elements and Timing
PURPOSE
Direction
Expectations
(measurements
Actions
11 OUTPUTS
Visions
MissionValues
Strategic focus
Critical success factors
Business Objectives
Performance Goals
Strategies
Tactics
Budgets
Performance Plans
TIME FRAME
10 - 20 years
Open-endedOpen-ended
5 years
3 years
5-10 years
1-5 years
1-5 years
1-3 years
1-3 years
3-12 months
ORGANIZATIONAL ALIGNMENT
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© 2007 Harrington Institute
ORGANIZATIONAL ALIGNMENTORGANIZATIONAL ALIGNMENT
Strategy
RewordsSystems
Structure
PeoplePractices
Processes &Capabilities
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
“ “ I f we are not customerIf we are not customer--driven,driven,our car wonour car won’ ’ t be either.t be either.” ”
Donald E. Petersen
Ford’s past chairman
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
“ “Being good is good.Being good is good.Being the best is great!Being the best is great!” ”
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute © 2007, HarringtonInstitute, Inc.
Excellence
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© 2007 Harrington Institute
Excellencecan be attained if you .
Care morethan others think is wise.
Risk morethan others think is safe.
Dream morethan others think is practical.
Expect morethan others think is possible.
© 2007, HarringtonInstitute, Inc.
Organization Excellence can be explained by
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© 2007 Harrington Institute
g p y
focusing on any one of the five parts, butwhen all five become interrelated – watchout! Great things happen. Profits, market
share, morale, customer satisfaction, andstock prices soar.
© 2007, HarringtonInstitute, Inc.
Have a quality
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day with a high
degree ofreliability.
Principles of Good GovernancePrinciples of Good Governance
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© 2007 Harrington Institute
Principles of Good GovernancePrinciples of Good Governance(continued)(continued)
Board Activities
• Meet without management being present.
• Evaluate their own performance.
• Audit Committee should meet at least 4 timesper year.
• Be frugal on executive pay.
• Be decisive when plan CEO succession.• Be quick to react to troubles.
© 2007, HarringtonInstitute, Inc.
Best Versus WorstBest Versus Worst
Governance CompaniesGovernance Companies
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© 2007 Harrington Institute
Governance CompaniesGovernance Companies
• Stock outperformed 2 to 1
• Retained value
Best 51.7 %
Worst -12.9 %
© 2007, HarringtonInstitute, Inc.
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© 2007 Harrington Institute
“ “ In the postIn the post --Enron days,Enron days,
governance has becomegovernance has becomecritical.critical.” ”
Sanjay Kumar, CEO
Computer Associates
© 2007, HarringtonInstitute, Inc.
Best BoardsBest Boards
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© 2007 Harrington Institute
Best BoardsBest Boards
© 2007, HarringtonInstitute, Inc.
• 3M
• Apria Healthcare
• Colgate Palmolive
• General Electric
• Home Depot• Intel
• Johnson &Johnson
• Medtronic
• Pfizer• Texas Instruments
•
Boards That Need HelpBoards That Need Help
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© 2007 Harrington Institute
Boards That Need Helpp
© 2007, HarringtonInstitute, Inc.
•Apple
•Conseco
•Dillard’s
•Gap
•Kmart
•Qwest
•Tyson Foods
•Xerox
•AT&T
•Ford
•HP
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© 2007 Harrington Institute
6
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© 2007 Harrington Institute
QuestionsQuestions
IssuesIssues
ConcernsConcerns
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