Tuesday, March 13, 2012

The Case for Global Standardization

This issue of common leadership frameworks leads me to this broader subject of global standardization....really standardization of anything...frameworks, IT infrastructure, well design, performance appraisal systems, armies crossing rivers.  Over a decade ago I was asked to help with a business improvement project.  It was a manufacturing business and the issue had to do with their maintenance management system.  As a result of mergers and acquisitions over time they had three legacy maintenance management systems.  The leader of the business chartered a team, much like a GE work-out team, to recommend a single maintenance management system. The team dutifully engaged with stakeholders, all of whom pretty  much said "We're all for a common system....so long as it is ours. Go get those other guys to adopt our system".  Faced with this resistance, the team came back to the business leader and reported that they weren't sure there was a business case for a common system and they would rather explore "e-procurement".  The business leader insisted they recommend a common system, not for the benefit of any one site but for the benefit of the whole.  He explained that the same suppliers were selling them materials ten different times in different geographies. Without a common system he could not leverage his scale to drive down the unit costs.  In addition, they were often facing the same kind of maintenance issue in different parts of the business but had no data that could help them learn from successful practices at different sites.  This particular leader was experienced, wise and skilled enough to know what the team was up against and threw his full weight behind sponsorship of the initiative.  He eventually got his common system, but it was hard.  I've observed this difficulty in implementing standard approaches in a variety of settings.  It's worth setting out why I think it is important to achieve standard approaches.  First, as in the example above, is the issue of economies of scale.   This plays out in any supply chain activity, whether materials or services.  One business leader I worked with asserted he could drive down costs by 20% just by managing costs at the enterprise level rather than at the site level.  As an aside, he routinely challenged teams to get 40% and was happy when he got 20%.  The second reason is for health, safety or environmental reasons. Shell, the company I left last year,  implemented 12 life saving rules, as an example...  "What employees and contractors must know and do to prevent serious injury or death."  You could derive similar examples from pharmaceutical companies, health care practitioners, aviation...just about any large enterprise.  The Deepwater Horizon accident is a really good example of the importance of adherence to a common global standard for safety and environmental reasons. The third reason is for organizational learning purposes. . Global companies are facing the same challenge multiple times...let's say five... in different parts of the world and finding three different good solutions to that particular challenge.  There is value in sharing those three different good things that work, but everyone needs to be working from a common base.  Last, it is important to have a common language around a topic to achieve a shared understanding.  To go back to the leadership framework example, if one part of the organization is using Kouzes and Posner as a reference point, another the Be-Know-Do framework and yet another a locally developed framework there isn't any way to consistently develop globally deployable capability.  Given all these reasons, why is it so hard?  More importantly what's a leader to do about it?   Those will be the subjects of tomorrow's blog.

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