By Rocky Sasser, Ed.D, Senior Reliability Professional, Allied Reliability
Featured in the April 2021 edition of the SMRP Solutions Monthly newsletter
The organization: a large, established multi-facility producer of a commodity product.
The situation: After three years, some of the new was wearing off the CEO, along with the shock of the downsizing he brought with him. The shock was over, but the anger hung on. People still remembered and talked about the buddies who had been lost in the waves of layoffs, along with their years of skill and experience with the equipment and production processes.
One of the more recent ventures led by the CEO was the strategic thrust into contracting out. All areas that were not part of the core competencies required to produce their product were prime candidates for finding someone who could do it better, cheaper, faster, and safer. Top management believed that by focusing on their core competencies and contracting out the rest, the organization would be able to achieve the vision of becoming the preferred supplier of their product by reducing costs and increasing productivity.
In earlier years, the organization had experienced an aggressive capital program which had been managed and mostly performed by in-house personnel. These employees were very proud of their ability to execute the work, as defined by successful start-ups. There were stories that the successful start-ups were bought by heavy budget and schedule overruns, but specific data about original scope, costs, and schedules vs. change orders vs. completed scope, costs, and schedules were skimpy, due to extensive use of undocumented verbal change orders. This sort of thing had been pretty loose in the days when money and accountability weren’t so tight. The organization had solved a lot of problems by throwing a number of skilled people at it and letting them sort things out on the fly. People were rewarded for their ability to pull it off, and the system had worked well for many years.
The old construction/specialty maintenance group was well known for its ability to take a relatively loose scope and translate it into a completed, working facility or equipment. These same employees were the ones called on to help pull the organization out of major equipment failures and to do specialty maintenance work when needed. Again, as measured by successful start-ups, this group had been heroes time and again. Cost details were fuzzy, but the schedule counted on these assignments - and they always worked well when called on to “put out fires.”
During this era of success, employment had been very stable. There was low turnover and almost all promotions were from within. Those individuals who had risen to the highest levels in the organization were those who were best at giving orders and making things happen, even if there wasn’t much input from customers and a few bodies were left along the way.
The change: The Services group was responsible for providing capital construction and specialty maintenance services for each facility. This group decided to improve productivity and reduce costs by contracting out capital construction and special maintenance tasks at all of their facilities. This decision was based on the overall organizational strategy of contracting out and had the approval of top management.
As the organization was centrally controlled, a team from the Services group was designated to select the contractors who would take over these tasks. They wrote the RFP, determined which contractors would be invited to bid, received the proposals, reviewed them, sent representatives on site visits, and made the final selection of contractors.
The original RFP specified that initially the contractors would assume responsibility for one third of the sites. As organizational issues related to the changes in work processes that were anticipated with use of contractors were worked out, additional facilities were to be turned over to the contractors. Two weeks after the Services group announced the decision concerning contractor selection, top management decided that the change should take place immediately, rather than phasing it in. A month after this announcement was made to plant managers, the work was turned over to the contractors.
At turnover, all the floor and mid-level management employees of the construction/ specialty maintenance group were laid off, and the contractors began interviewing this group to determine who they wanted to hire. Plant Services management made it clear that, with rare exceptions, they did not want the old middle managers re-hired. Meanwhile, the plants demanded that the people who had worked with them for years, and who knew their equipment and processes, be kept on, to continue doing their work. It was clear, though, that the Services group was managing the contract, so their wishes prevailed.
A network of interfaces was put in place at each facility, but no one in the client organization was sure what role they were to play. Were they inspectors, coordinators, or facilitators? People didn’t know how to get work initiated. The old loose process wouldn’t work, as contractors had to be managed and held accountable for the work they were assigned. It was clear that much more definition needed to be brought to the scoping effort, but there were no processes or people in place to do that.
With major work assignments scheduled to begin two months after the contracts were awarded, there was little time to hire and orient personnel. Many of the project managers brought in by the contractors were more experienced with construction than specialty maintenance, even though the initial work assigned was specialty maintenance. They were accustomed to having a clearly defined scope and plenty of elbow room to execute it in, without the constant coordination with the client that was required by the specialty maintenance work.
Questions:
- What business need was identified?
- What focus was developed to meet this business need? How do you think the effectiveness of this focus would be measured?
- What major issues do you anticipate might arise in this relationship?
- What future would you predict?
Internal impact factors
Describe the characteristics and identify the issues that must be addressed in terms of:
- The organization’s culture.
- The organization’s design.
- The organization’s leadership.
Change management plan
For each area identified above, sketch out a plan to manage the issues inherent in this change.