UPS Case Study

OVERCOMING ORGANIZATIONA L RESISTANCE

Site visit conducted on December 6, 2012

Dawson Wood
Director
Program Management Group
Bill OMeara
Director
Project and Process Support
Linda McCain
Manager
Process Center of Excellence

Organizational Overview
In 1907, Jim Casey started a messenger company in the Seattle, Washington area. Since then,
UPS has become a multi-billion dollar corporation that is the world's largest package delivery
company, a leading global provider of specialized transportation, and a provider of logistics
services. The organization manages the flow of goods, funds, and information to more than 200
countries worldwide. The company abides by the founders strict policies of customer courtesy,
reliability, service excellence, and low rates. These ethos translate into the company slogan:
Best service, lowest rates.
In 2011, the organization earned $53.1 billion and employed 397,100 workers worldwide. It is
found in 220 countries and territories, and it delivers to every address in North America and
Europe. Delivery volume is enormous and includes:

4 billion packages and documents shipped in 2011,

15.8 million domestic packages and documents delivered daily,
2.4 million international packages and documents delivered daily, and
8.8 million customers served daily.

CULTURE
UPS is a company that has never shied away from reinventing itself. It strategically and
intentionally hires people who are open and willing to look at and accept change. This practice
reaches all the way back to the founder Jim Casey, who focused on constructive dissatisfaction,
which was his term for always looking for a better way of doing things. According to Dawson
Wood, director of the program management group, It is this focus on continuous improvement
that helps to overcome the resistance that can often accompany organizational change.
Since its establishment in 1907, UPS has created or applied technology to improve processes.
The changes in technology include the use of automobiles, airplanes, telephones, and
computers to better refine and implement processes. The organization implemented
consolidated delivery, which combines packages that are heading to certain neighborhoods to
make the process faster and easier. It continues to use technology as a vehicle to ensure
continuous improvement and successful process management. Innovating with technology is a
critical cultural component due to the huge volume of work that UPS performs. Implementing
new solutions keeps the organization focused on maintaining efficiency, keeping prices
competitive, and providing new customer services. The technology at UPS spans an incredible
range from handheld devices to planning and route planning systems.

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State of Process Management

Although formal process management is a newer discipline (1997), UPS has been employing its
principles for more than 100 years. Throughout this time, the organization has found a way to
sort, load, and deliver packages in a consistent, efficient manner across the globe. Theyve
documented processes and continue to update them on a regular basis. More recent attention
has focused on assessing the back office processes and constantly reworking them in an effort
to continually mature them.

CURRENT PROCESSES
About 15 years ago, UPS evaluated its business and identified four core processes form the
organizations foundation:
1.
2.
3.
4.

package management (logistics),

product management (what it sells),
customer information management (customer-facing processes), and
customer relationship management (sales and marketing).

These four areas serve a cornerstone that helps the organization achieve its business goals;
everything at UPS supports and leads back to one of these functions. Each area has a process
manager responsible for its scope, goals, and direction. The goal is to encourage all four groups
to work together to achieve the main business objectives. According to Dawson Wood, We
want to increase customer satisfaction and reduce cost.
Over the past 15 years, however, the four groups have evolved in different ways. Package
management is a solid, well-defined process that has been in place for more than 100 years.
Changes were made to refine existing processes, although many that were implemented more
than a decade ago are only now coming to fruition. Linda McCain, manager of the process
center of excellence explained, We knew the process changes we wanted to make, but the
technology wasnt available. Its only just now that technology has caught up that we can
implement those new processes.
Product management has developed and become a solid process, although there was a learning
curve when it was originally identified as a core process. Customer information management
(CIM) and customer relationship management (CRM) are newer to the organization and have
gone in different direction than originally intended. UPS is currently refocusing and realigning
the group since it didnt achieve its original objectives.
These process changes go through a rigorous approval process. It begins when the project is
assessed for strategic alignment with the larger organizational focus. Second, there is a legal and
regulatory compliance review. Wood said, We are a risk adverse organization, so we make
sure to address our compliance issues early in the process. Third, prioritization reviews the
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revenue generation for projects, since the growth of an organization is dependent upon growth
versus cost reduction. Finally, the prioritization reviews cost reduction. UPS strives to have
projects meeting three of the four prioritization criteria, although it can be difficult to achieve at
times.

Section III: Overcoming Organizational Resistance

OVERALL ORGANIZATION AL APPROACH
With the amount of process improvement that occurs at UPS, it should be no surprise that
change is frequent. One goal of the organization is to make every attempt to minimize the
impact of changes. Many times employees want to see someone else make changes because,
while it may be a positive step, its not necessarily good for their own department.
But UPS is prepared for such perspectives. The organization believes that having strong, clear
policies is a key to creating a culture that embraces new initiatives. UPS has a short (35 pages)
policy book that is extremely powerful in the organization. It outlines the specific expectations,
and at many meetings, employees read a different section of the policy book as a way to open
the discussion.
With regard to change and resistance to it, there is a section of the policy book that speaks
directly to this issue (specifically, page 31). It states that while employees may disagree with the
suggested changes behind closed doors, when the door opens the groups is expected to present
a united front. One example of this occurred when there was a reduction in the number of US
operations regions and districts. The number of regions was reduced from five to three, and the
number of districts from 46 to 17. Bill OMeara, director of project and process support, said, It
was an uncomfortable meeting. There were five people in that meeting, and they knew that at
the end of the day, two wouldnt have a job. It was difficult. Yet when the door opens,
employees must move ahead as a unified group.
Many times, policy is enacted and used to guide discussions around organizational change, but
these changes come from the top down. When a manager decides to make a change, everyone
is expected to get on board for the sake of the organization. If there are questions or concerns,
employees are encouraged to talk to the specific manager in charge. Wood said, There was
some resistance towards implementing a new program. I gave people a card with the managers
number on it. I said, Call him, and then let me know when youre ready to get started. Within
minutes, we were implementing the new process.

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Processes have a few legitimate barriers. Anyone can come up with a variety of process
improvements, but the reality is that changes can take a long time to put into place. It is
essential to do three things when implementing change, according to Wood.
1. Stay positive. It can be easy to get down on changes that are taking a long time.
2. Keep them fresh. Some of UPSs changes have taken 15 years to implement. Sometimes
they were low on the prioritization list or technological solutions werent available. Keep
the excitement and enthusiasm for what new initiatives can offer.
3. Maintain focus. Remember why the changes matter. Further, keep in mind compliance,
revenue, and savings.

MEASURING SUCCESS
In many respects, UPS is known as an engineering organization, as they employ more than 3,500
industrial engineers whose main focus is to optimize processes and procedures. They use a
variety of KPIs that are determined by the business planning group. Based on last years number
and projections for the upcoming year, KPIs are set and they include measures such as on-time
service performance, miles per package, packages per stop, and customer complaints. There are
monthly plan reviews where each functional group reports on what they are focusing on, how
theyre falling short on measures, and how they plan to get on track. It is critical to meet these
KPIs because customers in all areas of the world expect the same level of service and care for
their packages.
Yet it is important to note that the processes from the past arent necessarily useful today. At
one point processes were hierarchically (optimized pick up, delivery, or sorting), now the
organization looks across functions and creates processes. The focus is on being as efficient and
seamless as possible and measurement is a key enabler.
One example of creating a process that has been refined over time is the delivery process.
Routes are scheduled to avoid left-hand turns. Wood explained, It seems silly to a lot of people
about how much time you save by not making a left-hand turn. But when UPS realized the wait
time combined with idling vehicles was costing millions of dollars, delivery routes were reconceptualized. Now, the organization saves 30 million dollars a year. To further speed up a
delivery, it introduced key fobs, and with one button it both unlocks the vehicle and starts it,
saving additional time for those driving routes.
Yet there are additional ways to measure success. The Management Incentive Program (MIP) to
rewards employees for their contributions to the organization. The measures are reviewed as
part of a quality performance review (QPR) and based on:

balanced volume growth,

growth revenue per piece,
growth in consolidated revenue,
growth in consolidated adjustable earning per share,

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positive operating leverage, and

end-to-end service elements.

The MIP is intended to reward people for good business results and allow them to share in
growth and profits. An upshot of this this program it helps retain good talent. The program gives
UPS stock for part of the compensation, while the other portion can be more stock, a 401K
contribution, or cash. Through the distribution of stock, UPS creates an employee investment in
the organization, since everyone is an owner. As Wood explained, We are owned by managers,
managed by owners. That philosophy is reflected in the culture and attitude of employees at
UPS as it increases the level of buy-in. When employees meeting during a meeting, we speak as
partners, owners of the company. We own the company. When people throw trash in the floor,
its my floor. All the conversations in all of the meetings, people are speaking as partners, said
OMeara.
Yet, measuring success and measuring change is not just about metrics, says Wood. A program
called Orion is meant to reduce drivers miles each day. Theyre not seeing the performance
numbers as a result of the program just yet, but there is a significant reduction of miles. UPS is
confident that money-saving performance numbers will come down as the program takes hold,
and patience is the key to seeing the desired outcome. So while the organization does measure
success, they are also patient enough to understand that success can take a bit of time to come
to fruition.

RESISTERS
There are three main things that UPS focuses on when it comes to resisters: training, showing
benefits, and changing thought processes. Training leads people to understanding the benefits
of change and subsequently changing their thought processes. UPS trains the trainer on how to
deliver the right message before rolling out initiatives. Then trainers correctly, fully inform
people of what is expected. Many times, said OMeara, this approach is enough to convince
those who are not willing to adopt new processes. Yet UPS understands that they cant simply
expect people to accept new processes at face value. The organization trains people in all new
initiatives. Wood said, We dont put anything out without putting people through training.
Dont give people something unless theyre shown how to do it correctly.
Although the organization trains for success, there are times when it isnt enough. Performance
is measured against an established baseline. If it isnt met, then employees are retrained more
vigorously. During the retraining phase, employees are monitored until they achieve
performance targets. If this doesnt occur within a specific timeframe, then someone shadows
the employee until he or she does accomplish the desired outcomes. When people get that
one-on-one attention, they usually get on board pretty quickly, said Wood.
Another way to address resistance is through the Quality Performance Review (QPR), which
includes leadership competencies that directly address change. One part of the evaluation is
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ones ability to accept change, and another part assesses process improvement. Wood said, If
you dont do well, you can get assigned training. The courses help you learn how make change
and how to view process differently. Low scores affect ones MIP score, and, subsequently,
their compensation.
When UPS crosses functional boundaries, resistance is most apparent. One way to address this
is through governance. Those executive management members who sit on the program and
projects oversight committee approve and prioritize projects, and many times, this alone
reduces the resistance to new initiatives. Pushing from the top down with metrics and
accountability will eventually see most of the resistance disappear.
UPS used another tactic to address cross-functional resistance. It merged several different back
office processes (departments) including information technology (IT), finance and accounting
(FA), human resources (HR), sales, and operations. The reorganization put these groups under
one process owner, which then allowed the different resisters to have one point of contact and
authority. The changes were implemented with less resistance, as the new group saw
themselves as working together.
Wood did suggest that not everyone will come around to the changes theyve implemented,
Sometimes you need to write them off. Sometimes you cant convince people at all.

ADVOCATES
UPS rewards those employees who are advocates of change. Many times, simply being on board
and supporting change leads to new opportunities, assignments, and responsibility. These
people naturally tend to get further in the company and realize promotions faster. Further, UPS
often turns to these individuals to explore new ideas and gauge their reactions. They are good
sources for feedback and information about future directions and initiatives. As McCain said,
There are always people who are going to be upwardly mobilethey are visionary and adopt
without resistance and accept the future. The best way UPS can reward advocates is to
encourage their growth.
UPS does offer a word of caution: Beware of fanatics. They can cause more damage than
resisters. These are the individuals who are so excited and enthusiastic, that they make
commitments to deliver more than is possible. Eventually, when things arent going as well as
they would like, they then become determined to deliver on their promises and bad behavior
starts to emerge. After that, others lose faith in the fanatic, and a project usually has to take
several steps backwards. Wood noted, Some of the brightest people are fanatics. We want to
keep them, but its critical for management set boundaries for those employees.

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CONCLUSION
Change is a common, ever-present state at UPS. They have created a culture that both
welcomes and encourages new initiatives. As Wood said, We never accept that what we are
doing today is ever enough. The organization uses a variety of tactics to gather support and
adoption for new directions. As a result, the organization is an industry leader that is innovative
and open.

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UPS Case Study

2013 APQC. ALL RIGHTS RESERVED