Government/Industry Forum on Capital Facilities and Core Competencies: Summary Report (1998)

Mr. David A. Skiven

Executive Director

General Motors (GM) operates 387 facilities totaling over 400 million square feet of space in 37 countries. The company employs 650,000 people and produces over 8 million vehicles and component sets for sale in 190 countries. The company's core business is marketing vehicles. Within GM's structure is a multibillion dollar service organization called the Worldwide Facilities Group (WFG). WFG is not a core business: it provides the manufacturing facilities for those who build the vehicles that GM markets.

Formed in 1994, WFG consolidated over 20 organizations within GM, a number of which had central staffs. The company concluded it needed single-point management that would align itself with and report to the largest operating unit within GM. In reorganizing its functions, WFG began with the premise that core competencies:

• are skills and services the organization retains or performs to ensure its survival; the skills/services they are particularly good at are core competencies
• do not deteriorate over time—they are enhanced;
• are the glue that binds the business;
• transcend organizational boundaries;
• are built through a process of continuous improvement;
• once lost are very difficult to regain; and
• are what you need to be good at.

WFG's vision is to be "recognized as a premier integrated facilities support organization providing a full range of services to General Motors plants and facilities on a global basis." WFG settled on providing four primary services to the company: facilities management, utility services, environmental services,

and the execution of capital projects. As a support organization, WFG must meet the needs of its internal customers and must be competitive on a global basis.

In facilities management, WFG is currently operating about 60 million square feet of space. WFG also manages closed plants. Once the operating unit is finished with a plant, it becomes part of the WFG portfolio, and is closed, cleaned, and redeveloped to maximize its value. Currently, the organization has 35 to 40 million square feet of closed facilities.

WFG is also responsible for asset-management programs, running a number of programs centrally, such as roofing, transformer replacement, and the like.

WFG manages large manufacturing mills that the company is trying to close. The core business has never been able to do this successfully, so it has turned these mills over to WFG to downsize and close:

Last, WFG manages the warehouse business for GM's non-product-related warehousing. Many closed plants are now converted into warehouses. As warehousing is consolidated, there is a significant reduction in the square footage needed. WFG handles from 5 to 6 million square feet in this area. Thus, in facilities management, WFG's core competencies are:

• management of building services;
• development and management of building asset programs;
• decommissioning or disposal of closed plants; and
• management of labor issues.

WFG has a varied role when it comes to utilities services. GM currently has 65 powerhouses and 89 wastewater treatment plants that have been put into a single unit, which has resulted in significant savings from an operational standpoint. Powerhouse support staff has been downsized by 15 percent in the last year. WFG's core competencies here are:

• utility procurement;
• interfacing on regulations and legislation that have an impact on the utility business;
• development of utility-efficiency programs;
• management of powerhouse and wastewater treatment.

When it comes to full environmental services—including permit acquisition, remediation, regulatory support, and assessment of chemicals—WFG's Environmental Services Group provides companywide support. In this area, WFG defined its core competencies as:

• acquiring permits;
• interfacing on regulation and legislation that have an impact on the core business;
• remediation;
• developing compliance programs;
• providing corporate technical expertise (air, water, waste); and
• managing chemical-selection processes.

WFG spends about $2 billion per year on facilities projects, and has developed a common project-delivery process that is being rolled out across GM. To be successful, in this business line, an organization needs to have project managers who can complete projects that meet the established quality, functional, and cost parameters. Such consolidation of services has allowed the organization to provide its in-company customers with a cross-functional approach to the business, permitting the customer to concentrate on producing a product. In addition, consolidation permits WFG to develop cross-functional teams to meet customer requirements. In summary, for capital projects, WFG's core competencies are:

• delivering new facilities;
• interfacing on regulation and legislation that have an impact on the construction business; and
• providing corporate technical expertise (architectural, structural, mechanical, civil, electrical).

The four primary service areas share some common elements and systems, including the development of staff skills, treatment of financial issues, and the way in which information is handled. There are regional support offices with high concentrations of operations. Communication is critical, and advance planning and customer contact are handled with one project manager in each of the major divisions. The project manager becomes the single management point for all services being performed for the customer. (See Figure 1.) The project

manager is dependent upon the rest of the organization if he or she is to be successful, and is physically located at the customer's site. He or she comes to know and understand the customer's needs and direction, and then can translate those needs into service requirements and communicate that chosen direction and WFG's direction to the customer.

Figure 1

Project manager's responsibilities in advance planning and customer service.

The role of WFG, then, is to deliver those services in the most cost-effective way possible; to develop strategies to service the customer, now and in the future; to reach and maintain a leadership position; to push some corporate initiatives; and to manage services through either in-house or outside providers. However, you cannot always give customers what they want. There are times when corporate programs and solutions must override the individual customer's needs in the best interests of the company. Thus, the service sectors are also responsible for understanding what the leadership position is, which in turn relates to understanding the company's core competencies.

WFG operates from a short-term standpoint in three primary areas: programs, projects, and operations. Price and performance benefits have been significant. Helping to create these benefits have been program savings achieved by leveraging GM's size to reduce structural costs; project savings accrued through a common approach to future projects based on lessons learned from feedback; and continuous improvements of existing operations.

Long-term benefits lie not just in price and performance but in adding value and strategic advantage to customers who might not immediately recognize them. WFG needs to provide competencies not found elsewhere that empower individual businesses of GM to adapt quickly to market opportunities through implementation of strategies. WFG, then, needs to know the external and internal forces that have an impact on the business. It must be able to provide some real strategic advantage to business units as they go into the global marketplace. For example, with a highly unionized work force at GM, WFG has to work within certain parameters. Also, GM has workforce demographics that must be considered, such as the fact that the average age of employees is 42 years and aging. The company has to deal with changing culture, past practices, and with globalization.

Externally, regulation and deregulation of various industries—such as the electrical industry—have a major impact on GM's business. In addition, issues concerning global warming and new air-quality standards are among those that WFG must understand as well as their impact on the company's core business. Market conditions, supplier availability, and competitors are other external forces that must be taken into account.

When it comes to outsourcing, companies must determine whether a service provided by in-house staff would be better done on the outside. When a company provides a service in-house that others can provide more efficiently and effectively, it sacrifices competitive advantage. However, a balance has to be maintained; a "smart buyer" must be kept on staff. That smart buyer must be someone who understands the business, its requirements, and customer needs, and who can translate those needs and requirements into a corporate direction.

Today, WFG is trying to predict what core competencies will be needed in the year 2005. If the organization has the core competencies to support the business, it must do so across the entire business, from engineering and manufacturing to research and development. WFG, consequently, is becoming a facilities facilitator, bringing professionals together to solve problems. From the facilities management standpoint, core competencies in this business are really managing services.

Those at WFG believe that if it is going to be active in the year 2005, it must be able to add value in the area of strategic facilities planning. A great deal of time is spent in such planning, trying to understand where facilities should be located, what they should look like, and what incentive programs are available to support the effort.

Business units change on an ongoing basis, developing new technologies, new materials, and new processing. WFG must be prepared to match these changing needs. The services provided have to meet the needs of the customers and their future direction or else they will work around WFG. WFG must go beyond merely providing the services the customers know they need or know that they can acquire through outsourcing or develop themselves. If WFG limits itself to meeting current needs, then GM can potentially eliminate the need for an organization such as WFG. To remain relevant to GM's mission, WFG's objective, then, is creating services that customers need but have not yet imagined.

Ms. Terry Brandt Wood

Manager of Project Development

Amoco began its first downsizing in 1986, starting with a ''yo-yo dieting'' approach. Amoco would cut its staff by 1,000 or 2,000 people in one location and then add them in another. A consistent, overall program controlling this effort did not then exist. In 1992, the company looked again at downsizing from a corporate basis, and reduced staff to 55,000 overall. Further cuts of 8,500 were made, and the company operated at this leaner state for 2 years. In 1994, the company went back and reduced the overall organization yet again by about 3,500 people. Today Amoco operates with 43,000 employees worldwide. Although losing staff, the company has increased revenues generated and, in turn, the number of capital projects that it manages.

The Worldwide Engineering and Construction (WEC) Division was designed as a result of the company's corporate self-examination. In a corporate reorganization, a level of management was taken out at the very top. Previously, there were separate construction groups to support the operating companies that were supposed to work together, but never really did. When the new organization was instituted, it represented a great cultural change. The centralized organization was brought together from four different divisions of the company: exploration and production, petroleum products, chemicals, and corporate. People in these divisions had different tools, processes, and viewpoints about how they did their work.

From a total of 1,100 engineers involved in engineering and construction, Amoco downsized to roughly 800. A careful evaluation was made of what the company really needed to do. The exploration and production group had initiated establishing some benchmarks and made major changes in how they managed projects. The journey to improvement led it to the realization that the best way to gain efficiency was to form integrated teams to work with outside contractors throughout a project.

The petroleum products division handled detailed design in-house, with some 50 draftsmen supporting the effort. It trained staff by getting them involved in detailed engineering and design on capital projects. The chemicals division was at the other end of the spectrum, with very little direct involvement in projects, using a lump-sum bidding approach. Close evaluation led Amoco to decide that all areas could be improved.

WEC was created to become a service provider. Perhaps the biggest challenge encountered by the organization was in managing the change in culture. Over the years, people had developed different work processes, viewpoints, language, and acronyms—and ultimately a different company identity.

An important task was to immediately establish a mission and vision. WEC tried to align a partnership in which everyone had something to gain and to lose. It also wanted to create a more interesting and exciting workplace. WEC's mission became "We create strategic value for our partners by maximizing Amoco's return on all assets." Its vision is "A culture of excitement and relentless dedication to the growing success of our stakeholders as we provide the best in Engineering Services."

Initially, WEC took a quick assessment of its organization and discovered a number of niches where things were working well. The chemicals group had an outstanding safety record, and other groups had good cost and leadership processes and great tools. Another was well equipped to handle special projects.

The second step was a study of benchmarks of companies in both the same and other industries, which was conducted with Independent Project Analysis Corporation of Reston, Virginia. The assessment that came back left no room for argument: none of the company's groups was doing well compared with industry and none of its processes would likely drive WEC to world-class performance. Therefore, WEC needed to reevaluate those processes and needed all of its staff to pull together to do that.

A new framework was developed, called a "common process." A fivestage "gated" process was designed to manage capital projects. Projects are divided into stages, each of which corresponds to a key decision point. (See Figure 2.) Successful implementation requires behaviors that permit effective cross-functional teams. Although this process met with resistance at first, through training and management support, including support from the Chief Executive Officer, behaviors changed, as did the company culture.

Under this process, at the conclusion of each stage, the team documents its work and frames decisions in a Decision Support Package (DSP). The DSP is reviewed by the appropriate "gatekeeper" to allow the team to obtain approval and pass through the gate to the next stage. The DSP not only covers the information necessary for approval, but also includes a plan for the next stage. The plan includes capital and manpower resources. Having the right people on

the team during each stage is particularly important. The gatekeeper and the team then have a clear expectation of the next stage. The process can be applied at a macrolevel such as moving from an exploration discovery in the Appraise stage to the asset being produced in the Execute stage and products marketed in the Operate stage. It can also be applied at a microlevel, for instance, in the actual drilling of the exploration well, the acquisition of a seismic survey, or the evaluation of a prospect. Each of these items constitutes a project that will move from an Appraise stage to the Operate stage.

Figure 2

Amoco's common process.

One thing the corporation needed was improvement in its advance-planning process. WEC felt this was a function in which it could add measurable value through a process and organizational design. Under the common process, a "front-end loading" assessment is completed at the end of the Define stage.

In addition to project management, WEC took a close look at all of its services. As a provider of engineering services, the company found it was well integrated. By integrating two value chains—the creation of new assets and the ability to maintain those assets—the division discovered some synergies.

WEC has identified 27 services that the division provides. By evaluating the value chain, it has determined that some of these services are differentiated and that they provide the highest value. A value-to-cost ratio has been developed that is applied to services, and as part of the strategic-planning process, a matrix is then completed. This matrix helped staff decide which services and projects should be provided in-house and which should be outsourced or "broker managed." Looking at the value-to-cost ratio helped convince the staff members that although there were functions they were capable of performing, WEC should not continue to do so if someone else could do them more cost-effectively. The division is then able to focus its energy on the high-value leverage work for which WEC had in-house expertise that could not be found elsewhere. For example, WEC had in-house expertise in operating and maintaining international plants because those plants had been designed by people on the staff who not only understood the facilities themselves but also had a global perspective on how to resolve issues in foreign countries.

This type of evaluation matrix proved to be a good motivational tool. In the capital project area, WEC possessed the common process that everyone could rally around. In engineering services, WEC had the viewpoint that services could be differentiated and "broker managed." Under the broker management concept, WEC owns the problem. Its staff can look at the problem, determine if it can add value in resolving the problem or if the problem should be handled by one of its alliance companies. Broker management assures that someone on WEC's staff has the responsibility to follow a problem that is given out to a contractor. WEC has also needed to train staff to develop new skills so staff members can eventually be able to act effectively in the role of broker.

In restructuring WEC a number of levels were taken out of the organization, making it very flat. WEC basically has the management responsibility for capital projects—the project manager and his or her team. The staff is organized around the common process, so where someone is in the organization depends upon the stage of the project. This organizational structure results in quick communication, but with teams all over the world, everyone must work hard to remain integrated.

The company has done a great deal of work on core competencies. Because the company has changed so much, it was recognized that different things were going to be needed from the staff. An assessment was conducted of the competencies the successful employees had. Based on profiles of 50 top engineers, project managers, project engineers, team leaders, and technical specialists, a group of competencies were identified for all individuals. These have been incorporated as part of their performance reviews each year. The company established the competency levels needed at particular points in their

careers, then tied employees' performance reviews, development, and salary increases to these competencies.

One of the interesting mistakes made was in the area of strategic orientation. Historically, it has never been an engineer's job to understand business strategies nor had he been rewarded for it. There was a division between those who were involved in developing business strategies and those who were involved in the technical work. In the reorganization, the layer that converted strategy into operations was taken out. Now, the company is facing some challenges with improving communications and building business acumen in the organization.

If core competencies had been evaluated earlier, and the company had mapped where it stood, different organizational decisions might have been made about how projects are organized. Amoco WEC has gone back and established a few more key positions. These positions are filled by senior project directors who are heavily involved in coaching, mentoring, and teaching project managers during the project stages.

WEC also learned that in addition to a vision statement, engineers need signposts and measures, that is, quantifiable areas to help show that progress is being made. Now, WEC is continually benchmarking the numbers to see if it is really moving ahead.