15 Oct CIO Leadership: For Kohler's Davor Grgic, ERP work never ends
Kohler, Wis. – Davor Grgic has been with the Kohler Co. for 26 years, long enough to see his share of boom and bust cycles.
Grgic, senior vice president of technical services for Kohler, knows the current economic climate could affect his IT budget, but Kohler is fortunate to be part of a global environment where there are businesses that are doing well and businesses that operate in a very challenging environment. When the factor of globalization is added to the company’s commitment to innovation, cultural and business alignment, and planning, it mitigates risk for the privately held company.
“We’re not seeing drastic moves in IT [spending] one way or another,” he stated. “Are we having to make some hard economic choices like all the other companies in this economic environment? Absolutely, but nothing that would turn things upside down.”
For Kohler Co., a global manufacturer of kitchen and bath products, there has been much more boom than bust, and Grgic has been a big part of it. His patience in leading a visioning exercise on enterprise resource planning helped put the company in a position to weather the gathering economic storm.
Despite 50 layoffs linked to the ongoing housing slump, the Wisconsin company has more than 32,000 employees worldwide, and more than 18,000 live outside the United States. Kohler’s business growth is attributable to innovation, especially in the area of business process transformation, and partially due to its willingness to branch out into business units like engines and power generation systems, cabinetry, tile, and home interiors, and hospitality and golf destinations.
Through Kohler Labs, the company has done more to help consumers explore its products through blogs and user-contributed content and social networks, but the primary technological factor in its business performance is a decision that was made at the onset of the dotcom boom in the mid 1990s. The ensuing transition to an SAP enterprise resource planning system has paid off handsomely, and even though the global economy has encountered another rough patch, Grgic believes that Kohler, with a still-evolving ERP system, will get through it in good shape.
Historically, Kohler’s business units had their own information technology architecture that grew through legacy implementations; in a number of cases, they also had stand-alone IT organizations, Grgic explained. Over the last 10-plus years, Kohler has fashioned a more integrated environment and more federated but centralized IT provisioning, support, and development.
The decision to become an SAP shop was a major one because Kohler had to address Y2K and a lack of coherence in its architecture across the board. The big question revolved around how to build something that would provide significant business benefits in terms of improved processes and better visibility into information across the enterprise.
This improved visibility across industry and geographic segments was critical to Grgic, who earned a bachelor’s degree in economics from the University of Wisconsin-Madison, and a master’s degree in business administration from the University of Minnesota.
Y2K was a business driver, but Kohler was growing pretty rapidly, and it was apparent that legacy systems were old, and office support was highly modified. It would have been nearly impossible to take one dozen disparate backbone applications – all crafted on different architecture with different data models – and figure out how to make them reasonably coherent and transparent across the organization, not to mention evolve them together.
“We had a lots of mainstream systems, some client server, but generally an environment where things were not in a good state of currency,” Grgic recalled. “So there were a lot of older, heavily modified systems that had no logical evolutionary path forward, both from an architecture standpoint and from a satisfying business needs standpoint.”
Kohler, which tends to carefully grind through its options, spent the better part of two years quantifying the potential returns, examining the implications for business processes, and identifying the end-state to help guide its decision-making. Ultimately, the process generated a high degree of consensus that the existing application mix was not going to work, and Y2K added to the sense of urgency.
The ERP trigger was pulled in 1997, but the process continues to evolve more than a decade later. It’s still unfolding because of recent acquisitions, the maturing of existing businesses, the evolution of ERP systems, and international growth and globalization. Kohler now has more than 50 manufacturing plants around the world, and ERP still requires constant navigation, including the need for standardization of processes.
Grgic said Kohler challenged a lot of business processes because it saw a variety of opportunities for process improvements. Generally, areas that required a lot of behavioral change and process change were the most challenging in terms of implementation and cultural acceptance. “Implementation teams that had in-depth understanding of where they were from a process standpoint, and how they wanted to evolve the process, were invariably more successful than teams that didn’t,” he noted.
Speaking of teams, Grgic forged a partnership with Kohler’s treasurer (now chief financial officer) and the controller of a large business unit who had a substantial amount of experience running other functions within Kohler. They formed the core group that championed ERP across the business units.
Beyond corporate information technology, Grgic wears a few other hats in areas like global procurement and corporate logistics, but his ERP partners provided important complementary skills. “None of us, individually, had all the elements it took to engage the businesses,” he said, “but the three of us together, engaging the business leaders and the business staffs, worked really well because we were on top of the financial implications, we were on top of the business implications, and we were on top of the architectural and IT implications.”
Had Kohler not pursued ERP, Grgic believes he would have faced questions from upper management and the rank and file because its ability to have good visibility across businesses would be significantly diminished. “I’m not going to say the company would not have done well anyway, but we would have constrained our ability to make decisions and to keep up with our growth with the information architecture that we had,” he said.
Recruiting in a global environment
The constant challenge of the ERP project helps with recruiting, but since Kohler is much more of a global company than it was eight years ago, it needs to recruit more talent in a much broader segment of the world’s geographies. There are differences in how to recruit staff in China versus Thailand, India versus France, and the United Kingdom versus Mexico, and any global company has to figure out the best methods.
To address it workforce needs, the company has set up the Kohler Learning Center to offer virtual e-learning and classroom and hands-on training to its global workforce. “It’s very challenging because the global competition for talent has intensified,” Grgic said, “and the supply of labor really isn’t growing in some of these high-growth areas nearly as much as demand is.”
Kohler also has focused on talent management and internal development plans, including what Grgic called “evolutionary key competency models.” That includes regular conversations with IT workers about what they must do to take the next step up the career ladder, and robust succession planning that will be important in addressing forthcoming Baby Boom retirements. This internal emphasis has enabled Kohler IT to fill about two-thirds of its openings from within.
Another recruiting plus is the role IT workers can play in innovation. Organizationally, the process is bottom up and top down, and it meets in the middle. “What typically happens is we do it at a management level, but then we battle test it against the suggestions and the ideas that we get from some of our core technology people,” he said. “We also battle test it against what we get from the front lines, from our customers.”
Within Kohler’s IT area, most innovation has been at the process level, and it tends to be more incremental than radical. The company doesn’t necessarily apply technology in unconventional ways, but deliberately anoints certain technologies as the most promising.
“We create, essentially, a concentric circle that says, `here are the technologies that are close to our core target area and planning time horizon,” he explained, “and then we have others that are peripheral.”
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