Redesigning the world...
Tuesday, May 31, 2011
What's next for you?
This review from overseas has a lot of information...
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Monday, May 30, 2011
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Total Executive Interviews and Reviews
Keys to Successful Entrepreneurs in Eastern and Western Cultures
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Thursday, May 26, 2011
Employee Retention - Building the Employer Brand
Is this the greatest business challenge of the next thirty years?
For years we have been told that the greatest business differentiator is the quality of the people we employee. Sure, this is important, but is it the greatest differentiator? After all aren’t there plenty of others that are at least as important - innovation, scale, efficiency, quality …
But now, there are several universal trends that indicate ‘people’ will almost certainly be the most important differentiator for the next few decades, and the reason is simple – scarcity.
The western world and to some extent the developing world will find it increasingly difficult to find employees. Those organisations that compete effectively for labour will thrive and those that don’t will disappear. The labour market will become increasingly competitive as employers position themselves to attract and then retain the people they need.
The GFC was nothing more than a temporary distraction from this on-going issue. The trends across all of the western world and much of the developing world are the same:
1) Lower birth rates
2) People living longer
3) A shortage of skilled labour
4) Greater work mobility
So what are the implications?
It all comes down to this.
It will be harder to find people and it will be harder to keep people; that organisational success will be increasingly determined by how successful an organisation is at finding and keeping good people.
Much to their credit, many organisations resisted the temptation to reduce their workforce during the recent economic downturn. If the last major recession of 1991-92 taught us anything, it was that employees do not forget. If an organisation fails to look after their employees during the tough times then those same employees are not going to show any commitment to that employer during the good times. This time around many organisations moved fast to protect their employer brand by ensuring that wherever possible, employees were retained, even if that meant in some instances reducing work hours and conditions.
The employer brand, the attractiveness of that organisation as a place to work, has therefore become as important to retention as the product brand is to product sales. Leading organisations now have in place a wide range of ongoing initiatives to protect and strengthen their employer brand.
Those organisations with a strong employer brand are not only able to attract the very best people but they are able to retain them longer and employ them more productively.
Whilst estimates vary, it is generally calculated that the cost of losing an employee is equivalent to 85% of their total employment costs - and this is just the bottom-line impact. On top of this you have the disruption that a departing employee causes in terms of the continuity of the customers relationships and the general disruption to the focus of their team and their team leader. Employees that work within a stable work environment with lower turnover tend to stay whilst those employees who work in an environment with a high turnover tend to leave. In other words high employee turnover is self-reinforcing.
What actions are employers taking to help build their employer brand?
The first thing they are doing is undertaking research, finding out what it is that existing and potential employees are looking for from an employer. The analogy with product branding is obvious. Get to know your market!
There are, of course, many complexities involved in this exercise. No two people are likely to have exactly the same requirements from their employer. Some may be happy to trade job security for less money, whilst for others they are happy to face higher employment risk for more income. Some employees like to work in a collegiate, co-operative environment, others in an environment based more on individual effort. There are of course, an infinite number of variables.
The challenge for the employer therefore is to clearly define what ‘types’ of employees they require. This requires a clear articulation of values and behaviours, work types and organisational culture. Once the organisation has clearly defined the types of employees they are seeking and also clearly understand what employees are seeking from employers, they can then set about the task of:
1) Building a work environment that retains these types of employees
2) Putting in place recruitment strategies that will secure these type of employees
Of course some organisations focus on attracting employees without focussing on what is necessary to retain them. These employees are attracted by what is promised and are disappointed by the reality once they arrive. In the marketing world this is like being attracted to a box of chocolates in pretty wrapping which then turn out to taste pretty awful. We have all had these purchasing decisions and we generally feel conned as a result. Certainly we would not by that product again and we may even bad-mouth the product to our friends.
The reason why many employers focus on the recruitment strategies to the detriment of the retention strategies is that it is easier. It is easier to put up a stand at a university to attract the young and the brightest than it is to actually build an organisational environment that lives up to the promise.
Building a strong retention environment requires a number of things.
First, the employer needs to think of their employees as customers and the leaders within that organisation responsible for ensuring that these customer needs are met. Each leader is responsible for a unique customer group, their team. Each team will have its unique customer issues and requirements. A team within a large manufacturing company that works on the shop floor will be extremely concerned about Occupational Health and Safety, whereas a white collar worker within the accounting department of the same organisation will have no such concerns.
So the first step any organisation must take is build an understanding of each of these unique employee groups (once again this is exactly the same as building a segmented marketing strategy for products), asking the question ‘what is it they want in order to feel passionate and committed, productive and focussed?’
Of course, the only way to know this is to ask them. The leader, for example, could simply sit with his or her team members and ask the question, "What is it that you need to be more engaged, committed, passionate and productive in your job?"
There are, however, some serious problems with this approach. First, it would be a very unusual team where all employees felt they could speak openly about every issue they have. Are they, for example, really going to criticise their team leader’s communication practices? Are they going to complain that they are too busy in case this is misinterpreted as their inability to cope? Are they going to raise issues about their overly bureaucratic information systems when this could be seen as simply their desire to dodge the paper work?
Secondly, they may not actually know or be able to clearly articulate what it is they require. Most of us are unclear about what really drives us, whether this is be with respect to our jobs, our purchasing decisions or our personal lives. Often our thoughts are jumbled and priorities are unclear.
Because of these problems there is a tendency for employees to give a simple and obvious answer to what they need, that is, they simply want more money. But research has shown that money is rarely the prime motivator. Organisations who simply out pay their competitors will struggle. Pay is a blunt instrument. The challenge for the organisation is to identify and encourage intrinsic motivators or emotional connections. Whilst these are more difficult to identify, the employer who indentifies and delivers these emotional connectors will build the most compelling employer brand.
This is not to say one on one conversations are invaluable, they are. But they are not sufficient.
To find out what employees really want, the organisation needs to do its research. A confidential, well-constructed contemporary employee opinion survey is the most popular vehicle for this. Over the past ten years employee surveys have moved from mere tokenism to become one of the most powerful organisational performance improvement initiatives available.
What other single initiative can:
- Make teams and businesses more efficient
- Strengthen leadership
- Improve employee engagement, passion and commitment
- Increase customer focus
- Improve sales
- Build alignment
- Enhance employer branding
- Reduce employee turnover
Other tools such as exit interview software also provides valuable insights.
Retention improvement action planning software helps larger organisations deliver different retention strategies to different segments or teams.
Conclusion
Building the best possible employer brand is based on developing the best possible understanding of employee needs and then meeting these needs. Because these needs evolve over time and the structure and makeup of corporations change, this research needs to be fresh and continuous. Great organisations will have in place an effective, on-going process for capturing employee issues and addressing them.
Every successful organisation will be constantly striving to build the best possible business environment for their employees, a workplace that encourages ideas, passion and commitment.
This organisation has the retention issue under control and they have built and can defend what is becoming the true business differentiator for all companies, people.
Source:
Lanning Bennett
Founder
COI Group
Will History continue to drive our Future???... again...
As we move into the 2nd year of business, I recall our first Directors report with two broad sweeping statements:
- The History of Change is Social Innovation
- The Future of Change is Social Innovation
To understand these two comments that underpin the existence of Total Executive and the knowledge portal we provide executives and their staff, we must first provide a couple definitions;
Innovation - The commercialisation of an idea/invention(1)
Social Innovation - Innovation developed through collaboration with community/society(2)
These definitions are considerably simplified from the definitions provided by Wikepedia below. However, I believe it is important to simplify the definitions right down to theire core - so their full impact on change can be understood.
Let's first take the impact of innovation on change...
If Innovation is the commercialisation of an idea or invention, then this means the idea or invention may have existed for years, even decades.
However, it is not until someone comes along and commercialises the idea or invention - ie use it to create something that produces a return of value (not necessarily a $value/profit it could be of community value), that the act of innovation has been achieved.
Thereby, the idea or invention may have existed for years, though it is only at the point of commercialisation - ie innovation - whereby 'change begins'.
Now let's consider the impact of social innovation on change...
If social innovation is innovation developed through collaboration with community/society, this implies that the act of commercialisation has involved more than one person.
Therefore, a social innovation must have a much more significant impact on change, than an innovation alone - as the number of people involved is considerably more.
It is therefore, given the definitions above, that I believe the history and future of change will continue to rely on Social Innovation.
With this in mind, Total Executive has been created.
Our knowledge bank provide resources to aid discussion and argument on the cornerposts of our portal:
- Leadership
- Sustainability (All levels - not purely 'Green')
- Responsibility and CSR
- Technology and Communications
These are underpinned with the belief that knowledge, coaching and mentoring via the fantastic minds we have within our executive community will produce social innovations that will help with the changes our planet will require into the future.
We bring you our first newsletter in April 2010.
We look forward to hearing how you are fostering and developing relationships across sectors into the future.
References:
1) Wikipedia define Innovation as:
Innovation is a new way of doing something or "new stuff that is made useful".[1] It may refer to an incremental emergent or radical and revolutionary changes in thinking, products, processes, or organizations. Following Schumpeter (1934), contributors to the scholarly literature on innovation typically distinguish between invention, an idea made manifest, and innovation, ideas applied successfully in practice. In many fields, such as the arts, economics and government policy, something new must be substantially different to be innovative. In economics the change must increase value, customer value, or producer value. The goal of innovation is positive change, to make someone or something better. Innovation leading to increased productivity is the fundamental source of increasing wealth in an economy.
Innovation is an important topic in the study of economics, business, entrepreneurship, design, technology, sociology, and engineering. Colloquially, the word "innovation" is often synonymous with the output of the process. However, economists tend to focus on the process itself, from the origination of an idea to its transformation into something useful, to its implementation; and on the system within which the process of innovation unfolds. Since innovation is also considered a major driver of the economy, especially when it leads to new product categories or increasing productivity, the factors that lead to innovation are also considered to be critical to policy makers. In particular, followers of innovation economics stress using public policy to spur innovation and growth.
Those who are directly responsible for application of the innovation are often called pioneers in their field, whether they are individuals or organisations.
2) Wikipedia define Social Innovation as:
Social innovation refers to new strategies, concepts, ideas and organizations that meet social needs of all kinds - from working conditions and education to community development and health - and that extend and strengthen civil society.
Over the years, the term has developed several overlapping meanings. It can be used to refer to social processes of innovation, such as open source methods and techniques. Alternatively it refers to innovations which have a social purpose - like microcredit or distance learning. The concept can also be related to social entrepreneurship (entrepreneurship isn't always or even usually innovative, but it can be a means of innovation) and it also overlaps with innovation in public policy and governance. Social innovation can take place within government, within companies, or within the nonprofit sector (also known as the third sector), but is increasingly seen to happen most effectively in the space between the three sectors. Recent research has focused on the different types of platforms needed to facilitate such cross-sector collaborative social innovation.[1]
History
Social innovation was discussed in the writings of figures such as Peter Drucker and Michael Young (founder of the Open University and dozens of other organizations) in the 1960s.[2]. It also appeared in the work of French writers in the 1970s, for example Pierre Rosanvallon, Jacques Fournier, and Jacques Attali [3]. However, the themes and concepts in social innovation have existed long before that. Benjamin Franklin, for example, talked about social innovation in terms of small modifications within the social organisation of communities [4] that could help to solve everyday problems. Many radical 19th century reformers like Robert Owen, founder of the cooperative movement, promoted innovation in the social field and all of the great sociologists including Karl Marx, Max Weber and Émile Durkheim focused much of their attention to broader processes of social change. However, more detailed theories of social innovation only became prominent in the 20th century. Joseph Schumpeter, for example, addressed the process of innovation more directly with his theories of creative destruction and his definition of entrepreneurs as people who combined existing elements in new ways. In the 1980s and after, writers on technological change increasingly addressed the importance of social factors in affecting technology diffusion[5]
Recent developments
The idea of social innovation has become much more prominent with ongoing research, blogs and websites (such as the social innovation exchange) [6], and a proliferation of organisations working on the boundaries of research and practical action. Several currents have converged in this area, including:
- new thinking about innovation in public services, pioneered particularly in some of the Scandinavian and Asian countries. Governments are increasingly recognising that innovation isn't just about hardware: it is just as much about healthcare, schooling and democracy. [7] [8]
- growing interest in social entrepreneurship.[9]
- business, which is increasingly interested in innovation in services.[10]
- new methods of innovation inspired by the open source field.[11]
- linking social innovation to theory and research in complex adaptive systems to understand its dynamics.[12]
- collaborative approaches to social innovation, particularly in the public sector.[13] [14]
A recent overview of the field highlighted the growing interest of public policy makers in supporting social innovation in these different sectors, notably in the UK, Australia, China and Denmark.[15] A focus of much recent work has been on how innovations spread [16] and on what makes some localities particularly innovative.[17]
History of Social Innovation and territorial development
There is another extensive literature on social innovation in relation to territorial (or regional) development, which covers: first, innovation in the social economy, i.e. strategies for satisfaction of human needs; and second, innovation in the sense of transforming and/or sustaining social relations, especially the governance relations at the regional and local level. A combination of both the modes provides a comprehensive approach to innovation in social and economic dynamics within territories. In Europe, from the late 1980s, research on social innovation from a territorial perspective was initiated by Jean-Louis Laville[18] and Frank Moulaert[19] and has been going on since then. In Canada CRISES initiated this type of research. The first large scale research project to work on territorial innovation analysis was SINGOCOM Social Innovation, Governance, and Community Building a European Commission Framework 5 project (2002-2004), that offered wide ranging discussions on Alternative Models for Local Innovation (ALMOLIN).
Some noted scholars
- Akhtar Hameed Khan
- Jean-Louis Laville
- Frank Moulaert
- Geoff Mulgan
- Michael D. Mumford
See also
- civil society
- post fordism
- social entrepreneurship
- Specialisterne
- sustainopreneurship
- Young Foundation
References
- ^ Nambisan, S. "Platforms for Collaboration", Stanford Social Innovation Review, Summer 2009.
- ^ see for example Gavron, Dench e ds Young at 80, Carcanet Press, London, 1995 for a comprehensive overview of one of the world's most successful social innovators
- ^ Chambon, J.-L, David, A. and Devevey, J.-M (1982), Les Innovations Sociales, Presses Universitaires de France, Paris
- ^ Mumford, M.D. (2002) Social Innovation: Ten Cases from Benjamin Franklin, Creativity Research Journal, 14(2), 253-266
- ^ notably in the writings of Christopher Freeman, Carlotta Perez, Ian Miles and others
- ^ www.socialinnovationexchange.org
- ^ Innovation in the Public Sector an overview of thinking about innovation in the public sector, published by the UK government's Strategy Unit in 2003
- ^ Ready or Not? published by The Young Foundation in 2007 about the need for public sector organisations to innovate
- ^ see for example Nichols; Social Entrepreneurship, Oxford University Press 2007
- ^ design companies article by Forbes magazine about how companies are innovating in the way they offer services
- ^ Innovation in open source article by harvard business school about innovation in open source
- ^ Westley,Zimmerman and Patton; Getting to Maybe;Toronto, Random House 2006
- ^ Nambisan, S. "Transforming Government through Collaborative Innovation", IBM Center for the Business of Government, April 2008
- ^ James A. Phills Jr., Kriss Deiglmeier, & Dale T. Miller "Rediscovering Social Innovation", Stanford Social Innovation Review Fall 2008.
- ^ Mulgan, Ali, Tucker; Social innovation: what it is, why it matters, how it can be accelerated, published by Said Business School, Oxford, 2007
- ^ various studies by Greg Dees and others and the study published by NESTA In and out of sync: growing social innovations, London 2007
- ^ Transfomers published by NESTA, London, 2008
- ^ Laville, J.-L. (Ed.) (1994) L’économie solidaire, une perspective internationale, Desclée de Brouwer, Paris
- ^ Moulaert, F. and Sekia, F. (2003) Territorial Innovation Models: a Critical Survey, Regional Studies, 37(3), 289-302
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Feel Boxed In???
Oschene
'Total Executive Views' is the section of our TotalEXEC portal where we display articles, news, reviews and interviews that have received interest by executives and their staff.
Subjects covered revolve around the cornerposts of our portal:
- Leadership
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A lot of these articles have featured in our newsletters and digital publications.
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To search for related articles, it is easiest to click on the tags below each article.
We look forward to your contributions to these articles.
All the best
The TotalEXECUTIVE team
Creators of Responsible Leadership
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Tuesday, May 24, 2011
The psychology of change management
Companies can transform the attitudes and behavior of their employees by applying psychological breakthroughs that explain why people think and act as they do.
Could this be used to encourage Responsible Leadership?
Over the past 15 or so years, programs to improve corporate organisational performance have become increasingly common. Yet they are notoriously difficult to carry out. Success depends on persuading hundreds or thousands of groups and individuals to change the way they work, a transformation people will accept only if they can be persuaded to think differently about their jobs. In effect, CEOs must alter the mind-sets of their employees—no easy task.
CEOs could make things easier for themselves if, before embarking on complex performance-improvement programs, they determined the extent of the change required to achieve the business outcomes they seek. Broadly speaking, they can choose among three levels of change. On the most straightforward level, companies act directly to achieve outcomes, without having to change the way people work; one example would be divesting noncore assets to focus on the core business. On the next level of complexity, employees may need to adjust their practices or to adopt new ones in line with their existing mind-sets in order to reach, say, a new bottom-line target. An already "lean" company might, for instance, encourage its staff to look for new ways to reduce waste, or a company committed to innovation might form relationships with academics to increase the flow of ideas into the organization and hence the flow of new products into the market.
But what if the only way a business can reach its higher performance goals is to change the way its people behave across the board? Suppose that it can become more competitive only by changing its culture fundamentally—from being reactive to proactive, hierarchical to collegial, or introspective to externally focused, for instance. Since the collective culture of an organization, strictly speaking, is an aggregate of what is common to all of its group and individual mind-sets, such a transformation entails changing the minds of hundreds or thousands of people. This is the third and deepest level: cultural change.
Linking all of the major discoveries in programs to raise performance has effected startling changes in the way that employees behave
In such cases, CEOs will likely turn for help to psychology. Although breakthroughs have been made in explaining why people think and behave as they do, these insights have in general been applied to business only piecemeal and haven’t had a widespread effect. Recently, however, several companies have found that linking all of the major discoveries together in programs to improve performance has brought about startling changes in the behavior of employees—changes rooted in new mind-sets. Performance-improvement programs that apply all of these ideas in combination can be just as chaotic and hard to lead as those that don’t. But they have a stronger chance of effecting long-term changes in business practice and thus of sustaining better outcomes.
Four conditions for changing mind-sets
Employees will alter their mind-sets only if they see the point of the change and agree with it—at least enough to give it a try. The surrounding structures (reward and recognition systems, for example) must be in tune with the new behavior. Employees must have the skills to do what it requires. Finally, they must see people they respect modeling it actively. Each of these conditions is realized independently; together they add up to a way of changing the behavior of people in organizations by changing attitudes about what can and should happen at work.
A purpose to believe in
In 1957 the Stanford social psychologist Leon Festinger published his theory of cognitive dissonance, the distressing mental state that arises when people find that their beliefs are inconsistent with their actions—agnostic priests would be an extreme example. Festinger observed in the subjects of his experimentation a deep-seated need to eliminate cognitive dissonance by changing either their actions or their beliefs.
The implication of this finding for an organization is that if its people believe in its overall purpose, they will be happy to change their individual behavior to serve that purpose—indeed, they will suffer from cognitive dissonance if they don’t. But to feel comfortable about change and to carry it out with enthusiasm, people must understand the role of their actions in the unfolding drama of the company’s fortunes and believe that it is worthwhile for them to play a part. It isn’t enough to tell employees that they will have to do things differently. Anyone leading a major change program must take the time to think through its "story"—what makes it worth undertaking—and to explain that story to all of the people involved in making change happen, so that their contributions make sense to them as individuals.
Reinforcement systems
B. F. Skinner is best known for his experiments with rats during the late 1920s and the 1930s. He found that he could motivate a rat to complete the boring task of negotiating a maze by providing the right incentive—corn at the maze’s center—and by punishing the rat with an electric shock each time it took a wrong turn.
Skinner’s theories of conditioning and positive reinforcement were taken up by psychologists interested in what motivates people in organizations. Organizational designers broadly agree that reporting structures, management and operational processes, and measurement procedures—setting targets, measuring performance, and granting financial and nonfinancial rewards—must be consistent with the behavior that people are asked to embrace. When a company’s goals for new behavior are not reinforced, employees are less likely to adopt it consistently; if managers are urged to spend more time coaching junior staff, for instance, but coaching doesn’t figure in the performance scorecards of managers, they are not likely to bother.
Some disciples of Skinner suggest that positive-reinforcement "loops" have a constant effect: once established, you can leave them be. Over time, however, Skinner’s rats became bored with corn and began to ignore the electric shocks. In our experience, a similar phenomenon often prevents organizations from sustaining higher performance: structures and processes that initially reinforce or condition the new behavior do not guarantee that it will endure. They need to be supported by changes that complement the other three conditions for changing mind-sets.
The skills required for change
If a company urges its employees to be ‘customer-centric’ but paid little attention to the customer in the past, they won’t know how
Many change programs make the error of exhorting employees to behave differently without teaching them how to adapt general instructions to their individual situation. The company may urge them to be "customer-centric," for example, but if it paid little attention to customers in the past, they will have no idea how to interpret this principle or won’t know what a successful outcome would look like.
How can adults best be equipped with the skills they need to make relevant changes in behavior? First, give them time. During the 1980s, David Kolb, a specialist in adult learning, developed his four-phase adult-learning cycle. Kolb showed that adults can’t learn merely by listening to instructions; they must also absorb the new information, use it experimentally, and integrate it with their existing knowledge. In practice, this means that you can’t teach everything there is to know about a subject in one session. Much better to break down the formal teaching into chunks, with time in between for the learners to reflect, experiment, and apply the new principles. Large-scale change happens only in steps.
Second, as the organizational psychologist Chris Argyris showed, people assimilate information more thoroughly if they go on to describe to others how they will apply what they have learned to their own circumstances. The reason, in part, is that human beings use different areas of the brain for learning and for teaching.1
Consistent role models
Most clinical work confirms the idea that consistent role models, whom the famous pediatrician Benjamin Spock regarded as decisive for the development of children, are as important in changing the behavior of adults as the three other conditions combined. In any organization, people model their behavior on "significant others": those they see in positions of influence. Within a single organization, people in different functions or levels choose different role models—a founding partner, perhaps, or a trade union representative, or the highest-earning sales rep. So to change behavior consistently throughout an organization, it isn’t enough to ensure that people at the top are in line with the new ways of working; role models at every level must "walk the talk."
The way role models deal with their tasks can vary, but the underlying values informing their behavior must be consistent. In a company that encourages entrepreneurial decision making at low levels, one middle manager might try to coach junior employees to know how to spot a promising new venture; another might leave this up to them. Both, however, would be acting in line with the entrepreneurial principle, whereas a boss who demanded a lengthy business case to justify each $50 expenditure would not be. But organizations trying to change their value systems can’t tolerate as much variance in their role models’ behavior. If entrepreneurial decision making were a new value, both of these middle managers might have to act in roughly the same way in order to encourage their subordinates to make bold decisions.
Behavior in organizations is deeply affected not only by role models but also by the groups with which people identify. Role modeling by individuals must therefore be confirmed by the groups that surround them if it is to have a permanent or deep influence. (Most teenagers could tell you a lot about this.) Say that a well-respected senior leader is waxing lyrical about making the culture less bureaucratic and even conforming to the new regime by making fewer requests for information. If the sales reps in the company canteen spend every lunchtime complaining that "we’ve heard this a thousand times before and nothing happened," individuals will feel less pressure to change their behavior. Change must be meaningful to key groups at each level of the organization.
Putting the approach into practice
The case of a retail bank shows how these four conditions can coalesce to change mind-sets and behavior and thereby improve performance. But though we have grouped the actions of the bank under the four conditions, it didn’t apply them in a neat sequence. As in any change program, there was much disruption and risk. Nonetheless, basing the program on four proven principles gave the CEO confidence that it would eventually succeed.
A few years ago, this CEO took the helm of a large European retail bank that employed more than 30,000 people. He set several targets: doubling the economic profit of the bank, reducing its cost-to-income ratio to 49 percent (from 56), and increasing its annual revenue growth from the current 1 to 2 percent to 5 to 7 percent—all within four years. But retail banking is almost a commodity business. No financial-engineering shortcuts or superficial changes in practice could win a competitive edge for the bank. It could meet these performance goals, the CEO realized, only by galvanizing its people to deliver far better customer outcomes at a much lower cost. That meant changing the culture of the bank by transforming it from a bureaucracy into a federation of entrepreneurs: managers would be rewarded for taking charge of problems and deciding, quickly, how to fix them.
The story of change
First, the CEO developed these insights into a story that would make sense to all of the bank’s employees, top to bottom, and would persuade them to change their behavior in line with the new principles. His principal technique was dialogue-based planning, a refinement of double-loop learning (see sidebar, "People want to develop," for a different technique). First, he drafted a top-level story of the way he perceived the bank’s position and refined the story with the help of his executive directors. Each of them in turn developed a chapter of the story relevant to his or her direct reports; the human-resources director, for example, explained how she would improve the system for identifying potential highfliers and redraw their career paths so that they would spend less time in low-impact jobs. Every director assigned responsibility for each "deliverable" in the story to one member of his or her team. Each team member then had to develop a performance scorecard setting out what he or she would do differently to meet the new goals.
The directors and the CEO then met again to retell their chapters and to get feedback from one another. Each director shared the amended version with his or her subordinates, who in turn retold the relevant part of the story to their own direct reports, and so on down five levels of the organization to the branch managers. At each retelling, the emphasis was on making the story meaningful to the people listening to it and to the groups to which they belonged.
At every level, information flowed upstream as well as down. Part of the story told by the director of retail operations, for example, was the customers’ desire for faster banking processes. One thing slowing them down, according to the staff of the branches, was the document imagers, which broke down, on average, every three days. Ordering a new imager thus became a detail in each branch manager’s story, and the branch staff could translate the top-level story—"our customers want faster operations"—into a practical result that also made their lives easier. At each level of the organization, an employee heard the relevant version of the proposed changes from his or her immediate boss, the person widely regarded as the most effective communications channel.2
How could the CEO know that people really bought into his story? The secret, he felt, was to ensure that it described how life would be better for all of the bank’s stakeholders, not just investors and analysts.
Reinforcing systems
The most dramatic structural change at the bank was eliminating 20 percent of its managerial jobs. The hypothesis, later proved correct, was that doing so would remove a swath of useless activity, without any falloff in performance. All of the bank’s managerial jobs were terminated, and managers were invited to apply for the remaining 80 percent. Applicants knew that they had succeeded if they were invited to a dialogue-based planning session—another way of signaling the importance of the process. Unsuccessful candidates left the bank. The goal was not, primarily, to improve the bank’s cost-to-income ratio; on the contrary, the cost of laying them off was quite high. Rather, since fewer managers now had to make the same number of decisions, this move was intended to force the survivors to make them more quickly.
Those managers who consistently ranked in the lowest level were asked to leave the company
Simultaneously, the bank’s performance-management process was sharpened. Under the old system, managers were rated from 1 to 5 each year and remunerated accordingly. On average, 84 percent of them got a rating of 3 or more, though the performance of the bank was hardly as good as those results would imply. It injected reality into the process by introducing rankings within cohorts. To reveal the true relative performance of the bank’s employees, a manager assessing ten people, say, could rank no more than three as top performers and had to put at least one person in the lowest level. The ten directors evaluated the top 50 managers in meetings chaired by the CEO. The bonus for gaining the first rank was increased to 20 percent, from 10. Managers in the lowest rank, who would formerly have received a bonus of 5 percent, got none at all. Those who consistently ranked in the lowest level were asked to leave.
Skills for change
There was more drama to come. After four months of developing the new strategy with the ten directors, the CEO realized that only five of them were committed to change and equipped to see it through. To ensure that his bank had the right skills to change its practices and culture, he replaced the other five with new directors, three of them outsiders.
Meanwhile, the top 50 managers spent two days at a skill-development center where their leadership abilities—in coaching and decision making, for example—were assessed, and each drew up a personal plan to develop those talents. The company began to assess the performance of its people not just on whether they "made the numbers" but also on the leadership dimension. One manager who had consistently won high bonuses was known to be hell to work for, a fact acknowledged by the new measurement scheme: he was paid the lowest sum appropriate to his post. This news, which traveled fast on the grapevine, underlined the message that leadership really counted.
Consistent role models
Dialogue-based planning ensured that leaders at each level of the organization were "singing from the same song sheet." Their planning sessions were high-profile events where they themselves started modeling the new type of behavior that the bank wanted its staff to adopt. The CEO’s enthusiasm also inspired employees to behave differently. He convinced them that although change would take a long time and would be very hard to achieve, his passion for improving the life of everyone involved with the bank was heartfelt.
Both messages came through strongly in the way he reshaped his executive team. The five departing directors left just as the most disruptive changes were starting, and the work of the remaining five became even more intense during the six months it took to find replacements. It would have caused far less chaos to search for them while leaving the old team in place—and in the dark—but the CEO’s conscience told him not to do so. Besides showing other managers that there was nothing soft about the change program, his approach demonstrated his integrity and his respect for the needs of all of the bank’s people, even those he didn’t want to keep in the long term. In such a large-scale change in behavior, the leader’s character and integrity matter enormously.
The outcome
The bank, which is now two years into its four-year improvement timetable, is about halfway toward meeting its targets for reducing its cost-to-income ratio and increasing its revenue and economic profit. This achievement is a sure sign that behavior is heading in the intended direction throughout the bank. Does it prove that mind-sets too are changing? No numerical evidence is available, but from close observation we can see that the culture really has evolved. The bank isn’t a comfortable place to work, but the focus on performance is far stronger, functional silos are being broken down, and people treat every task with far more urgency. A small but indicative example: average queuing times in branches have dropped by over 30 percent, largely because branch managers can count on their employees to work a more flexible shift system by making the most of part-time work and temporary cover. The imagers are working as well.
It is neither easy nor straightforward to improve a company’s performance through a comprehensive program to change the behavior of employees by changing their mind-sets. No company should try to do so without first exhausting less disruptive alternatives for attaining the business outcome it desires. Sometimes tactical moves will be enough; sometimes new practices can be introduced without completely rethinking the corporate culture. But if the only way for a company to reach a higher plane of performance is to alter the way its people think and act, it will need to create the four conditions for achieving sustained change.
People want to develop
Workshops that draw on transpersonal psychology, a progressive branch of the discipline, can speed up cultural change and make it more enduring.1 Transpersonal psychology suggests that the innate desire to develop and grow infuses human beings with energy. Employees will not put sustained effort into a new kind of behavior if they have only a rational understanding of why it matters to the company; it must mean something much deeper to them, something that they know will have an effect on their personal growth.
Giving them an emotional connection to the new behavior can trigger that shift in perspective. The workshops help to change behavior by establishing these connections and thus giving change a personal meaning for participants. When large numbers of managers go through such transformational workshops within a brief time frame, small group by small group, the graduates create a critical mass of individuals who willingly embrace the new behavior and culture so that both are more likely to be sustained.
The format and off-site setting of such workshops generally resemble those of other corporate get-togethers, but their content is unusual. Facilitators experienced in applying the principles of adult learning and transpersonal psychology to business use conversations, role-playing, and reflection to help participants tap into their rational and subconscious hopes for the future. These hopes may contrast uncomfortably with the current work of the participants—both what they do and how they do it. The contrast can unlock a deeply felt need for change.
An international energy company, for example, had tried for years to make "people development" a core value and discipline. It was succeeding only among the few managers who already believed that they should serve as coaches and counselors. Many managers saw themselves as bosses rather than teachers. To get the 1,000 most senior managers to adopt a "coaching" mind-set (and some other positive cultural attributes), the company put them all, 30 at a time, through a three-day transformational workshop, starting with the executive team.
The rational case for the importance of people development to the company’s strategy and operations was easily stated. Creating an emotional connection between the managers and the new behavior was harder. The workshop leaders asked people to discuss, in pairs, the following question: "When were you mentored in your career?" Participants had good memories of the defining moments of mentoring that had helped them achieve their current positions. They remembered the people who had the courage and interest to give them the hard feedback or encouragement they needed. Then the facilitators asked, "Whom have you mentored? How does it feel to help others develop?" These questions too prompted memories that evoked strong positive emotions.
But transpersonal psychologists think that getting individuals to have an emotional response to a required new form of behavior isn’t enough to persuade them to adopt it permanently. It must also help to satisfy their innate appetite to grow. When they view the new behavior’s meaning from this completely different perspective—not as the fulfillment of an external requirement but rather as a way of satisfying a personal need—they are unlikely ever to give it up.
The facilitators stepped up to this level of meaning when they asked the energy company’s managers, "When you leave this company, what do you want people to say about you?" Given the opportunity to think about this question, few were content to answer, "I made the company richer." Many hoped to be remembered for the difference they had made to other people’s lives, for caring enough to help their colleagues grow. Many also realized that a big gap separated what they would like to hear, on the one hand, and what their coworkers would actually say, on the other. Often those closest to retirement, with the most to offer as mentors, felt this gap the hardest. They realized that developing other employees would satisfy their own personal aspirations, not just the company’s.
After every manager had been through the workshop, the group ranked leadership development as the second most powerfully experienced value at work (exhibit). Eighteen months previously, leadership development had received no votes. The proportion of employees who said that they had received good feedback and coaching rose to 80 percent, from 30, while 75 percent said that the behavior of their managers had changed significantly. The new values would have failed to take hold if in addition to giving employees an emotional connection to behavioral change the company hadn’t implanted the other three conditions necessary to achieve it: appropriate skills, supporting structures, and role models. The workshops helped to promote all of these conditions as well.
—Gita Bellin and Michael W. Rennie
Notes
Gita Bellin is an independent consultant, and Michael Rennie is a director in McKinsey’s Sydney office.
1Transpersonal psychology developed in the 1960s, when Abraham Maslow, Stanislav Grof, and others began integrating the classical Asian traditions of Zen Buddhism, Taoism, and yoga into their theories and the practice of humanistic psychology. To develop the workshops described here, the authors have also drawn on ideas from cognitive, behavioral, and gestalt psychology; neuroscience and quantum physics; emotional intelligence; and adult learning.
About the Authors
Emily Lawson is an associate principal and Colin Price is a director in McKinsey’s London office.
Notes
1These insights into what Argyris called "double-loop learning" were further developed by Noel Tichy into the "teachable point of view" used at GE’s Crotonville training center and at Ford Motor. In double-loop learning, the "framing system" (mind-set) that underlies an individual’s actions can be altered through examination and questioning. In "single-loop learning," goals, values, frameworks, and mind-sets are taken for granted and learning occurs within the system.
2For example, an individual’s boss was consistently rated as the most effective communications channel in a UK survey of HR professionals (Internal Communication, The Work Foundation, December 2002).
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