Managing Change: Lessons from Corporate Culture Change, Part 3 of 3

****************************************************************************************
ACKNOWLEDGEMENT

This article was published in the July-Sept 2009 (Vol. 44, No. 3) issue of
Management – the quarterly magazine of The Malaysian Institute of Management

Reproduced here with permission from the author Dr. Victor S. L. Tan
and from
The Malaysian Institute of Management
****************************************************************************************

Too many organisations go about the wrong way in creating corporate culture change. That probably explains why many corporate culture change initiatives fail or that they cannot be sustained. And it is not too surprising that many leaders and managers are beginning to doubt whether it is possible to change corporate culture in the first place.

Corporate cultures are created by humans. Those rules whether overt or covert in terms, beliefs, thinking, feeling and behaviour are man-made and can be changed. Perhaps, the main aim of this concluding part of a series on change management is to offer change agents some valuable lessons from some of the corporate culture change efforts undertaken by various organisations. While there are many aspects and lessons that one can learn from corporate culture change work, I am taking the liberty to share here ten powerful lessons that I believe will help change agents get on the right footing.

Lesson 1: Effective corporate culture change must begin with changing mindsets

No change can be implemented without, first of all, a change in mindset. By changing mindsets, I am referring to the 5 components of mindsets: Blindspots, Assumptions, Complacency, Habits and Attitudes, more easily remembered from the acronym; B.A.C.H.A. (Source: Changing Mindsets, Victor S. L. Tan, publisher: Times International). Changing mindsets is about uncovering blindspots with regard to areas for improvement. It is about questioning assumptions of thinking, behaviour and practices that are no longer relevant or useful. It is about reducing complacency in the workplace to increase innovation, productivity and performance. Changing mindsets is about eliminating unproductive habits or work practices that do not add value to the individual or the organisation. It is about inculcating a positive attitude towards oneself, work, people, the management and the organisation as a whole.

With mindset change, one is then aware of the need to change the policies, procedures and practices accordingly. In one of our client engagements with a conglomerate in Indonesia, the culture change began with a mindset change from the top management and then cascaded down to the lower level staff. This has proved to be an effective approach to pave the way for a start of the change process as the whole organisation had been engaged in old thinking and outdated ways of managing for the last 20 years in operation. The uncovering of the blindspots and the constant questioning of assumptions helped reduce the level of complacency of the leaders and executives. This resulted in the abandoning of unproductive work practices in the workplace and overall, a more positive attitude of people towards one another, towards their respective departments, their work and the organisation as a whole.

Lesson 2: Successful organisations have corporate culture aligned to their vision, mission, strategies, goals and their environment

It is generally agreed that the purpose of corporate culture is to develop an internal environment that is conducive for people to perform effectively.

However, a corporate culture will only be relevant and useful if it is aligned to the organisation's vision, mission, strategies, goals and the external environment it operates in. What this implies is that an organisation must first get its vision and mission right before deciding on the desired corporate culture. Of course, having determined the right vision and mission, it can then formulate the relevant goals and strategies. In the case of Jaguar Cars, a luxury car manufacturer, in the 80s, the culture change led by Chairman and Managing Director, John Egan focused on aligning the culture towards the new mission for Jaguar "to become the finest car company in the world". A new set of beliefs and core values on growth, quality, market sensitivity, learning and human development, and professionalism was developed, encouraged and practised in the workplace to enable Jaguar to produce world-class luxury cars. With the new culture, what followed was an impressive turnaround of Jaguar, with a huge jump in turnover, profitability and productivity.

The reason why determining the corporate culture needs to take into consideration the environment is because the nature of the industry or the type of business often dictates certain ways of doing things to enable it to compete or stay successful. For example, in the IT industry, the speed of response is a critical factor in doing business. In financial services, integrity is an important value to win the trust of customers.

Lesson 3: To achieve credibility and win the commitment of people, policies, procedures and practices must be consistent with the new culture

Consistency is an important factor in gaining the credibility for any change programme. Saying one thing and doing another thing is the surest way of losing credibility. Once a new culture is identified and the desired core values and behaviour communicated to employees, it is important to simultaneously change the existing policies, procedures and practices in the workplace to align to the new culture. Thus, for example if a new culture promotes openness, it is important to share information and disseminate relevant information freely and openly based on needs rather than hierarchy.

In the case of the culture change initiated by Ciba-Geigy where it strived to reduce its impact on the environment and pay more attention to employee concerns, the leaders started to change their policies and practices to align to the new culture. The company disposed of its photographic film business and reorganised itself to make decentralisation and autonomy a reality. It also conducted massive training to develop leadership and entrepreneurial qualities among its employees.

Lesson 4: To get a buy-in of corporate culture change requires a strong rationale

It is true that most cases of culture change take a lot of effort and time to overcome resistance. An effective way to overcome resistance is to provide a strong, compelling and sound rationale for the culture change. From our experience, such a rationale must often incorporate not just what is good for the organisation but also for individuals. Thus for example, an organisation which is promoting a performance-oriented culture should not just stress on the benefits of increasing productivity and performance to enable the company to compete and survive. It should also stress that by developing such a culture, it would also enhance the competency of individuals, help them develop a performance track record and increase their market value in terms of knowledge, skills and experience. It should also communicate to the staff that such a culture would also add meaning to their work and bring about personal satisfaction in the process.

Lesson 5: To ensure company-wide culture assimilation, culture change programmes should utilise the various culture transmission mechanisms available

To succeed in culture change, there must be prevalent practices of behaviour that reflect the new culture. Thus to ensure company-wide internalisation of the new culture, an organisation should utilise every channel of communication and every opportune occasion to promote and communicate the new belief system, core values and desired patterns of behaviour to every level of staff from the top right down to the lowest level of organisational hierarchy. Companies should use formal and informal channels of communication to influence and educate others on the new culture. Just like in advertisement, the publicity blitz should be frequent, focused and impactful to achieve maximum results.

Lesson 6: Achieving deep and sustainable culture change requires the participative approach

Culture change is by nature a deep and fundamental change. Such a change requires not just opening up minds but also touching hearts. People must really not just think it but they must really feel it before they behave in accordance to the desired culture. The way to achieve sustainable culture change is to first have people want to practise the new culture rather than being forced to do things in a certain way. A good way to do this is by highlighting the aspect of the culture that shows care for people. Thus showing how the practice of the new culture will enhance respect between one another, create a more enjoyable workplace and increase the competency and value of individuals speaks well of the care the organisation has for its people. As the saying goes, "People do not care how much you know until they know how much you care". Showing care certainly goes beyond opening one's mind; it certainly touches the heart.

Another good way of developing sustainable culture change is to get people's involvement. Involvement can come in many ways. It could be involvement through their input and suggestions on how they would translate certain core values into practice in their daily tasks. Or it could be soliciting their suggestions on how they could promote the practice of respecting one another in the workplace. Other ways of involvement could be through culture promotion activities such as a slogan competition to come up with a theme for launching the core values of the new culture. One of the organisations we worked with had come up with an essay writing competition on topics such as "How I Can Help Promote the New Corporate Culture in My Organisation" for individuals as well as for group categories. In the process of discussing amongst themselves and writing the essays, employees began to understand a little bit more of the new culture and began to see the value of the new culture, and subsequently began to want to assimilate the desired patterns of behaviour in the workplace.

Lesson 7: Top management commitment is essential to the success of culture change

The success of culture change requires company-wide acceptance. A limited change in the way of thinking and working within a small unit or department does not constitute a culture change in organisation. To have company-wide practice of a new corporate culture requires the commitment of top management. Commitment here refers to not only the initial launching but the continued support and follow-through. Support is needed to change policies and systems to align to the new culture.

In the case of British Airways (BA), a major culture change was instituted with full top management support, when the then Thatcher government decided to convert BA from government ownership to private ownership. The Chairman, Lord King and CEO, Colin Marshall provided the support to the change in organisation structures, systems and policies. In fact, the company's top management approved the change to a new performance appraisal system and compensation system which put greater emphasis on improving customer service and being market-driven. Colin Marshall's unwavering commitment was demonstrated by his personal presence in question-and-answer sessions at a series of training programmes on "Managing People First" and "Leading The Service Business" for senior and middle managers.

Lesson 8: To speed up culture change, leverage on “Opinion Leaders”

Every resource is needed to help speed up the culture change process. A good way to tap into the organisation's resources is to seek out "opinion leaders" to assist in promoting the new culture. Opinion leaders can be formal or informal leaders whose opinions matter to others. Often these leaders have people who look up to them and listen to what they say and do what they say. Thus, it will make sense to first convince these opinion leaders and then involve them as change agents and as role models to help spread the new culture within the organisation.

Lesson 9: Create a powerful dream of the new culture

Every great achievement starts with a powerful dream. There is a compelling force of change in creating a powerful dream. And great changes come from powerful dreams. Martin Luther King had a powerful dream in the 60s when he said, "I have a dream that one day on the red hills of Georgia, the sons of former slaves and the sons of former slave owners will be able to sit down together at the table of brotherhood". Christopher Columbus had a powerful dream of sailing across a shorter East-West trade route. Mahatma Gandhi had a powerful dream to lead his country to independence from the British. John F. Kennedy had a powerful dream of landing man on moon. Likewise, it is important to create a powerful dream of the new culture an organisation wants to develop. It should come across as exciting, inspiring and worthwhile for everybody in the organisation.

Lesson 10: Recognise and reinforce change success early and frequently

A culture change is on ongoing process and may take a long time to see tangible results. Too often leaders wait too long before they start to recognise, reward or reinforce the motivation of people in the process of implementing culture change. If the wait is too long, people will run out of stamina, their interest will simmer down and the assimilation process will come to a halt. It is thus important to look out for "early wins" and "small wins" along the way of culture change implementation, and recognise and reward people to ensure they stay motivated. In one of our culture change engagements, for example, a celebration was held when the organisation came to a consensus on the defined core values. There was further recognition of the roles of the people involved when the new culture was launched. And every success, no matter how small was highlighted early in the process and was recognised, celebrated and rewarded.

Rewards need not be merely monetary. It can come in the form of a commendation letter recognising a particular team in recruiting the most number of change agents, or a public announcement during a family day outing where individuals are singled out for being effective role models in leading their team effectively. It is the culmination of all these small positive gestures and steps taken on a continuous and relentless fashion that ultimately lead to a culture transformation for the organisation.


Written by Dr. Victor S. L. Tan. Dr. Tan is an international authority on change management and the CEO of KL Strategic Change Consulting Group (www.klscc.com) specialising in strategic change and corporate culture. He is the author of six management books including his latest book, The Secret of Change. The author may be contacted at +603 – 9074 1129 or victorsltan@klscc.com

Managing Change: How to Change Your Corporate Culture (Part 2 of 3)

****************************************************************************************
ACKNOWLEDGEMENT

This article was published in the April-June 2009 (Vol. 44, No. 2) issue of
Management – the quarterly magazine of The Malaysian Institute of Management

Reproduced here with permission from the author Dr. Victor S. L. Tan

and from
The Malaysian Institute of Management
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Changing corporate culture is unlike a heart transplant operation which can be done overnight. Instead, it is an ongoing process that takes time and requires constant monitoring. It is certainly not about transplanting alien cultural elements into an organisation. Changing corporate culture is about transforming the organisation through continuous influence and the shaping of beliefs, assumptions, values and patterns of behaviour of people towards creating a desired work environment. It is about changing the mindsets of people to a new way of thinking and working, which will enable the organisation to be effective, efficient and competitive. Thus, changing corporate culture is about opening minds and winning hearts of people to a new way of working, which is not just about increasing the bottom line but also about improving relationships amongst people and seeking meaning in work through a sense of belonging, shared values and satisfaction.

How does an organisation go about influencing and shaping its corporate culture? KL Strategic Change Consulting (KLSCC) Group has worked with over 200 Asian organisations, and in many of them the work has involved, to a great extent, changing their corporate culture to align to their respective visions, missions, goals and the environment.

The following diagram shows the KLSCC's Corporate Culture Change Model, which is comprised of four phases.

Phase 1: Culture Assessment

The Culture Assessment phase comprises two tasks. One is the assessment of the existing culture of the organisation, and the other is to determine the desired corporate culture. To get a more reflective picture of the real culture of an organisation, one should use a combination of tools. One way is to conduct personal interviews with a representative sample of participants in the organisation. One-to-one interviews as well as focused interviews with groups can be conducted to assess the existing culture as well as determine the desired culture of the organisation.

Besides interviews and discussions, Corporate Culture surveys can also be conducted on a representative sample of participants. To encourage accurate input, these surveys must be conducted in an anonymous fashion with the assurance of strict confidentiality. In this respect, KL Strategic Change Consulting Group has developed various corporate culture assessment questionnaires, tools and instruments to help organisations gauge their existing culture as well as determine their desired culture. A desired culture encompasses not just personal and organisational aspirations, but also the demand of the external environment (which includes competition, customers, shareholders and other stakeholders) that will enable the organisation to compete and succeed.

Phase 2: Culture Gap Analysis

This phase involves analysing the gaps that arise from the existing corporate culture and the desired one. This analysis looks into the people, policies, process, technology, strategy and structure of the organisation. One way this can be done is by analysing what currently impedes an organisation from achieving its desired vision, mission and goals. Another way is to define the missing links, be they resources, the appropriate leadership style or the behaviour of people that is required to enable an organisation to achieve the desired future state. The results from the gap analysis will provide sound input to the development of change programmes that influence and shape the culture of the organisation.

Phase 3: Changing Mindsets: Influencing Culture Change

The core of cultural change is the change in mindsets. This involves learning new ways of thinking, new ways of working and interacting with one another. It enables the acquiring of new attitudes and new skills in the workplace. To do this, there is a need to influence and shape the beliefs, assumptions and values of people in the workplace. There are many ways to do this. For a start, the change agents who lead the culture change should become role models. Their attitudes and daily behaviour in the workplace must reflect those defined as desired culture. Their consistent behaviour with the desired culture will encourage others to emulate them. Albert Schweitzer said it best, when he remarked, “Setting an example is not the main thing in influencing others. It is the only thing.”

The next change should be to revamp company policies, procedures and the systems of the company to be aligned with the new culture. Thus any inconsistent practices that are not aligned to the desired patterns of behaviour should be abandoned. To ensure wide influence of the new culture, the organisation should undertake company-wide training to communicate the new belief systems, core values and desired patterns of behaviour.

Orientation programmes can be conducted for new recruits as well as existing staff to help them modify their beliefs, attitudes, values and behaviour to the desired patterns of behaviour in the workplace. The company must capitalise on every communication channel possible to widely publicise and communicate the new corporate culture. Newsletters, e-mails, department meetings, branch managers' meetings, management meetings, family day gatherings, sports club activities and company anniversary events can be useful channels and opportunities for promoting and reinforcing the new culture within organisations.

Another very effective way to start the culture change process in an organisation is through the recruitment process. Potential candidates are screened for the right values and behaviour patterns that will fit the desired culture. Candidates are then interviewed thoroughly and selected on the basis of possessing the relevant values, thinking and behaviour patterns. Some organisations we worked with, have also undertaken a thorough workforce reorganisation, whereby people with the beliefs, values and behaviour that are consistent with culture of the organisation are put in charge whereas those who are not, are being sidelined.

“The crux of effective change will come from how organisations implement a performance reward system to recognise, encourage and reinforce the practice of the desired culture.”

Thus the new leaders who are in charge will develop their people and inculcate the practices of the new culture in the organisation. This type of workforce restructuring, while it “rocks the boat” often is what is needed to change the culture of very old, bureaucratic and archaic organisations in crisis situations. Often the demands of competition and the fast changing environment dictate this type of approach to change quickly and effectively to enable the organisation to survive. Culture change requires constant monitoring and fine-tuning of approaches to achieve effective results. And ultimately, the crux of effective change will come from how organisations implement a performance reward system to recognise, encourage and reinforce the practice of the desired culture.

Phase 4: Sustaining the New Culture

Sustaining a new culture requires continuous improvement efforts in moulding, shaping, influencing and reinforcing actual behaviour in the workplace on a daily basis. The reality of whether a new culture is sustainable lies in what value and importance leaders place in maintaining the consistency of the desired practices and patterns of behaviour in the daily activities and tasks in the workplace.

Thus a constant flow of new ideas and suggestions to promote and reinforce the new culture is needed to get people to really internalise those beliefs, values and behaviour. And the constant linking of positive performance and results to the new culture will also add credibility towards the new corporate culture. And once people truly see the benefits of the new culture not just for the organisation but also for themselves as individuals, they will want to continue those practices.

To serve as a useful guide for change agents to implement culture change in their organisations, 1 would like to share our experience of the change efforts we made in working with over 200 Asian organisations. Overall, there is a common, desired work environment which employers and employees strive for.

While there are many issues and a lot of dissatisfaction raised by various levels of staff in the organisations we worked with, we feel that a lot of these are symptoms of some of their yet unfulfilled intrinsic needs. These needs could be the feeling of recognition and appreciation, a sense of importance, a sense of belonging, the joy of achievement, the pride of involvement or the fun of sharing.

In summary, there is a common thread running through the organisations which we have worked with. Overall, their staff members want the following:

• Good relationships between divisions, departments and individuals
• A conducive work environment
• Appreciation of good work done
• A sense of fairness
• Encouraging support and guide when needed
• Competitive salaries and staff benefits
• Relevant and timely information on what's going on
• More open communication without fear
• Promotion and growth opportunities in the company
• Tactful discipline

Overall, to create this environment and a conducive and productive corporate culture, top management, leaders, managers and staff must work in concert to achieve a win-win partnership to ensure the following are practised in the workplace:

• People are clear of the direction of the organisation
• People are involved and their views or input sought in the decision making process
• The workplace is friendly and meaningful, and people enjoy coming to work
• Communications are clear, timely and relevant
• People get the resources and support they need to do their jobs
• People are respected, recognised and appreciated for doing a good job
• People are kept informed about what is going on in the company
• People are held accountable for their jobs and own up to the problems
• Individual and team efforts are rewarded or recognised
• There are opportunities for learning and career advancement
• There is a spirit of enthusiasm, sense of belonging and teamwork
• Nurturing people is a practice of the organisation

Written by Dr. Victor S. L. Tan. Dr. Tan is the Chief Executive Officer of KL Strategic Change Consulting Group. He is an author of five management books. His latest book is The Secret of Change. For more information, visit www.klscc.com or contact the author at victorsltan@klscc.com

Managing Change: Understanding Corporate Culture (Part 1 of 3)

**************************************************************************************** ACKNOWLEDGEMENT

This article was published in the Jan-Mar 2009 (Vol. 44, No. 1) issue of
Management – the quarterly magazine of The Malaysian Institute of Management

Reproduced here with permission from the author Dr. Victor S. L. Tan

and from
The Malaysian Institute of Management
****************************************************************************************

Many organisations today are hard pressed to change as they are driven by a strong need to change through this digital and the K-economy era. There is no alternative. They have to change to enable their organisations to compete and survive. However, many CE0s are unhappy because many of the changes implemented are not sustainable.

The scenario sounds too familiar. An organisation suddenly realises the need to change due to external pressure of competition. It decides to take a quick and simple way, i.e. undertake training for staff to improve their competency and motivation. Their staff members are sent off to a nice resort for a couple of days where they brainstorm issues, develop strategies to resolve problems, build team spirit and nurture a sense of camaraderie. When the staff members come back, they are all charged up for two weeks and then the enthusiasm subsides and everyone goes about doing things the old beaten way. The issues are still there. The result is that there is no iota of change happening. It is likewise with the implementation of change initiatives, be they TQM or business process reengineering or the GRID management approach – all started well but have not ended up well.

As a consultant, I have been posed the most common question from CEOS: How do you sustain a change initiative and the enthusiasm for continuous improvement?

There is one great strategic flaw in the way most organisations go about implementing change. They go about managing change in a superficial manner through merely changing the structure, process, strategy and technology without addressing the fundamentals that drive the organisation. And these fundamentals are the components that influence and guide the behaviour of people in organisations. It is these very basic components that make up the corporate culture of an organisation. Unless an organisation takes time to shape its corporate culture to the desired change, the effort and results will not be sustainable.

What is Corporate Culture?

Corporate culture is the way people do things in an organisation. It is a set of norms comprising of beliefs, attitudes, core values and behavioural patterns shared by people in an organisation.

It is these shared beliefs, core values and patterns of behaviour which influence the performance of an organisation. Beliefs are the assumptions or perceptions about things, which people and the organisation as a whole take as true or valid. For example, an organisation may have a shared belief about the great potential of its people. Core values are the primary or dominant values that are accepted throughout the organisation, e.g. the core value of respect. A pattern of behaviour is the way people act towards one another. For instance, an organisation that has the belief in the potential of its people and has the core value of respect will have the desired pattern of behaviour of treating people well.

KL Strategic Change Consulting Group, in its consulting work with over 250 Asian organisations, has found that the corporate cultures of Asian organisations play a significant role in determining the capability and speed of leading change within the organisations as well as in the industry. Thus corporate culture is important as it will determine whether or not an organisation survives in the face of changes, turbulence and challenges in the environment. The model developed by KL Strategic Change Consulting shows a direct correlation in how an organisation's beliefs and assumptions influence the core values, which in turn shape the behaviour of people. And it is this behaviour pattern that ultimately affects the performance of an organisation.

Characteristics of Corporate Culture

How does one go about specifically to describe the corporate culture of an organisation? There arc certain characteristics that an organisation values, which distinguish it from other organisations. It is this set of characteristics that provide a start for describing the corporate culture of an organisation. Overall, organisation behaviour experts can agree that there arc about 10 characteristics which collectively provide insights into the essence of the culture of an organisation. The following are the 10 differential characteristics:

1. Individual initiative: the degree of responsibility, freedom and independence that individuals have
2. Risk tolerance: the degree to which employees are encouraged to be aggressive, innovative and risk-taking
3. Direction: the degree to which the organisation creates clear objectives and performance expectations
4. Integration: the degree to which the units within the organisation are encouraged to operate in a coordinated manner
5. Management support: the degree to which managers provide clear communication, assistance and support to their subordinates
6. Control: the number of rules and regulations, and the amount of direct supervision that is used to oversee and control employee behaviour
7. Identity: the degree to which members identify with the organisation as a whole rather than with their particular work group or field of professional expertise
8. Reward system: the degree to which reward allocations (i.e. salary increase and promotions) are based on employee performance in contrast to seniority, favouritism and so on
9. Conflict tolerance: the degree to which employees are encouraged to air conflicts and criticisms openly
10. Communication patterns: the degree to which organisational communications are restricted to the formal hierarchy of authority

To understand the corporate culture of an organisation, employees are invited to participate in rating these characteristics on a continuum from low to high that corresponds with a scale from 1 to 10. By collating the input from a representative sample of employees, a composite picture of the organisation culture can then be determined. This description will provide a good starting point for employees to develop a common understanding about the organisation, the way things are done and how people are supposed to behave.

The Benefits of Corporate Culture

How does corporate culture help an organisation? What benefits can an organisation derive from developing a strong and conducive corporate culture? In our corporate culture work, we have found that our clients benefited in the following ways:

• It helps align the company towards achieving its vision, mission and goals.
• It increases the team cohesiveness of various departments, divisions or units within an organisation as its corporate culture serves as the 'glue' that bonds people together.
• It shapes the behaviour of staff at work by encouraging the assimilation of core values and the desired behaviour, thereby enabling the organisation to be more effective and efficient.
• A common culture promotes consistency, resolves conflict and facilitates coordination and control.
• It increases staff motivation through a sense of belonging, loyalty and common beliefs and values, which encourage them to think positively of themselves and their organisations.
• A strong culture enables an organisation to pull all its people together and maximise their potential; this certainly provides a competitive edge.

A study of 200 companies by Harvard Business School researchers John Kotter and James Heskett found that corporate culture has a strong impact on the performance of organisations. This landmark study provides four significant conclusions as follows:

• Corporate culture can have a significant impact on a firm's long-term economic performance.
• Corporate culture will probably be an even more critical factor in determining the success or failure of firms in this new millennium.
• Corporate cultures that inhibit strong long-term financial performance are not rare; they develop easily, even in firms that are full of reasonable and intelligent people.
• Although difficult to change, corporate cultures can be made more performance enhancing.

A company with a strong positive culture will motivate people to continue growing, learning and improving. Research has shown that employees have higher motivation and satisfaction working in organisations which are well managed with managers and employees who practise sound principles, common beliefs and shared values.

Thus it can be seen that to enable change initiatives and the enthusiasm for continuous improvement to be sustained, organisations need to develop a conducive corporate culture to support such efforts. They need to inculcate beliefs, assumptions and core values that shape behaviour towards the desired results. To do this requires more than just simply instituting a performance management system. It requires a mindset change of the way people create their own identities, make sense of their working lives and find meaning from their work. And that is going to the core of fundamental change – the change in corporate culture.

Written by Dr. Victor S. L. Tan. Dr. Tan is the Chief Executive Officer of KL Strategic Change Consulting Group. He is an author of five management books. His latest book is The Secret of Change. For more information, visit www.klscc.com or contact the author at victorsltan@klscc.com

Building High-Performance Organisations

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ACKNOWLEDGEMENT

This article was published in the New Straits Times on October 23, 2004
as a CIMA Business Talk article.

Reproduced here with permission from
The Chartered Institute of Management Accountants (CIMA Malaysia).
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Jean-Francois Manzoni from international business school INSEAD has developed a refreshing set of theories on how to drive performance. After working with many leading organisations on the MBA programme at business school INSEAD, Manzoni has defined his own set of drivers for improving performance. They make a refreshing change from the usual empirical view taken by researchers about what drives better performing organisations.

Manzoni, who heads the INSEAD-PricewaterhouseCoopers research initiative on high-performance organisations, makes it clear that the most important catalyst for change is people and their attitude and behaviour. Many of the key issues raised will strike a chord but most would agree that identifying problem areas is always easier than putting them right.

In judging the performance of an organisation, Manzoni first considers.whether the “whole” (the management team) is as great as the sum of its parts. He cites companies where individual executives are competent, often extremely so, but where as a team they do not spark, or pull in the same direction. He then looks at how much effort it takes to get things done. Are processes and systems helping or does running the company feel like pulling a heavy load uphill?

Next he considers the boundary of the firm. Many managers feel it is easier to control and coordinate resources when they are within the firm. The common assumption is that, if an activity is undertaken within an organisation, it must be easier than outsourcing – this is often ill-founded.

Finally, he looks at what he terms the “ideas cost”. How well does an organisation exploit its capabilities and resources, particularly the knowledge and experience of its staff? Building on these observations, the following are key aspects of a framework for organisational excellence:

• A healthy dissatisfaction with the status quo (DSQ). In high-performing organisations, people want to improve, learn and do things better. There is an aggressive culture towards competitors and this drives the DSQ.

• “We can and we will do it” – strong employee self-confidence is important, but must be backed up by a top management team pulling in the same direction and sharing a common understanding of the business model. To give people enough time to focus on important activities, companies must be disciplined in removing work that doesn't add value and that focuses neither on the customer nor on the employees. Many organisations are too lenient over this: there needs to be a constant drive to maximise return on time invested in initiatives. Companies should also consider and influence all the drivers of behaviour – performance measures / rewards, technology, structure, people skills, culture and process, to facilitate work that adds value.

• Change should lead to opportunities. So many organisations recruit good people, train and support them and then offer jobs to external candidates. This makes many employees feel helpless and that they cannot make an impact on problems and issues. A programme aimed at addressing problems with performance can help people to feel empowered and capable of tackling issues.

• A strong sense of “us” in improving performance. Clarity on mission, vision, strategy and values is vital so that all employees understand the basics of an organisation's strategy. Again, this is not possible unless there is a coherent view of strategy at the top. Top management needs to be both distinctive and realistic: distinctive in their strategic choices and realistic in terms of delivery and the culture of the organisation. The business and cultural model has to be enforced. Microsoft, for example, have directors of culture and people who are focused on achieving this.

• A desire to succeed and avoid failure – for many, confronting under-performance feels uncomfortable. Addressing these high-level issues requires multi-disciplinary skills. Management accounting and the advanced management accounting tools that include techniques such as shareholder value management, activity-based management and the balanced scorecard, can help deal with some of the issues raised. But management accounting techniques cannot work alone: it is leadership and the right human resource strategies that will support learning, encourage autonomy and create an environment for success.

Written by Stathis Gould. The writer is head of technical issues at the Chartered Institute of Management Accountants (CIMA), United Kingdom. This article first appeared in Insight – CIMA's online newsletter for accountants in business. Insight is accessible at www.cimaglobal.com/newsletters. For more information, please contact The Chartered Institute of Management Accountants (CIMA), Malaysia at Tel: +603 – 7723 0230 or e-mail: kualalumpur@cimaglobal.com Website: http://www.cimaglobal.com

They Have Moved My Cheese

“When the night seems to be at its darkest, it means the sun will soon rise up. Press on…Don’t give up!”

Unknown¹

“Know your enemy (i.e. challenges), know yourself, and your victory will not be threatened. Know the terrain, know the weather, and your victory will be complete.”

Sun Tzu²

The global financial crisis that began in the West has arrived in Asia Pacific. The developing countries and developed nations in Asia Pacific are being hit hard – their stock markets and currencies have fallen, foreign funds begin their exodus, and consumer spending stalls. Economists say the worst is yet to come.

Job-killing recession racks up more layoff victims.

http://www.btimes.com.my/Current_News/BTIMES/articles/jobs26/Article/

Companies and multinational corporations begin to miss their previously planned quarterly revenue targets and reports operating losses. They need to restructure to further reduce costs. Plants and offices are either temporarily or permanently closed. Employees are asked to take unpaid leave, offered voluntary separation schemes (VSS), or retrenched, and the remaining staff are retained or reassigned.

10 years of woe: Gates.

http://www.smh.com.au/news/world/10-years-of-woe-gates/2009/01/27/1232818386171.html

What happens when you become part of the statistics of employees that has been retained or reassigned? You now report to a new supervisor, team leader, manager or head of department (herein known as “your new boss”). You now work with new colleagues and peers that only know you by your email name, and vice-versa. All your past achievements, work relationships, and goodwill have come to nought. Your morale is low. You become confused, disillusioned and fearful with the ambiguity and lack of credible information. You feel insecure or unstable in the new role. What do you do?

For starters, be very thankful that you still have a paying job to be able to put food on the table and pay bills without resorting to dipping into your personal savings, the family savings, or borrowing money.

The first 3 months is crucial

Newly elected President Obama, like past Presidents of the United States, gets 100 days to prove himself. You should give yourself only 90 days. In that time frame, you will need to get yourself focused and begin delivering on your new job responsibilities. The following 10 areas should be given priority to get yourself into top form again:

1. Embrace change

Like it or not, change has occurred. If you are unable to accept it, then it is going to be tough for you emotionally and psychologically to adjust to your new role and responsibilities, and to meet the expectations of your new boss. Having a difficult time adjusting to the new situation can make matters worse for you, as your new boss will soon notice your lack of enthusiasm, initiative and self-drive, resulting in poor contribution and performance later on.

Why have you been retained or reassigned while others are offered VSS or retrenched? Unless the company is closing down permanently, the organisation still need human resources. With the reduced numbers in human resources, the company will require each remaining employee to be able to take on the workload of two or more employees. This means, you are one of several high performing, dependable employees who have been contributing significantly to the company, and needs to be retained to get the job done in the current and coming difficult times.

• Adopt a positive attitude – you are an asset to the company
• Seek out positive aspects brought by the change instead of burying yourself in unhappiness and ambiguity
• Seek accurate information or clarification – sort out the myths from the facts. Do not assume and derive your own conclusions based on rumours
• Avoid “emotional vampires” in the office who will suck your positive energy by telling you why now there is no future with the company, the new job is only temporary and that another round of restructuring or retrenchment will be coming, or it is no longer worthwhile to work hard and smart for the company, etc
• Get involved – to deal with change with minimal pain, you will need to work fast, stay focused, be flexible, and cope with ambiguity

2. Rediscover your passion

Now that you realise that you have been retained because you have been performing well in the past, how did you do it? Where did the self-motivation come from to drive you to become one of several good or excellent performers in the organisation? All that ambiguity, office and industry rumours have frightened your passion into hiding.

Yes, the passion is still inside you. More than other times, you now need to rediscover it – overcome your low morale and take charge. You have done it before – perhaps many times in the past. So, it is not impossible for you to rediscover your passion again if you set your mind to it, and the mind is a formidable human ability that directly affects our thoughts, behaviours and actions.

3. Build new relationships

The single most important relationship is that you need to establish a productive working relationship with your new boss and manage his or her expectations. This means you will need to plan out a series of one-to-one meetings to discuss about your new role and responsibilities, critical issues to be addressed, resources, working style, expectations and mentoring, delivery timeline, and personal development.

You will also need to identify colleagues and peers that can help you by guiding or coaching you. Establishing early cooperation and support from colleagues and peers is important.

4. Learn fast

Now that you are in a new team or department, you need to accelerate your learning. This means that you need to quickly understand the new methodologies and processes, systems and technologies, documentation, availability and location of information resources, communication structures, markets, products, and the sub-culture of the team or department.

5. Identify critical issues

“There are no universal rules for success in transitions,” says Harvard Associate Professor Michael Watkins (2003, p.13). To begin tackling your new job responsibilities, you will need to:

• Diagnose the situation of the new business portfolio or work requirements
• Understand the history
• Identify the challenges and opportunities
• Know what constitutes your Circle of Influence (Covey, 1989, pp. 81–91)
• Focus on the critical few that are important to your new boss and the business

6. Get your hands dirty and secure early wins

There are no shortcuts to credible, sustainable and repeatable success. To get the job done and to deliver results, you must get your hands dirty i.e. you have got to do it. Do not rely on others to get the job done – while you wait for others, others wait for you. Take ownership and drive the task through to proper completion or closure. Break down large tasks into smaller ones – each completed small task represents a milestone to the conclusion of the single large task.

Among the critical issues that are important to your new boss and the business, focus on the lower hanging fruits and tackle or solve those first. This approach will help you achieve early wins to build your credibility, create momentum, and also enhance your positive thinking {Watkins, 2003, p. 13).

7. Be humble

Do not become conceited and allow past achievements to go to your head. Being overly proud about your past or current achievements can cloud your judgement and lower your guard. Remember, recessions do not last for only a few days. So, you need to have sustaining power – think marathons and not 100 metre runs. Every new day will offer a new challenge. Yesterday’s success does not guarantee you success today or tomorrow – it only serves to give you guidance and a positive attitude.

8. Improve yourself – continuing professional development (CPD)

Now may be a good time for you to further your studies part-time, for e.g. the MBA degree or other postgraduate degree or professional qualification (ACCA http://www.accaglobal.com/, CIMA http://www.cimaglobal.com/, ICSA http://www.icsa.org.uk/ http://www.maicsa.org.my/) that you have been putting off. Acquiring new knowledge or skills within the next 2 to 3 years would put you in a better position when the economy rebounces.

Other alternatives are short courses or training courses that specialises in a particular area or discipline, for e.g. management, accounting, financial management, marketing management, product management, costing and budgetary control, purchasing and supply chain management, and also language courses such as Chinese/Mandarin and Japanese, etc.

In Malaysia, such courses are available, for example, from the Malaysian Institute of Management http://www.mim.org.my/, the Federation of Malaysian Manufacturers http://www.fmm.org.my/index.asp http://www.fmm.edu.my/, Open University Malaysia’s Institute of Professional Development http://www.oum.edu.my/, University of Malaya Centre for Continuing Education http://www.umcced.edu.my/, and others. Also, do check on recognition and accreditation of the course by the relevant authorities, and/or the private sector. For Malaysians, one way of financing your studies can be via EPF’s Educational Withdrawal Scheme that is loan- or debt-free.

9. Planning is necessary. Execution, a must

Planning helps you develop a roadmap to manage your job responsibilities, identify challenges and opportunities, and the required actions or activities. Figure 2 outlines the task planning and execution process.

10. Personal branding

Personal branding is about marketing yourself in a professional way to boost your career. Consider starting a weblog on a particular area or topic of interest that can complement your career goals or aspirations instead of political and sensitive weblogs (unless you are a politician).

If you lack HTML programming knowledge, then check out the easy weblogging offered by Google’s Blogger https://www.blogger.com/start, Yahoo! 360 http://360.yahoo.com/ or MSN Spaces a.k.a. Windows Live Spaces http://specials.uk.msn.com/spaces/default.aspx.

Additionally, create your presence in LinkedIn http://www.linkedin.com/ or Facebook http://www.facebook.com/ that will enable you to network with other professionals to create or develop future career growth opportunities.

¹ From one of two motivational posters given to me by my brother-in-law when I was going through my first retrenchment experience several years ago

References:

Champy, James & Nohria, Nitin; editors. (1988 – 1996). Fast Forward: The Best Ideas on Managing Business Change. Boston, MA: Harvard Business School Press

Covey, Stephen R. (1989). The 7 Habits of Highly Effective People. New York, NY: Fireside / Simon & Shuster

Evans, Dave. (2008). Social Media Marketing: An Hour a Day. Indianapolis, IN: Sybex / Wiley Publishing, Inc

Gardner, Susannah & Birley, Shane. (2008). Blogging for Dummies, 2nd Edition. Hoboken, NJ: Wiley Publishing, Inc

Johnson, Dr. Spencer. (1998). Who Moved My Cheese? An Amazing Way to Deal with Change in Your Work and in Your Life. London, England: Vermilion / Random House

Joyce, William F. (1999). MegaChange: How Today’s Leading Companies Have Transformed Their Workforces. New York, NY: The Free Press

Kotter, John P. (1996). Leading Change. Boston, MA: Harvard Business School Press

Kotter, John P. (2008). A Sense of Urgency. Boston, MA: Harvard Business Press

Salmon, Michael. (2004). Super Networking. Petaling Jaya, Malaysia: Advantage Quest Publications

Watkins, Michael. (2003). The First 90 Days: Critical Success Strategies for New Leaders at All Levels. Boston, MA: Harvard Business School Press

² Wee, Chow Hou; Khai Sheang, Lee & Hidajat, Bambang Walujo. (1991). Sun Tzu: War and Management. Singapore: Addison-Wesley

Organizational Change and Innovation

Today, more than before, organisations are facing global, economic and technological developments that are continuously and rapidly changing, which in turn causes increased business challenges, risks and uncertainties. Thus, the task facing today’s managers is to help organisations effectively respond and adjust to the changes.

Organisational change is the process by which organisations transform from their present state to a desired future state to obtain or increase their strategic advantage in the constantly evolving business or economic environment.

Through innovation, organisations are able to put to effective use of creative ideas into products, services and business processes that serve to satisfy customers or help organisations better produce them.

Thus, it is important for organisations to be able to manage change and innovations to ensure business continuity, sustain competitiveness and profitable growth.

1.0 Forces of Change

Let us consider the major factors in the business environment that create pressures on organisations, thus forcing change.

The business environment consists of the economic, legal and political, social, technological, and management factors that affect business activities. Significant changes in any part of the business environment are likely to create pressures on organisations.

The forces of change can be categorized as external and internal forces of change. Figure 1 summarizes the major forces of change which organisations face.




Competitive Forces

Successful organisations continuously strive to obtain a competitive advantage over other organisations. Since organisations need to match or exceed competitors in at least one of the dimensions of competitive advantage such as in efficiency, quality, innovation or customer care, competition becomes a force of change.

To lead in efficiency and quality, organisations need to adopt the latest technologies and processes such as computer-in-manufacturing and ERP systems. In adopting new technologies and processes, employee work relationships also changes, as the employees need to learn new skills and techniques or acquire new knowledge. To lead in innovation and thus obtain a technological edge over competitors, organisations need to possess skills in managing the process of innovation.

Therefore, the ability to manage change is central to the ability to obtain and sustain a competitive advantage in a marketplace that different organisations compete for the same customers.

Economic, Legal and Political, and Global Forces

Economic, legal and political, and global forces continuously affect organisations and force them to change how and where they trade, produce goods and services.

In North America, the North American Free Trade Agreement (NAFTA) has established trade cooperation between the United States, Canada and Mexico, leading to many organisations in these countries taking advantage to find new markets for their products and services, and new sources of inexpensive resources such as labour and raw materials.

In Europe, the European Union (EU) has grown to include more than 20 countries, and countless organisations seek to exploit the advantages of a large and protected market for their products and services, and resources.

In Asia, Japan and other fast-growing Asian countries such as China, Taiwan, Malaysia and Thailand, recognizing how these economic unions protect their members and create barriers against foreign competition, have also moved to form the Asean Free Trade Agreement (AFTA) and other trade cooperation initiatives such as the East Asia Summit (EAS).

Organisations that fail to exploit low-cost resources and the rise of low-cost foreign competitors and development of new technologies that can erode an organisation’s competitive advantage can bring doom to any organisation that does not change and adapt to the realities of the international or regional marketplace. Other challenges facing organisations are the need to change the organisational structure to allow expansion into foreign markets and the need to change in order to adapt to different cultures.

Demographics and Social, Organisational Development, and Ethical Forces

Workforce composition changes and increasing diversity of employees presents organisations with many challenges and opportunities. Increasing changes in the demographic characteristics of the workforce leads to managers changing management styles and methods.

While the forces of change appear to bombard organisations from all sides, progressive and successful organisations do not fear change. As a matter of fact, such organisations effect changes to their organisations. Changes initiated by organisations are known as planned change. The practice of organisational development (OD) –

"A process that applies behaviourial science knowledge and practices to help organisations build the capacity to change and to achieve greater effectiveness, including increased financial performance and improved quality of work life."

[Cummings & Worley, 2005, pg. 1], is to bring about planned change to increase an organisation’s effectiveness and capability to change itself.

Many leading international companies such as General Electric, Hewlett Packard, Motorola and Boeing, practices organisation development to continuously improve organisational effectiveness and competitiveness.

It is also important for organisations to take steps to promote ethical behaviour in the face of increasing governmental, political and social demands for more responsible and honest corporate behaviour and governance.

Strategic and Technological Forces

One of the key challenges facing all organisations is sustaining profitable growth. Organisations that are able to year after year create and sustain superior performance against the competition have what is known as competitive advantage.

Competitive advantage can be defined as “anything that a firm does especially well compared to rival firms.” [David, 2005, pg. 8] In other words, when a firm can do something that rival firms cannot or owns something that rival firms desire to acquire or achieve, that can represent a competitive advantage.

In Michael Porter’s seminal work Competitive Advantage: Creating and Sustaining Superior Performance, he said,

“Competitive advantage is at the heart of a firm’s performance in competitive markets. After several decades of vigorous expansion and prosperity, however, many firms lost sight of competitive advantage in their scramble for growth and pursuit of diversification. Today the importance of competitive advantage could hardly be greater. Firms throughout the world face slower growth as well as domestic and global competitors that are no longer acting as if the expanding pie were big enough for all.”

[Porter, 1985, pg. xv]

Although published in 1985, his work and words still ring true in the 21st century!

Strategic management is all about gaining and maintaining competitive advantage. Organisations today consider and practices strategic management more importantly and seriously than ever before. Thus, organisational change is also brought about by the implementation of new strategies.

The Internet boom and new developments in technologies have also brought about the need for organisations to change. For organisations able to understand and harness the benefits of new technologies such as electronic commerce technology, competitive advantage can be developed in the areas of supply chain management, business-to-business (B2B) and business-to-customer (B2C) relationships, for e.g. Dell, Inc.

This is why of late the Malaysian government is seriously encouraging the small and medium enterprises (SMEs) to adopt new technologies in the face of increased globalization and competition. The formation of the SME Bank serves to assist SMEs to acquire loans to upgrade technology and expand their business.

2.0 Targets and Types of Change

2.1 Targets of Change

In addressing change, organisations need to plan for change instead of being adversely affected by unplanned change. Planned change is normally targeted at improving performance in the following 4 major levels:

• Human resources
• Functional resources
• Technological capabilities
• Organisational abilities

Human Resources
Human resources (HR) are an organisation’s most important asset because an organisation’s distinctive competences lie in the skills and abilities of its employees, which contributes to a form of competitive advantage.
Therefore, organisations must continually monitor their organisational structures to establish the most effective way of motivating and organizing HR to acquire and use their skills.
As mentioned earlier, this will form an aspect of organisation development (OD). Hence, typical types of change efforts directed at HR include:

• New investments in training and development activities
• Socialising employees into the organisational culture
• Changing organisational norms and values to motivate multicultural and diverse workforce
• Ongoing review and analysis of promotion and reward systems
• Changing the composition of the top-management team to improve organisational learning and decision making

Functional Resources
In organisations, each organisational function needs to develop procedures that allow it to manage the particular business environment it faces. As changes occur, organisations often transfer resources to the functions where the most value can be created.
Organisations can improve the value that its functions create by changing its structure, culture and technology, for e.g. the change from a functional to a product team structure may speed the new product development process.
Technological Capabilities
Technological capabilities give organisations enormous capacity to change itself in order to exploit market opportunities. For e.g.,

• The ability to develop a constant stream of new products or to improve existing products so that they continue to attract customers represent an organisation’s core competences
• The ability to improve the way goods and services are produced in order to increase their quality and reliability is a crucial organisational capability

Organisational Capabilities
Through the design of organisational structures and culture, organisations can harness its human and functional resources to exploit technological opportunities. Organisational change often involves changing the relationships between people and functions to increase the ability to create value in order to sustain profitable growth.
2.2 Types of Change
Planned change can be generally categorized into:

• Evolutionary change (Calm waters metaphor) – which is gradual, incremental and specifically focused
• Revolutionary change (White water rapids metaphor) – which is sudden, drastic and organisation-wide

Evolutionary change involves the constant attempt to incrementally improve, adapt and adjust strategy and structure to better match the changes in the business environment that are taking place. Examples of this type of change are Business Process Improvement (BPI) and Total Quality Management (TQM).
Revolutionary change involves a whole new way of doing things, new objectives, and new structures. Examples of revolutionary changes are Business Process Reengineering (BPR), restructuring and innovation.
3.0 Innovation and Technology
Innovation relates to the development of new products or services, new production or manufacturing processes, and new operational systems.
Technology relates to the skills, knowledge, experience, body of scientific knowledge, tools, machines and equipment used in the communication, design, production and distribution of goods and services.
Technology is central to the operations, goods and services of most organisations. Therefore, technological innovations can have major implications for organisations.
The 8 different types of technological innovations are:

1. Product innovation – innovations resulting in products or services
2. Process innovation – innovations in business related processes
3. Radical innovation – innovations that revolutionizes products, services or processes
4. Incremental innovation – innovations that enhances existing products, services or processes
5. Competence enhancing innovation – innovations that build on existing knowledge and skills
6. Competence destroying innovation – innovations that render existing knowledge and skills obsolete
7. Architectural innovation – innovations that affect the entire system or the interactions of a system’s components
8. Component innovation – innovations that only affect one or more but not all of the components of the entire system

Thus, technological innovations do not just happen, but are also planned for by organisations.
4.0 Summary
Now that we have an appreciation of what organisational change and innovations are, we can also readily appreciate that organisations need to be in control to respond to or to influence change and innovation. Change cannot be stopped.
Organisations that are unable to deal with change and cannot innovate cannot hope to succeed in the increasingly competitive business environment that is constantly bombarded with forces of change.
Organisations able to manage planned change and innovation to achieve strategic or competitive advantage in the industry they operate in will have a higher chance of business success leading to profitable growth.
Some examples of companies that have been able to successfully manage change and innovation are:

• Dell – computer systems – able to manage the change from telesales to an online system using Internet technology, and innovated on its supply chain processes.
• Apple – computer systems, digital music players – able to manage change and innovation to continuously introduce highly innovative products and services.
• eBay – online auction – able to manage change and innovation to offer customers innovative online auction services.
• Google – online search engine – able to manage change and innovation to understand web-surfers or consumers’ information search needs better than others.
• AirAsia – low cost carrier – able to manage change and innovation to achieve profitable growth in the local Malaysia and regional airline industry in the face of high competition and rising fuel costs.
• Maybank – commercial bank – able to manage change and innovation by foreseeing and offering superior Internet banking facilities to meet consumer needs.

References:
Cummings, Thomas G. & Worley, Christopher G. (2005). Organisation Development and Change. (8th Edition). Mason, Ohio: Thomson South-Western

David, Fred R. (2005). Strategic Management: Concepts and Cases. (10th Edition). Upper Saddle River, New Jersey: Pearson Prentice-Hall

Porter, Michael E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York, NY: The Free Press

Porter, Michael E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York, NY: The Free Press

Schilling, Melissa A. (2005). Strategic Management of Technological Innovation. New York, NY: McGraw-Hill

Tidd, Joe; Bessant, John & Pavitt, Keith. (2005). Managing Innovation: Integrating Technological, Market and Organisational Change. (2nd Edition). New York, NY: John Wiley & Sons