619024 Intro to the Influence Model

Introduction to the Influence Model

Elizabeth Mohr, Christina Palme

7 August 2003

CONFIDENTIAL

This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from McKinsey & Company. This material was used by McKinsey & Company during an oral presentation; it is not a complete record of the discussion.

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2

• Introduction

• The Influence Model and Performance Leadership

• Overview of the Influence Model

• The Influence Model as Diagnostic Tool

• Appendix– Theoretical Background – Case Studies – Further readings and contacts

CONTENTS


3

THE INFLUENCE MODEL: INTRODUCTION

• Organizations change most effectively when individuals change their mindsets and behaviors. Change programs that do not address mindset and behavior shifts may work for some time, but they generally do not achieve lasting change. Therefore, changing mindsets and behaviors should be one of the major aims of any change program. The Influence Model describes how this change can be driven.

• The Influence Model consists of four key levers to shift mindsets and behaviors: - role modeling- fostering conviction and understanding- reinforcing with formal mechanisms - developing talent and skills

• For each of the four influencers there are specific levers that can be used to define the set of actions that will lead to the desired change. Most effective change programs will incorporate complementary and consistent actions from all four influencers.

• The Influence Model is a practical and flexible tool. It is an integral part of the Performance Leadership framework, but it can also be used alone. Teams working on change projects can use it as a framework for developing concrete, tangible ideas to translate future plans into something actionable as the Influence Model addresses a step typically missing in many change programs – development of explicit actions to influence mindset and behavior change. Teams have also used the Influence Model as a diagnostic tool to gain insights into the conditions for lasting change and the potential barriers to it.

• This pack briefly explains how the Influence Model fits with the Performance Leadership approach and then provides a general introduction to the model and how teams can use it. The appendix includes theoretical background, a number of case studies and further sources of information.


4

• Introduction





CONTENTS


5

THE INFLUENCE MODEL AND PERFORMANCE LEADERSHIP

Role-modeling Fostering understanding and conviction

Developing talent and skills

Reinforcing with formal mechanisms

Behavior and mindset

shifts

Direction

Coordination & Control

Account-ability

LeadershipExternal Orientation

Innovaton

Capability Motivation

Environment & Vaues

Where are you today and where do you want to go?

What do you need to do to get there?

How do you lead the implementation?

Performance Profile Understand current performance and set aspirations for the future based on a diagnosis of the nine elements of organizational performance

Tailored Implementation Architect an implementation program and make choices around tailoring the changes

Influence Model Develop a set of initiatives required to change mindsets and behaviors and close the existing performance gaps

The Influence Model forms the second phase of the Performance Leadership approach


6

• Introduction





CONTENTS


7

The Influence Model consists of four change levers designed to shift mindset and behaviors

THE INFLUENCE MODEL: CHANGE LEVERS"I will change my own behavior if…"

Role-modeling“I see superiors, peers and subordinates behaving in the new way”

Fostering understanding and conviction“I know what is expected of me – I agree with it, and it is meaningful”

Developing talent and skills“I have the skills and competencies to behave in the new way”

Reinforcing with formal mechanisms“The structures, processes and systems reinforce the change in behavior I am being asked to make”

Mindset & behavior

shifts


8

THE INFLUENCE MODEL: CHANGE LEVERS AND LEVER CATEGORIES

• Leadership actions• Opinion shapers• Interactions

• Story development (includes all the key elements, e.g., values, strategy, case for change)

• Story delivery (across relevant levels, i.e., organizational, employee, functional)

• Organization structure• Targets and metrics• Management processes• Business processes• Rewards, recognition

and consequences• Information systems

Role-modeling“I see superiors, peers and subordinates behaving in the new way”

Fostering understanding and conviction“I know what is expected of me – I agree with it, and it is meaningful”

Developing talent and skills“I have the skills and competencies to behave in the new way”

Reinforcing with formal mechanisms“The structures, processes and systems reinforce the change in behavior I am being asked to make”

Mindset & behavior

shifts• Talent management– Hiring– Replacing– Retaining

• Learning– On-the-job

development– Training– Action learning

Lever categoriesLever categories

Each change lever can be broken into a number of more actionable categories


9

LEVER CATEGORIES – ROLE MODELING Description

• Enlisting the support and involvement of influential stakeholders at all levels of the organization to assist in shaping the desired behaviors– Formal leaders– Informal leaders– Champions or change leaders

• Identify influential stakeholders from all levels of the organization• Understand reasons for resistance• Appoint formal ‘change champions’• Change team composition to include key opinion leaders in change processes• Appoint formal top management initiative ‘sponsors’ • Ensure top management ownership of change through linkage of program

success to their evaluation and rewards• Task change agents to carry the message to their environs (e.g., BU, team, etc.)• Develop strategies to explicitly address the needs and concerns of influential

organizational members• Explicitly seek the support and involvement of opinion shapers in the design of

the change process – ensure involvement of influential ‘resistors/detractors’• Remove ‘blockers’ from key positions

Opinion shapersOpinion shapers

• Ensuring that group dynamics are effective in pivotal performance groups

• Improve quality of direction, interaction and renewal– Identify and agree on team roles & priorities– Encourage inquiry and reflection within groups– Spend time analyzing the root causes of problems– Provide coaching to individual members

• Understand current degree of alignment around corporate story/change agenda– Open discussion forums– Conduct consensor workshop

• Encourage team alignment by engaging groups in real work

InteractionsInteractions

• Setting an example of exemplary behavior in day-to-day interactions with subordinates

• Increase visibility of leaders through regular staff interaction• Create forums for leaders to interact with the rest of the organization• Use symbolic language and actions to emphasize importance of the desired change

to customers and employees• Rebalance time commitments to emphasize priorities• Engage leaders in work in-line with organizational priorities• Provide feedback and/or personal development workshops to improve style/EQ• Use action learning and leadership dialog process to align leadership group around

corporate values• Evaluate managers on their attention to company values

Leadership actionsLeadership actions

Example actions

* For further information please refer to The Influence Model: Creating Context Specific Initiatives to Change Mindsets & Behaviors


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LEVER CATEGORIES – FOSTERING UNDERSTANDING AND CONVICTION

Description Example actions

• Articulating, updating, and integrating key elements (e.g., strategy, case for change, vision) needed to align the organization to achieve performance objectives into compelling, energizing and meaningful stories

• Recasting the change/transformation plot in dramatic terms of a rallying cry with the intent to energize and entice members of the organization for addressing change– Why do we need to change?– Is the suggested change right?– Are we capable of doing it?– Who is supporting this?– What’s in it for me?

• Develop story plot to include case for change• Update mission/vision to align with organizational agenda• Develop corporate story by including key people in story

development (e.g., pivotal players, opinion shapers)• Conduct audience analysis and develop variants of the story for

different levels/audiences (e.g., top team, R&D, frontline)

Story developmentStory development

• Communicating and cascading the story throughout the organization in order to reach and energize all the members

• Measuring understanding, reinforcing,

and updating the story based on the organizational agenda and reception of the story in the organization

• Communicate the story in different forums, e.g., – Corporate event– One day off-site– Management workshop– Leadership council

• Communicate the story in different formats, e.g., – Memos– Visual representations (e.g., intranet, carry-cards, posters,

banners)

Story deliveryStory delivery



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LEVER CATEGORIES – REINFORCING WITH FORMAL MECHANISMS

Description Example actions

• Aligning management processes (including strategic, operational and people planning and review and knowledge management processes) and systems with the mission and key value drivers

• Redesign operations planning processes • Emphasize financial performance reviews• Transfer best practices between divisions• Institute individual performance appraisal and feedback systems • Incorporate knowledge sharing metrics into individual scorecards

Management processesManagement processes

• Motivating individual and group performance and aligning employee interest with the organization’s objectives through financial and non-financial incentives and consequence management

• Institute ‘’pay for performance’ system• Institute meaningful non-financial rewards, team rewards (e.g., extra

vacation days)• Tie at-risk pay to individual performance as well as corporate performance• Provide promotion opportunities to high performers

Rewards, recognition and consequences

Rewards, recognition and consequences

Information systemsInformation systems

Business processesBusiness processes

• Changing the organization structure, decision rights and responsibilities, and coordination mechanisms that formally dictate interactions

• Flatten organization into numerous performance units with P&L responsibilities• Redesign roles and responsibilities of Board of Directors• Revise top management job descriptions • Redistribute decision rights

Organization structureOrganization structure

• Setting up individual and organization-wide performance goals necessary to reach or exceed aspirations

• Identify BU/corporate targets which reinforce the strategy• Identify value drivers and set performance metrics (KPIs) at the BU/corporate

level• Translate corporate/BU objectives into individual targets and KPIs

Targets and metricsTargets and metrics

• Reducing costs, improving quality and decreasing process times by redesigning business processes such as new product development, customer management, procurement, etc.

• Build cross-functional procurement teams• Consolidate R&D activities• Set up key account teams

• Enabling tighter coordination, enhancing access to information, redesigning business/ organizational models, and improving front-line performance through investments in technology

• Install enterprise-wide MIS system for performance reporting/management• Develop intranet system for knowledge capture and sharing• Build decision support systems to assist customer-facing functions



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LEVER CATEGORIES – DEVELOPING TALENT AND SKILLSDescription Example actions

HiringHiring • Define and communicate an employee value proposition• Hold managers accountable for the quality of their talent pool• Map high value jobs to high value people• Evaluate proposals from external consultants• Select consultants based on personal fit with the organization

• Selecting and placing individuals into jobs (including temporary support such as consultants)

• Embedding development opportunities within operational job assignments, or providing development conjunction with these assignments

• On-the-job developmental activities include coaching, mentoring, job rotation, and special assignments, etc…

• Explicitly evaluate and reward managers based on their skills and commitment to coaching

• Post internal transfer opportunities on bulletin board• Assign a mentor to every new employee based on common background • Create “development plans” for “top 50”• Promote job rotation and cross-functional transfers• Develop individualized assistance and action plans for underperformers

On-the-job developmentOn-the-job development

• Reducing the voluntary departure of top performers

• Assign top talent to good managers• Use long-term incentives, stock grants or options to encourage

tenure• Track attrition levels and work to maintain an attractive value

proposition• Shape work content and environment to excite, motivate, and stretch

high performers• Offer most attractive development opportunities to high performers

RetainingRetaining

• Instructing on specific knowledge or skills

• Formally prepared in advance and delivered within defined time period

• Build a “corporate university”• Develop on-line training materials• Introduce a tuition reimbursement program• Prepare a personalized training schedule based on individual’s needs

• Addressing day-to-day problems within a facilitated, interactive forum

• Brings people together to learn, reflect, and find solutions to real business issues

• Integrate action learning methods into existing training and development strategy

• Engage in role plays and focus groups to test solutions• Roll out by involving in workshop to practice new solutions

Action learningAction learning

TrainingTraining

ReplacingReplacing • Replace underperformers based on annual review• Replacing low performers occupying key positions

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TESTING ACTIONS FOR “GOODNESS OF FIT”

Leadership

External orientation

Direction

Accountability

Environment and values

Capability

Innovation

Influence model initiativesProfile elements

Coordination and control

Motivation

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

1. Consistency: Ensure alignment of actions among performance model elements

2. Complementarity: Ensure integrated actions are taken across all 4 influence model quadrants

3. Comprehensiveness: Ensure sufficient actions are taken across performance profile and influence model to achieve desired outcome but taking care not to overwhelm the organization with too many actions

4. Context: Ensure actions are aligned with the organization's strategic objectives and context

“Goodness of Fit” is the extent to which the complete set of initiatives are consistent, complementary, comprehensive, and context specific

Note: While each initiative is resident under one lever, it may impact more than one element (e.g., stories impact direction, leadership, and

environment)

Before going into implementation planning the final set of actions needs to be checked


14

• Introduction





CONTENTS


15

• A few teams have used the Influence Model as a starting point for developing diagnostic tools or surveys. Questions structured around the four change levers can help to identify areas in which changes need to be made in order to accomplish behavior and mindset shifts and build the conditions for lasting change.

• Such diagnostic/surveys can be used at various stages of an engagement. Practitioners recommend using them at the beginning of a study only if a team has a good understanding of the client situation. Diagnostics/surveys can also be used in ongoing studies when the issue of behavior and mindset change is critical to implementation. The repeated use of the diagnostic can monitor and measure the degree of change throughout the course of a study.

• The following section shows a series of sample questions that have been used in various client settings. Teams may decide to use these questions and, if needed, tailor them to the specific needs of the client, or they may decide to develop their own set of questions based on the four change quadrants of the Influence Model.

• Contact: Renate Osterchrist, Specialist (MUN)

THE INFLUENCE MODEL AS DIAGNOSTIC TOOL


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THE INFLUENCE MODEL AS DIAGNOSTIC TOOL – EXAMPLE QUESTIONS

• Have qualification activities (e.g., training) been derived from the results of the actual/target gap analysis?

• Have placements been specified based on the actual/target gap analysis?

• To what extent is top talent already filling the positions that are critical for success?

• Is the top team capable of handling resistance from the organization constructively?

• Do the internal project leaders have the necessary project management skills (for the overall program and sub-projects)?

• To what extent does the top team act collectively to promote the vision and the path to achieve it?

• What percentage of the key stake-holders (labor representatives, opinion leaders, etc.) support the project in all necessary aspects?

• Is middle management actively involved?

• Is the top team clear about what it must do in order to support the transformation?

• Do managers "live" the principles of the desired change, e.g., focus on customer orientation, process orientation, quality, cost reduction?

• How clearly does the top team provide recognition for committed employees and promoters?

• To what extent is non-performance or poor performance penalized?

• Have clear objectives been defined?

• How many employees are familiar with the company's business situation (best practice comparisons, customer satisfaction, revenues, market position)?

• How many employees have understood why the change is necessary, in what direction the company should head, and what steps are needed to do so?

• How many employees are committed to the goal and the path for getting there?

• How many executives communicate target-group-specific messages about the "What," "Why," and "How" of the company's plans for change?

• To what extent are interactive communications used (e.g., forums, small-group discussions, one-on-one discussions, dialog workshops, etc.)?

• Have strategies been developed to achieve the vision/goal, with clearly formulated milestones along the way?

• Do the current area-specific strategies match the company's overall strategy?

• Are the management systems aligned to the envisioned changes, e.g., policy deployment, KPIs, incentives, job profiles, job appointments, organization structure?

Mindset and behavior

shifts




• To what extent are feedback instruments used to evaluate the effectiveness of the top/middle management's communication and to derive action from the results?

• Are the people affected by changes actively involved in developing solutions?

• To what extent do patterns of interaction in the organization support the change effort (e.g., trust, no turf wars, ...)?

• Are the requirements defined that employees and executives must meet in the future (target profile) in order to effect change and make it sustainable?

• Is the current level of skills among employees and executives known and recorded?

• Are employees and executives sufficiently qualified for new tasks/ processes (actual/target profile gap analysis)?

• Have the processes and information systems been adapted to support the envisioned changes?

• Have the necessary investments to adjust the structure/systems been taken into account?


17

• Introduction





CONTENTS


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THE INFLUENCE MODEL IS BACKED UP BY RESEARCH FROM MULTIPLE DISCIPLINES

• “People take their cues from those who they consider as ‘significant others’ and model their behavior accordingly.”

– Imprinting work by Lorenz

• “People don’t leap from unskilled to highly skilled in one bound. The job of a parent (organization) is to underpin (or scaffold) the learning at any stage of development so that it becomes embedded in patterns of behavior before the next developmental leap occurs.”

– Scaffolding work by Vroom

• “Adults learn through a trial and error approach.”

– Adult learning work by Kolb

• “It’s difficult to behave in a different way if the behavior is inconsistent with your view of the world.”

– Cognitive dissonance work by Festinger

• “The prize for behaving differently must be greater than the perceived pain involved in entering into the new behavior.”

– Personal motivation work by Kurt Lewin

• “The surrounding environment sends us signals which we each interpret in different ways but which cause greater likelihood to behave in a certain way.”

– Operant conditioning work by Skinner


shifts





19

Larry Bossidy's discussion about making change touches on the four change levers of the Influence Model

THE INFLUENCE MODEL IS RELEVANT TO PRACTITIONERS

“First, you tell people clearly what results you’re looking for…

Then you discuss how to get those results…

Then you reward people for producing those results…

If they come up short, you provide additional coaching…

Sometimes the “ahas” come from watching others’ behaviors”

– Larry Bossidy

• Weekly emails from CEO telling all employees his vision and asking for suggestions

Fostering understanding and conviction

• New organization structure, centered on market segments

• New compensation system linking rewards to performance

• Web-based evaluation tools and quintile performance rankingsReinforcing with formal mechanisms

• “After class” coaching sessions, led by CEO for top leaders who have struggled to meet numbers or convey results


• Monthly “performance calls” led by CEO, COO and CFO with top 150 leaders

• HR department renamed Leadership and Change Management

Role-modeling

Representative actions to improve accountability and collaboration


20

THE INFLUENCE MODEL IS RELEVANT TO PRACTITIONERS

• 2-day meetings to review business for the top 150 executives – Bossidy

• Change the vocabulary and the dress code of the organization, stop the ‘non-concur’ process, stop ‘Lou said’ orders – Gerstner

• Elevate the HR function – GE, IBM

• Restructuring board & management process – IBM

• Pay in stocks & options – IBM• Reorganize structure & power –

IBM• Clear goals, priorities and review

process – Bossidy• Fix, sell or close philosophy

embedded – GE

• Coaching – IBM, GE, Bossidy• 6 Sigma – GE, Bossidy• Rigorous succession planning

process – GE

• Customer surveys – IBM• Employee surveys – GE• Employee educational programs –

IBM• Work-Out – GE• Structured dialogues – Bossidy• Personal notes - Bossidy• Define leadership expectations –

Bossidy, IBM, GEMindset

and behavior shifts




Recognized business leaders engage in a range of actions similar to components of the Influence Model


21

• Introduction




• Appendix– Theoretical Background – Client Case Studies

• Transportation company• Financial services group• UK Petroleum company• US Petroleum company• Electric Utility• UK Retail Bank• Asia Pacific Bank• Pricing

– Case study of influence model as diagnostic tool– Outside- In Case Studies

• Nissan• BAE Systems

• Further readings and contacts

CONTENTS


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TRANSPORTATION COMPANY CASE STUDY – SUMMARY

• Public sector organization responsible for transportation in large European city.• In 2000 five previously independent entities responsible for streets, taxis, buses, trams,

rail and all other modes of transport were combined into one organization of 3000 employees.

• Proposed integration of additional major organization responsible for subway system would bring total employees to 16 500.

Situation

Themes for change

Kicking off the change

Designing effective actions

• Initial diagnostic using the OPP Survey, interviews and fact-based analysis identified three principal themes to be addressed:

- Align the new organization around a common direction - Embed effective coordination and control mechanisms throughout the organization - Develop the people capabilities required for effective delivery

• The top team was identified as one of the priority groups to focus on, in order to establish a clear, common direction for the new organization and to role model effective interaction, integration and accountability.

• Each theme was broken down into the necessary outcome changes and corresponding behavior and mindset shifts.

• The Influence Model was then used to identify a set of actions aimed at closing existing performance gaps and bringing about the desired changes.


23

From… To…

Align organization

around common direction

• Lack of clear and implementable common strategy

• Employees unclear where TransportCo is going or how their business/team fits in

• Top team not seen to interact effectively as a team by peers or immediate reports

• Top team not communicating consistent messages to wider organization

• Top team not encouraging participation or incorporating input from wider organization

• I see us as running our own businesses rather than running TransportCo

• I think our blame culture keeps us from working together more effectively

• Clearly defined and implementable Common Transport Strategy and business strategies (Bus, subway etc.) in place and communicated throughout the organization

• All employees understand the Common Transport Strategy, the business plan and their business strategies and what role they as individuals/ teams/ businesses play in its delivery

• Top team members act as a role model to the organization of a unified team with delivery of Common Transport Strategy and business plan as common goal

• I see us as the leaders of a united TransportCo with the common goal of running an integrated transport system

• We and our employees collaborate across businesses and functions to effectively deliver an integrated transport system

• Top team decisions are systematically and consistently communicated to direct reports and cascaded as appropriate to allow fully informed management activities

• Employees interact effectively with senior managers to share ideas and contribute to direction of the organization

Outcome

Behaviors

Mindsets

THEME ONE – ALIGNING THE ORGANIZATION AROUND A COMMON DIRECTION TRANSPORTATION COMPANY CASE STUDY


24

Embed coordination and control throughout

organization

• There’s no real consequence for me if I perform well or poorly

• I don’t really understand how decisions are currently made, so I just go along with the process as it stands

• Little encouragement by top team of collaboration among businesses and functions

• Top team participates in and accepts ineffective management processes

• Unclear roles and responsibilities

• Performance management targets disconnected from overall strategy and not supported by direct consequences for under/over performance

• Top team not supported by adequate management processes to deliver

• Clear roles and responsibilities for top team members and their respective teams

• Performance management contracts used effectively to support delivery of strategy

• Comprehensive and integrated system of management processes in place to support top team activities

• Top team members role model collaboration among themselves and actively encourage collaboration throughout organization

• Top team engages in and continuously shapes new and effective management processes

• I am accountable for performance and results• I see how decisions are made and I am an

active contributor to the process

Outcome

Behaviors

Mindsets

From… To…

THEME TWO – EMBEDDING COORDINATION & CONTROL THROUGHOUT THE ORGANIZATION TRANSPORTATION COMPANY CASE STUDY


25

Develop capability to deliver

• Top team lack key skills (e.g. direction setting and interpersonal) to operate at full potential

• Over-reliance on external skills

• Top team members demonstrate variable skill in using existing tools effectively

• Top team members use different leadership styles inappropriately causing lack of clarity and cohesion

• I always have to speak because other people aren’t prepared for our meetings

• I never get the chance to speak or I engage ineffectively because other people dominate the floor

• I’m scared to challenge in case I’m seen as being antagonistic

• Top team has skills to interact as a high performing team

• External skills used to complement increased internal leadership capabilities

• All members of the top team able to consistently engage in effective management processes

• Top team members are aware of and able to use a range of leadership styles effectively in different contexts

• I trust others to take the lead because I know they are well prepared

• I feel discussions are well balanced and well moderated and I can contribute freely

• We hold challenging debates without people reacting defensively

Outcome

Behaviors

Mindsets

From… To…

THEME THREE – DEVELOPING CAPABILITIES TO DELIVERTRANSPORTATION COMPANY CASE STUDY


26

INTEGRATED INFLUENCE MODEL TRANSPORTATION COMPANY CASE STUDY


shifts




• Top team sponsors and resources cross business best practice sharing initiative

• Top team members establish coaching relationships with subordinates (e.g., regular meetings)

• Top team holds regular visible meetings on direction and performance

• Top team members establish regular follow-on communication/review sessions with their teams on– TransportCo strategy & progress– Implications for/role of

Business/Function

• Top team is coached in key skills (e.g. interpersonal, leadership styles)– One on one sessions, 360°

feedback– Workshops on styles

• Top team reviews roles of team and of individual members to:– Reprioritize activities (e.g., match

skill sets with critical tasks)– Reallocate talent and skills to key

areas, as well as provide for job rotation and skill building

– Make decision making process explicit and understood

• Quarterly round table discussions introduced for Top team to develop and monitor Common Transport Strategy

• Top team workshops held on story development/ communication around strategy and change

• Top team coaches direct reports on story development/ communication

• CEO holds biannual one on one meetings with top team to discuss strategy and performance contracts

• Top team defined to take key strategic and policy decisions

• Effectiveness of key management processes improved (e.g., specific monitoring of time and calendar)

• Protocol developed for communicating top team decisions to direct reports

• Top team members include high potential employees in key meetings/ committees/ projects

• Clearly defined performance contracts instituted for top team members, incorporating specific consequences for over/ under performance

The Influence Model was used to identify a set of actions aimed at closing existing performance gaps and bringing about the desired changes


27

FINANCIAL SERVICES GROUP CASE STUDY – SUMMARY

• Initial diagnostic using surveys, deep structure interviews, a review of the performance systems and top team work, showed significant performance gaps between the current and desired profile of the organization. Five key themes were identified: - Develop people - Create openness and trust - Foster interdependency (collaboration) - Focus on customers - Foster growth

Mandate for change

Themes for change

Designing effective actions

Situation• Large regional bank in Asia-Pacific region, but poorest performing in home

country. High-risk portfolio with exposure to Asia and mid-East. • Highest cost-income ratio, poor customer satisfaction and consumer brand. • Low staff moral with decision-making considered slow and cautious.

• Strategic shift to improve performance was driven by the new CEO • His aim was to reposition the bank as a lower cost, less risky business and to

create a new performance momentum by driving specialist BUs rather than remaining a generalist bank.

• The team developed an Influence Model for each theme. These were then pulled together into an integrated Influence Model


28

• Leadership actions– Included values dimension in the

CEO evaluations of top 100• Opinion shapers

– Trained storytellers to tell the story in their environments using the visual representation provided on the corporate intranet

– Used repeated exposure to story and peer pressure to persuade potential blockers

• Interactions– Used facilitated workshops with

cross-BU and cross-function participants to increase levels of trust and collaboration, and create a sense of interdependency (e.g., personal transformation, trust exercises)

• Rewards, recognition, and consequences– Established calibration meetings in which

managers agree in advance what performance management scores mean in rating their people

– Made remuneration process more transparent by making ranking known to employees; enabled managers to have “hard conversations” based on facts

– Established bottom 5% rule to remove underperformers

• Information systems– Created internal job market website – Introduced e-enabled tools that support line

managers in delivering meaningful, effective, and efficient performance review feedback

• Talent upgrading– Hiring: Increased graduate intake,

Introduced requirement that staff must have college education to become manager

– Retaining: Introduced internal job market for everyone with tenure >1 year, Established program focused on learning and networking for star performers

• Learning– Training: Provided training for

managers on coaching and conducting open and honest performance and development discussions, Developed e-MBA program in conjunction with University for staff

– Action learning: Used management workshops to hone people skills (e.g., executive coaching on providing feedback)

• Story development– Developed basic story around strategy and

5 core values in top team workshops– Encouraged BUs to come up with own

versions of the story in high performance workshop days

• Story delivery• Communicated changes and

enhancements to HR processes – Leaders shared 360º review outcomes with

staff to tell story of own leadership journey


shifts




THEME ONE – DEVELOPING PEOPLE FINANCIAL SERVICES GROUP CASE STUDY


29


shifts




THEME TWO – CREATING OPENNESS AND TRUST

• Learning– Action learning– Used targeted exercises in top

team workshops, such as -Set up trust framework and

encouraged self-rating against it by the participants, followed by sharing perspectives in pairs on each element

- Held group discussions on overall strengths/ weaknesses of the team using dots-on-chart exercise (green for strength, red for weakness)

- Used interaction improvement exercises

• Story development– Included “earn the trust of the

community” amongst the 5 core values• Story delivery

– Told story in transparent way to external forums, analysts etc

– Used consensor and interactive keyboard tools in senior team workshops to encourage open discussion and dissent

– Tied all communications of business decisions to values

• Organization structure– Increased transparency through

delayering• Rewards, recognition, and consequences

– Created consequences through remuneration systems for top team members not living the values

• Interactions– Used facilitated workshop

program for the top team, significant portion of which was focused on encouraging trust, openness, and readiness to dissent

– CEO revealed his 3 major weaknesses from 360º feedback in interview with press

FINANCIAL SERVICES GROUP CASE STUDY


30


shifts




THEME THREE – FOSTERING INTERDEPENDENCY

• Leadership actions– Used “walk before you talk” approach

which required top team and direct reports to undergo workshop program first

• Opinion shapers– Trained storytellers (selected change

agents from all levels) to tell the story in their environments using the visual representation provided on the corporate intranet


• Interactions– Used facilitator workshops with cross-

BU and cross-function participants to increase levels of trust and collaboration, and create a sense of interdependency

• Learning– Action learning: Held series of

workshops and modules which to date involved over 2,000 of 20,000 employees (includes all senior management) to promote mindset and behavior shifts in a collaborative environment, Developed management leadership skills in workshops (e.g., executive coaching)

• Story development– Developed basic story in top team workshops

around direction and values, Included “lead and inspire each other” as one of the 5 core values,

– Encouraged BUs to come up with own versions of the story in workshops

• Story delivery– Used workshops and visuals to deliver story

“through osmosis, not big bang”, e.g., introduced an e-based visual representation of the corporate story to communicate all the elements of the story (e.g. long-term goals, BU-specific programs),

– Used 360º peer reviews and workshops to measure understanding of story (e.g., “taking a stand” exercises required participants to talk about changes they will make based on the transformation workshop),

– Reinforced delivery: Each participant receives diploma and key card with 5 top values only after attending relevant workshops, Tied all decision communications to values, e.g., “According to our value of…, we plan to…”

• Organization structure– Atomized the organization by creating 15+

specialized BUs with significant autonomy, but guided by “One Bank” philosophy

– Increased transparency of performance perceptions from the market to specialized BUs (e.g. true segment reporting) and higher profile for BU leaders (e.g. photos on results pages)

• Targets and metrics– Increased transparency through monthly

performance reporting by BUs • Management processes

– Tied decision-making process to the core values

– Established allocation of funds through BU bidding system



31

• Instituted sales effectiveness program to build business planning and customer acquisition skills in frontline districts

• Planned and executed as local initiatives to promote local ownership of issues

• CEO spends a day a month working in a bank branch – ‘be a concierge for a day’ program instituted for senior leaders

• CEO publicly offers to buy rural branches when rival announces their closure – tells media this is to “live up to our values” of putting customer first

• Included “put our customers first” as the first of the 5 core values

• Used presentations and pilot frontline workshops to communicate and embed the theme

• Held landmark conference for top 100 in personal banking BU including video of customers talking about the bank

• Refer to branches as ‘stores’

• Introduced “quasi-franchise” approach to branch districts to improve local autonomy – moving to ‘200+ P&Ls’

• Changed remuneration for frontline from transactional to total customer profitability model

• Introduced CRM process to deliver planning information to the frontline in a timely fashion

THEME FOUR – INSTILLING A GREATER CUSTOMER FOCUS


shifts






32

• Interactions– Used facilitated workshop

program for the top team, significant portion of which was focused on developing “AND” mindset to underpin growth

• Targets and metrics– Established specific/tailored “perform”

and “grow” set of objectives for each specialist Bus; introduced Perform, Grow and Breakout scorecard

• Management processes– Introduced BU resource bidding from

the growth pool• Rewards, recognition, and consequences

– Put higher percentage of pay at risk, increased bonus potential, and linked to performance

– Created consequences through remuneration systems for top team members not living the values

• Learning– Action learning

• Used targeted exercises in top team workshops to develop "AND" mindsets to underpin growth

• Story development– Included “perform and grow to create

value for our shareholders” as one of the 5 core values

• Story delivery– Introduced an e-based visual

representation of the corporate story to communicate all the elements of the story, including long-terms goals, BU-specific programs, etc.

– Tied all decisions communication to valuesMindset

and behavior shifts




THEME FIVE – FOSTERING GROWTH FINANCIAL SERVICES GROUP CASE STUDY


33

INTEGRATED INFLUENCE MODEL • Story development

– Developed basic story around strategy and 5 core values in top team workshops

– Encouraged BUs to come up with own versions of the story in high performance workshop days

• Story delivery– Used consensor and interactive keyboard tools in

senior team workshops to encourage open discussion and dissent

– Leaders shared 360º review outcomes with staff to tell story of own leadership journey

– Used workshops and visuals to deliver story – Reinforced delivery

• Each participant receives diploma and key card with 5 top values only after attending relevant workshops

• Organization structure– Atomized the organization by creating 15+

specialized BUs with significant autonomy, but guided by “One Bank” philosophy

• Targets and Metrics– Established specific/tailored “perform” and “grow”

set of objectives for each specialist BU– Increased performance transparency through new

monthly BU results reports and higher profile for BU leaders (photos on results pages)

• Rewards, recognition, and consequences– Created remuneration consequences for top team

members not living the values– Established calibration meetings in which managers

agree in advance to what performance management scores mean in rating their people

– Made remuneration process more transparent by making ranking known to employees; enabled managers to have “hard conversations” based on facts

• Information systems– Created internal job market website – Introduced e-enabled tools that support line

managers in delivering meaningful, effective, and efficient performance review feedback

• Talent upgrading– Hiring: Increased graduate intake, New

requirement that staff must have college education to become a manager

– Retaining: Introduced internal job market for everyone with tenure >1 year, Established program focused on learning and networking for star performers

• Learning– Training: Managers taught how to improve

coaching and conduct open and honest performance appraisals

– Action learning: Held series of workshops and modules which by April 2002 have involved 2,000 of over 20,000 employees (including all senior management) to promote mindset shifts in a collaborative environment

• Leadership actions– Included values dimension in the CEO

evaluations of top 100– CEO spends a day a month working in a

bank branch – ‘be a concierge for a day’ program instituted for senior leaders

– CEO publicly offers to buy rural branches when rival announces their closure to“live up to our values” of putting customer first

• Opinion shapers– Trained storytellers (selected change agents

from all levels) to tell the story in their environments using the visual representation provided on the corporate intranet


• Interactions– Used facilitated workshops with cross-BU

and cross-function participants to increase levels of trust and collaboration, and create a sense of interdependency (e.g., personal transformation, trust exercises) Mindset

and behavior shifts






34

• Initial change to the asset based model

• Developing peer groups• Evolution to BSSs • Change to performance

management processes• GO teams

• Focus on elephant field strategy• Focus on agreed KPIs• Focus on near term performance

in reviews

• Role modeling of CEO in performance reviews

• Role modeling of peer group behaviors, especially the leadership role of the peer group convenors

• Significant effort devoted to building general management skills in new BULs– Formal training programs– Peer support– Coaching from senior

managers – especially GVPs, & through the performance conversations

• Skills and capabilities developed internally, not bought in from outside


shifts




UK PETROLEUM COMPANY CASE EXAMPLE


35

US PETROLEUM COMPANY CASE EXAMPLE 1/4 • Story development

– The CEO, a high-performing executive of the parent company, agrees to take on underperforming California assets, but only as the CEO of a stand-alone business• Convinced that the new company needs to

be free of the bureaucracy of the parent company and have complete autonomy to act, he makes case for change

– New vision to “become the leading oil, gas and resources company in California” • Orchestrates acquisition of E&P unit of a

competitor arguing that consolidation in the industry and the difficulty of turning a profit as a stand-alone business in California means the companies would be better off together

– With the addition of the acquired E&P unit, the new corporate mission is to “profitably grow the value of the business by 1-2% EVA per year”

– New core values promulgated to build a stronger performance ethic in the new organization:• Being a part of something special• Passion for learning and improving• Being accountable to each other• Founded upon honesty, integrity, respect• Bias for action

• Story delivery– After each improvement, performance targets

ratcheted up again to reinforce message of creating a “winning” organization

– Teams formed to create the organization design and identify potential value creation opportunities and focus the • The teams helped communicate the need

for the merger and a smooth transition to a united company

• Teams spearhead the effort to achieve the new mission, vision and live the values

– Included line organization in sub-teams to identify close-in opportunities and contribute resources to evaluate


shifts





36

Targets and metrics • New, clear operations KPIs developed and cascaded down to subunits

and teams – gives them clear targets, goals and metrics against which to manage

• Adapted Balanced Scorecard framework as key performance management tool

• New transparent and very public performance feedback systems: Rigorous business review meetings with open forums for discussion, Unit results against targets displayed on bulletin boards throughout the organization

• Rewards, recognition, and consequence management: Initiated new compensation system directly tied to performance against balanced scorecards

• Reengineered business processes to achieve further capital and fuel reductions– Governance system adapts new, tighter operations and capital

planning process and HR management• Mergers lead to restructured organization

– Major restructuring led to 150 job cuts • An additional 90 positions were targeted for elimination in 1998

– Redundant management positions were cut and all employees’ roles are redefined within their team and organizational context to ensure accountabilities

– Company discards previous organization design in favor of one that integrates construction, drilling and purchasing functions to better coordinate processes and personnel

– New operations-focused design – over 85% of personnel report to the COO

– Interlinking team structure ensures that information is shared across the surveillance processes

– Flatter and leaner organization is more focused around process teams which are tailored to specific life-cycle and other requirements of field

US PETROLEUM COMPANY CASE EXAMPLE 2/4


shifts





37

• Training– New training programs instituted to

close skill gaps– Carefully documented “best practice”

management procedures and disseminated knowledge throughout the

company

• Skill building– Formed a strategic development group

to serve as an enabler to achieve acquisitions and asset portfolio management

• Retention– Joint merger teams closely examined

the company's requirements for level of work, staffing, and what skills were vital to keep in-house

– Selection process for new hires tightened

– Jobs in the new company are awarded through a careful redrafting of job descriptions and individual evaluation process



shifts





38

• Leadership actions– CEO provided the vision and

inspirational leadership • Cut the cord to parent company

and rallied his team • Demonstrated a highly energetic /

roll-up your sleeves style, going to great lengths to champion his new vision

• Dogmatic on accountability and follow-through

– Top team members of merged company follow CEO's lead and demonstrate commitment to promote openness and drive to win• Spearheaded changes in each

asset to meet cost reduction, synergy and growth objectives

• Instituted open forums and public performance feedback reports within their departments/ assets

• Ratcheted up performance goals each time they were achieved

• Established joint teams to design merged organization– The joint merger teams were staffed

by managers at all level and in all functions• Forced to implement their own

tough cost-reduction initiatives• Employees from different

businesses or markets work together on the integration plan and communicated it to their peers



shifts





39

• Story development– Developed corporate story around the

4 imperatives• Key element “this is what we are

about”• Missing dynamic elements to

create burning platform• Story delivery

– Created extensive communication campaign (e.g., newsletter with the CEOs’ perspective on the progress, brochures with theme of the month)

– Asked each BU head to take part in the process and cascade the imperatives down in KPI form

• Management processes– Created leadership committees with all

stakeholders at the same table • Targets and Metrics

– Developed new scorecards, targets and metrics tying back to the 4 imperatives

– Made changes to the metrics based on value-driver analysis for each BU

• Performance reviews and consequences– Developed new competency model to

include BU results and leadership characteristics

– Established review processes where they were missing (e.g., distribution, office services)

– Developed a set of evaluation tools – incorporating new KPIs and competencies in people review forms and templates

– New consequences for under performers –asked to leave if no improvement within a probation period of 3 to 6 months

• Talent upgrading– Hiring

• Acquired external talent from growth industries to create new growth

• Put in place aggressive recruiting processes

• Agreed to remove the bottom 3-10% annually

– Replacing• Learning

– Training• Trained HR managers to run and

orchestrate employee evaluations• Trained staff involved in auditing

and tracking metrics

• Leadership actions– Top team demonstrated visible

focus on Wall Street commitments– Tom team evaluated using the

new people review system– BU leaders demonstrated varying

levels of commitment – for those who demonstrated real commitment the message was very powerful and personal (e.g., this is how I am personally affected)

ELECTRIC UTILITY CASE EXAMPLE


shifts





40

• Leadership actions– Establish CEO as change

champion– Appoint cost czar – Establish 18 month, theme-

based action plan• Interactions

– Instill "on-board or out" philosophy within top team

• Organization structure– Lean out center roles

• Targets and metrics– Create cascading metrics

• Management processes– Set common processes

• Business processes– Centralize where possible

• Rewards & consequences– Increase variable pay– Align compensation with group

targets– Differentiate employees'

compensation by performance level• Information systems

– Integrate systems

• Talent upgrading – Hire new top team members for

key roles– Reinvest in recruiting to source

new talent at entry levels– Establish front-line retention

program for personal bankers• Learning

– Train on value-based management

– OD effort on shared values – Train managers on performance

feedback

• Story development – Build story on themes that lead to

compelling vision• Story delivery

– Cascade story deep into business units

– Encourage CEO to use events to relate back to story

UK RETAIL BANK CASE EXAMPLE


shifts





41

ASIA PACIFIC BANK CASE EXAMPLE 1/3

• Add new corporate value around accountability for costs

• Hold series of top team workshops to develop story on cost/operating improvement (what is happening, why, and what it means for the organization)

• Hold all-hands town-hall meeting to present the story and have Q&A; repeat on bi-monthly basis to update

• Have each manager hold a short one-on-one with each of their subordinates to explain impact and implications of changes on individual

• Delayer the top 5 management levels• Create a cross-functional and divisional “idea

committee” and task with coming up with cost reduction ideas on on-going basis

• Put in place a “tough” budget challenging process that every BU goes through every quarter

• Establish KPIs for operating and cost performance and integrate into company scorecard; cascade to all managers in performance contracts

• Put in place a “3 strikes you’re out” consequence management process

• CEO personally approves purchases higher than $100k

• Each BU head identifies 5 “opinion shapers’ and has periodic meetings with them to update them on what is going on; also encourages them to pass on to colleagues

• Eliminate executive dining room• CEO and rest of top team each call 5-

10 managers per week to inquire on progress on budget, challenge unit performance, and support improvement efforts

• Incorporate “cost consciousness” into 360º feedback

• Hold interactive sessions in each unit/function to brainstorm cost reduction ideas using best practices from similar units in other organization

• Hire “cost czar”• Bring in new people from organizations

that are known for cost efficiency• Remove managers who don’t achieve

budget and new KPI targets

From . . .• Our company performs as well as it’s going to• I’m doing my job• If we cut more costs, we’ll be hurting our effectiveness

To . . .• We can improve and we owe it to our shareholders to do it• I am accountable for performance and results• We can be creative and strategic in finding improvement

opportunities; they can make us more effective


shifts





42

• CEO and top team develop story on cost/operating improvement (what is happening, why, and what it means for the organization)

• Have each BU head, and then each manager within a BU get their subordinates together to discuss how changes will affect the BU/unit specifically and answer questions

• Send monthly cross-company progress update emails

• Put up a TV monitor showing progress on operating performance in the cafeteria

• Make support functions/shared services into profit centers that BUs pay for service; allow BUs to choose whether they buy services internally or externally

• Create a new governance forum with the top 25 executives; have them meet once a month to exchange information, make decisions, and keep momentum

• Move to economic profit metric as key measure of company performance; cascade to all units and managers

• Increase variable compensation for managers and base it in large part on achieving operating/cost targets

• Create on-line forum for operational best practice sharing

• CEO personally evaluates performance against budget for top 100

• Identify influencers/opinion shapers in each BU; invite them to governance forum on a rotating basis

• CEO sends memo to organization articulating what he will be cutting from his own budget

• Hold action learning workshops at the end of which each group comes up with the 10 tangible things they will change to improve operating performance and how they will do it

• Link promotions to achieving cost/budget targets

• Rotate managers who have achieved good cost results to units that have a higher cost structure

• Institute regular training for managers to learn about new advancements in operating efficiency and teach them how to apply


From . . .• Our company performs as well as it’s going to• I’m doing my job• If we cut more costs, we’ll be hurting our effectiveness

To . . .• We can improve and we owe it to our shareholders to do it• I am accountable for performance and results• We can be creative and strategic in finding improvement

opportunities; they can make us more effective


shifts





43


• Atomize the business into more natural performance cells

• Map the new decision rights for each business process using RASCI—reset spending authorities

• Reset KPIs and targets and record commitments using performance contracts

• Clarify positive and negative consequences with performance management grid

From . . .• Holding people accountable isn’t worth the ‘upset’ it creates• Raising issues is better than raising solutions• Avoiding failure is success• I am not responsible, the system does it to me• Someone else always has to consider the matter before

the decision is made

• Incorporate ‘accountability’ behaviors into 360º feedback

• Roll out action learning workshops on accountability

• Hold special training for managers on holding people accountable

• Replace managers who fail to deliver

• CEO personally evaluates performance against key accountabilities for top 35 GMs each quarter

• Hold top team session to realign its accountabilities

• Post safety, quality service and throughput record at all plant entrances

• Add ‘closed loop’ and ‘count on me’ jargon into corporate story and introduce new values around ‘empowerment & accountability’

• Communicate to everyone the new accountability model, why it is happening and what it means

• CEO shares his accountabilities and personal stories with two layers down and others emulate

To . . .• We hold people accountable, it strengthens us • I want to get things done –I will drive solutions to issues• The far side of failure is success• I am part of creating the system and am responsible for

influencing it• I am accountable to make decisions and ‘get on with it’


shifts





44

• Create pricing team with authority to monitor and influence all pricing decisions

• Add specific pricing metrics and set targets against them

• Link senior managers’ incentives to pricing results

• Build transaction-based information monitoring system

• Institute rapid knowledge-sharing mechanisms and processes to facilitate “real time” pricing decision support

• Obtain buy-in from management team on the importance of pricing in driving profitability and ability to manage price upwards

• Clearly communicate pricing objectives and everyone’s role

• Show the organization that the impact is real and substantial

• Communicate enhancements to pricing strategy in monthly/quarterly meetings

• Have senior management communicate the importance of pricing strategy

• Have senior management actively and regularly solicit feedback from frontline

• Expect top team leaders to visibly engage in pricing activities


shifts




PRICING CASE EXAMPLE

• Train managers and sales reps in customer-specific "bottom-up" pricing initiatives, e.g.,– Front-line transaction price

management– Effective product/

customer mix management

– Price negotiation techniques

• Hold workshops with senior managers to discuss pricing strategies and processes


45

• Introduction




• Appendix– Theoretical Background – Client Case Studies

• Transportation company• Financial services group• UK Petroleum company• US Petroleum company• Electric Utility• UK Retail Bank• Asia Pacific Bank• Pricing

– Case study of Influence Model as diagnostic tool– Outside- In Case Studies


• Further readings and contacts

CONTENTS


46

ENERGY COMPANY CASE EXAMPLE – INFLUENCE MODEL AS PART OF DIAGNOSTIC

Overview of problem-solving process

End-products

• Interview notes from 58 interviews

• Summary diagnostic

• Root causes

• Intervention areas and design criteria

• Holistic, complementary interventions

Synthesis

5-whys around focused questions

Clustering

Causal loops

Phase I: Diagnostic, inquiry and scoping

Phase II: Designing Interventions


47

DIAGNOSTIC OVERVIEW QUESTIONS

Background

Conviction and understanding

Behaviors and interactions

Structures and processes

Skills and capabilities

N.B. Each question is a trigger with greater depth behind – filled a 90 minute interview

• Where is the next performance prize for the organization? What are the barriers to capturing it?

• Is it important to look at performance management processes at the moment? Why or why not?

• Is there sufficient energy and excitement?

• Does the organization have a clear and shared sense of direction and purpose?

• Are the performance targets of the organization high enough? Too high?• Are the performance aspirations of the organization exciting?

• Is there sufficient challenge and support in the organization?• Is there the right amount of transparency in the organization?• Is teamwork effective in the organization?

• Does the organization have the right structure?• Do the performance management processes facilitate good performance?

• How is the organization building the core capabilities that it needs to be distinctive in the market?

ENERGY COMPANY CASE EXAMPLE


48

SUMMARY DIAGNOSTIC – THE FIRST INTERVENTIONENERGY COMPANY CASE EXAMPLE

Behaviors and interactions

Great site teamworkTarget driven motivation

Challenge process has broken down

Weak at execution and closure

Lack of federal behaviorPerformance is spun

Context and values

Clear high-level strategyStrong performance cultureThoughtful environment

Strategy implications unclearShort-term performance focusOverly self-reliantExecutors are not rewarded Insufficient clarity on managing

interfaces with other units

Skills and capabilities

Good fundamental business skills

Limited deep functional expertise

Poor people development processes

Focus on explaining past performance

Structure and processes

BU model has been empoweringBurdensome data processes with

no feedbackReduced clarity around space and

accountabilityShared responsibility reducedHaphazard one-size-fits-all

approach


49

A SERIES OF FOCUSSED QUESTIONS ENERGY COMPANY CASE EXAMPLE

Weaknesses from diagnostic Focused questions

6. Why do we take a haphazard approach to standardization?

Haphazard one-size-fits-all approach

Strategy implications unclear 1. Why don’t we have effective and consistent priorities?

Burdensome data processes with no feedback 5. Why do we have burdensome data processes?

Reduced clarity around space and accountabilityShared responsibility reduced

2. Why have space and accountability become less clear?

3. Why can’t we have honest conversations about performance?

Challenge process has broken downPerformance is spun

Executors are not rewardedWeak at execution and closure 4. Why are we weak at execution and closure?

7. Why do we only focus on past and short-term future performance?

Focus on explaining past performance Short-term performance focus

Limited deep functional expertisePoor people development processes

8. Why do we have weak people development processes that only generate limited deep functional expertise?

Overly self-reliantLack of federal behaviorInsufficient clarity on managing interfaces with other units 9. Why are we too inwardly-focused?


50

THE 5-WHY PROCESS DRILLED DOWN BELOW THE SYMPTOMS TO ROOT CAUSES . . .

Why?

Why?

Why?

Why?

Why?

Why?

Why?

Why?

Why?

Why?

Why?

Why?

Why?

Why?

Why?Why?Why?

Why?Why?

Why?Why?

Why?Why?

Why?Why?

Why?Why?

Why?Why?

Why?Why?

……We do not like to say 'no'There is no consequence of saying yes and failing Silent decommitment is tacitly accepted behaviorWe are punished for saying noupward challenge is unacceptableOpen decommitment is not acceptedSaying no to an initiative requires significant workIt is easier to say nothing than yes or noIt is uncomfortable to say no to data requestsSilent decommitment is easy and is tacitly accepted behavior……

Summary diagnostic 5-why process Root causes

ENERGY COMPANY CASE EXAMPLE


51

• Introduction




• Appendix– Theoretical Background – Case Studies – Outside- In Case Studies


– Further readings and contacts

CONTENTS


52

NISSAN CASE EXAMPLE – CREATING OPENNESS AND TRUST • Story development

– Ghosn begins his tenure as CEO with “active listening” – seeking the opinions of people inside and outside the company to get as much objectivity about the company’s weaknesses as he could

– Ghosn quickly realizes that the loss of identity is a huge risk for the company and mobilizes cross functional teams (CFTs) to develop a detailed action plan – the “Nissan Revival Plan”

• Story delivery– The nine CFTs with 10 members and their sub-

teams serve as both watchdogs and communicators for the revival plan – explaining the necessity for change and projecting difficult messages across the entire company

– Employees recognize that the revival plan is designed by middle-managers they respect and trust – inside the company it is clear that the profound changes are meant to preserve Nissan’s dignity and restore its former glory

• Restructure Organization– To improve transparency and cooperation

across Nissan’s four major divisions, Ghosn eliminates the regional president posts and replaces them with 4 management committees chaired by EVPs in Japan

– Redefines roles for Nissan managers and Renault managers that Ghosn brought with him so that all had line responsibilities and their contributions to Nissan were clear

– Ghosn shakes up the top management in a reshuffle, moving out blockers or those who failed to meet his targets

• Communications– Ghosn institutes a new policy that English – the

language of global commerce – will be Nissan’s official management language • Builds common ground – French and

Japanese managers struggle equally to master a language that is not their own

• Edict is like a thunderbolt to management and serves notice to “old guard” at Nissan to shape-up or ship-out

• Learning– Training

• Mid-level and lower-level employees receive extra training and clear explanations of how their work fits into the overall big picture of the turnaround

– Action learning• English language training classes

vastly expanded and offered to all managers

• To overcome the potential for varying degrees of definitions for important concepts, a Nissan team created a company English dictionary of 100 vital words in management with clear definitions

• Leadership actions– CEO Ghosn expects his people to commit to

every observation or claim they make and sets an example by publicly announcing he would resign if the major goals of his “Nissan Revival Plan” are not met within 3 years

– Ghosn revives the company’s flagship sports car to demonstrate that Nissan is rebuilding its brand and on the road to a full recovery.

• Cross Functional Teams (CFTs)– Each CFT had two leaders from the executive

committee, but regular members drive the work and came up with the harsh medicine for Nissan

– CFT members have frontline experience with Nissan’s operating problems and credibility with the rank and file

• Interactions– Ghosn shows sympathetic ear to employees

who endure hardships at the production level – in granting full wage and bonus hikes, he demonstrated traditional Japanese paternalism by rewarding employees who survived the pressure cooker of restructuring


shifts




OUTSIDE IN


53

NISSAN CASE EXAMPLE – CREATING A PERFORMANCE ORIENTED CULTURE

• Story development– Ghosn mobilizes cross functional teams

(CFTs) to develop a detailed action plan – the “Nissan Revival Plan”• Working from the inside, the teams help

him identify the radical changes that had to be made and built on the best of elements of Japanese national culture

• Story delivery– Ghosn uses the middle managers from his

CFTs to disseminate the difficult messages about the revival plan

– After achieving his goals a year early, Ghosn pushes for even greater performance improvement with the “Nissan 180” plan – sell an additional 1 million cars and trucks each year, reach 8% operating profit margin and bring automotive debt down to zero

• Restructure Organization– Ghosn ends the practice of deciding promotions

solely on tenure and age, focusing instead on actual performance. The fundamental change to Nissan’s culture is difficult, but sends a clear message to managers

– Ghosn shakes up the top management, moving out blockers or those who failed to meet his targets in a reshuffle

• Rewards, recognition, and consequences– Revamped the remuneration systems to focus on

performance– The use of stock options as a form of performance-

based pay is sharply increased – available to only 30 top executives in 1999, by 2002 some 700 employees receive them

• Reengineer business processes - cost reductions– Cuts supplier costs by 20% by demanding price cuts

from suppliers – Dismantles Nissan’s reliance on the Keiretsu system

of interlocking cartels– Engineers are challenged to take costs out of

production by reducing quality standards that were much higher than competitors

• Learning– On-the-job

• High performing managers are promoted over more tenured managers and forced to win respect of subordinates who are older

• Leadership actions– CEO Ghosn publicly offers to resign if the

major goals of his “Nissan Revival Plan” are not met within 3 years

– When the revival goals are met a year ahead of time, Ghosn pushes for an even more difficult target – the Nissan 180 plan• “Complacency is the enemy”

– Ghosn takes a personal interest in selection of CFT members so he could shape the next generation of Nissan leaders

• Cross Functional Teams (CFTs)– Drawn from the ranks of middle management,

CFT members had line responsibilities and fully understood the harsh medicine of their revival plan

– CFT members had credibility with the rank and file and took some of their own harsh medicine on cost cutting and downsizing


shifts




OUTSIDE IN


54

• Story development– Ghosn discovers that Nissan has an

enormous cost burden to bear, leaving it with dangerously low margins and no profits

– Mobilizes cross functional teams to develop a detailed action plan – the “Nissan Revival Plan” that focuses largely on cost reduction• Working from the inside, the teams help

him build buy-in, motivation and trust in the turnaround plan so it can be achieved very fast

• Story delivery– Members of the CFTs disseminate the

difficult messages about cost reductions across the entire company

– Ghosn personally works hard to convince labor leaders that while the rank and file would endure some pain, the downsizing of Nissan would prevent the collapse of the company and the loss of all its 148,000 jobs

• Restructure Organization– Major restructuring leads to the closure of 5 plants

and cutting 29,000 jobs• Reengineer business processes - cost reductions

– Cuts 20% off supplier costs by demanding price cuts from suppliers

– Dismantles Nissan’s reliance on the Keiretsu system of interlocking cartels – despite widespread fears, the sell-offs fail to damage relationship with former partners

– Engineers are challenged to take costs out of production by reducing quality standards that were much higher than competitors

• Rewards, recognition, and consequences– In sharp contrast to the other auto companies,

Ghosn agrees to a MetalWorkers union demand for pay and bonus increases

• Information systems– Created new “lean manufacturing” operating

system that allows for custom-built cars and trucks using major components that are delivered to Nissan factories on a carefully timed schedule


• Mid-level and lower-level employees receive extra training and clear explanations of how their work fits into the overall big picture of the turnaround

• Leadership actions– CEO Ghosn publicly offers to resign if the

major goals of his “Nissan Revival Plan” are not met within 3 years

– When the revival goals are met a year ahead of time, he pushes for an even more difficult targets – reach 8% operating profit margin and bring automotive debt down to zero• “Complacency is the enemy”

• Cross Functional Teams (CFTs)– Drawn from the ranks of middle

management, CFT members had line responsibilities and took some of their own harsh medicine on cost cutting and downsizing

NISSAN CASE EXAMPLE – ESTABLISHING SIGNIFICANT AND SUSTAINABLE COST IMPROVEMENTS


shifts




OUTSIDE IN


55

BRITISH AEROSPACE CASE EXAMPLE – FOCUSING ON CUSTOMERS

• Story development– Placed customer focus as the top

corporate value • Story delivery

– Communicated corporate story widely at all levels of the organization through a variety of forums, e.g., • CEO forums• Team meetings• Customer-focus workshops and

brainstorming sessions held with customers present

• Restructuring the organization– Some BAe divisions, e.g. Military

Aircraft and Aerostructures, are realigned around customers

• Targets and metrics– Put in place Customer Satisfaction

Process Model• Set service benchmarks• Applied benchmarked service

standards• Assigned customer personnel to

customers to ensure appropriate coverage

• Used customer feedback to ensure all customers received benchmark service levels

• Rewards, recognition, and consequences– Rewarded employees against their

execution on set customer service standards


• Trained employees against the set customer service standards

• Leadership actions– Top team formed Group of

130 managers to be leaders of transformation, and the Customer Value Team to lead this aspect of the transformation, and convince the group of 130 of the viability of their plan• Team visited exemplary

customer service companies

• Mirrored best practices• Opinion shapers

– Group of 130 “touched” other members of the organization by providing role modeling and change champions in their local environs

– Snowball effect ensued


shifts




OUTSIDE IN


56

BRITISH AEROSPACE CASE EXAMPLE – FOCUSING ON PERFORMANCE

• Story development– Used centrally launched and directed

change program, Benchmark BAe, as a corporate story for the entire corporation (e.g., replaced BUs individual change programs)

– Placed performance focus as one of the top corporate values, and communicated widely

• Story delivery– Cascaded new performance objectives

down the organization, tying workgroup and personal programs to the story at corporate and BU/function level

• Targets and metrics– Set cascading goals, targets, and

metrics across the organization – Eliminated BUs’ ability to select their

own performance measures– Adopted external best practices as

benchmarks– Measured Benchmark BAe impact

against Benchmark scorecard and values against values scorecard

• Management processes– Set and broadly communicated KPIs for

all managers using Value Based Management (VBM)

• Rewards, recognition, and consequence management– Initiated ambitious, high-reward

employee suggestion programs – – New profit sharing program awarded all

employees an equal allotment of free shares in BAe if the company exceeded its profit targets

• Talent upgrading– Replacing/retaining

• Completed lay-offs of 60,000 of 127,000 people to achieve organizational alignment with renewed focus on core business and skills


• Instituted BEST (Benchmark Executive Skills Training) – a series of workshops over 18 months to expose the top 1500 managers to the skills connected to the 5 values

• Trained employees in appropriate use of performance measures

• Leadership actions– Top team formed Group of 130

managers to be leaders of transformation, and the Performance Value Team to lead this aspect of the transformation, develop action plan and convince the Group of 130 of the viability of their plan• Identified best practices• Mirrored best practices

• Opinion shapers– Group of 130 “touched” other

members of the organization by providing role modeling and change champions in their local environs

– Snowball effect ensued


shifts




OUTSIDE IN


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BRITISH AEROSPACE CASE EXAMPLE – FOCUSING ON PEOPLE DEVELOPMENT

• Story development– Placed people development as one of

the top corporate values– Polled employees of the biggest

divisions comparing results against UK average and using it as a case for change

• Story delivery– Communicated story and the

heightened sense of job security throughout the organization

– Continued to use and communicate regular, issue-driven opinion surveys

• Organization structure– Corporate, BU/function level

• Flattened the “command and control” hierarchy in favor of employee empowerment

– Workgroup/individual level• Formed teams as the dominant unit of working, and

integrated personal development plans into team value plans

• Rewards, recognition, and consequence management• Tied 5% of managers bonus to employee

satisfaction surveys• Targets and metrics

– Workgroup/individual level• Established personal development metrics,

including job appraisals• Defined everyone’s role within their team and

organizational context, and aligned it with the new value system

• Learning– Personal Development Plans (PDPs)

• A bold proposal from the People Values Team to institute PDPs for all 46,000 employees was adapted– Used by supervisors and

members of work teams for career planning and skills enhancement

– Facilitated the creation of different behaviors and helped employees find more fulfillment in their work

– Training• Built systems and methods for new

skills and knowledge methods• Put in place virtual university, team

leader training

• Leadership actions– CEO and all executive directors

have their own Personal Development Plan (PDP) Interactions• Annually updated, the PDPs

assess key weaknesses and how to address them

– Used peer 360° reviews to reinforce and track desired behavior changes


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BRITISH AEROSPACE CASE EXAMPLE – FOCUSING ON INNOVATION

• Story development– Placed innovation as one of the top

corporate values• Story delivery

– Formed the Innovation Forum, an annual 2-day event, to facilitate senior management exploration of socio-economic trends and BAe responses to them

– Chairman’s Award for Innovation emphasized one-company concept and sent the message that BAe values brilliant innovation

– Integrated values into processes for internal transfer of knowledge

• Organization structure– Set up a corporate technology board to spur

cross-divisional technology sharing– Established Benchmarking and Best Practice

Center to ensure that innovation and knowledge is disseminated across BAe

• Targets and metrics– Established technology plan on corporate and

divisional level setting high-reach, breakaway targets

• Management processes– Tasked managers with identifying new products

and solutions, and estimating their revenue potential

• Rewards, recognition, and consequences– Created a corporate Chairman’s Innovation

Award to dramatize the need for innovation in all aspects of company operations and reward top innovators

• Talent upgrading– Retaining

• Retained mostly highly skilled people ready for change as the result of major lay-offs


• Built systems and methods for transfer of new skills and knowledge methods (e.g., The Internal Trading Framework formed to enhance way in which teams worked together, supported each other, and shared knowledge)

– Action learning• Instituted annual 2-day Innovation

Forum in which senior management explores challenges to BAe and potential responses

• Leadership actions– Formed Group of 130 managers

to be leaders of transformation, and the Innovation and Technology Value Team to lead this aspect of the transformation, develop action plan and convince the Group of 130 of the viability of their plan• Identified external benchmarks• Mirrored best practices


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• Introduction





CONTENTS


60

FURTHER READINGS & CONTACTS

Title Reference/Contact

Influence ModelInfluence Model• The Psychology of Change

Management (McQuarertly) • can be downloaded from the McQuarterly webpage

• Inspiring Performance Leadership: Creating an Organization ‘Built for Performance’

PerformanceLeadership PerformanceLeadership

• Performance Leadership- Short Introduction

• PD Net 613737

• The Influence Model: Creating Context Specific Initiatives to Change Mindsets & Behaviors

• contact Christina Palme for a copy of this document

For more information on PL, contact:

Europe – Matthias Beck, Principal (MUN), Colin Price, Director (LON), Bill Schaninger, Organization Practice Expert (LON), Elizabeth Mohr, Organization Practice Specialist (LON), Christina Palme, Senior Research Analyst (DUS)

North America – Richard Elder, Principal (DCO), Michal Kisilevitz, Associate Principal (DCO), Paul Flatin, Practice Knowledge Specialist (DCO)

Asia Pacific – Michael Rennie, Director (SYD), Tom Saar, Director (SYD), Priya Ahuja, AP Organization Practice Manager (SYD), Matt Guthridge, Organization Practice Specialist (SYD), Elizabeth Morris, Senior Research Analyst (SYD), Katty Dos Santos, Senior Research Analyst (SYD)

Topic

• The Culture Cookbook: How to Improve Business Performance through Culture

• PD Net 615042

• Improving Talent Management using the PLI Influence Model - Case Examples

• PD Net 612913

• PD Net 615403

Note : For further information please refer to the PLI section on the Global Organization and Leadership Practice website


61

FURTHER READINGS – DEVELOPING TALENT AND SKILLS


HiringHiring• PD Net 511990 • Recruiting: Best Practices in Human Resource Management

• How Executives Grow (McKinsey Quarterly) • PD Net 512313On-the-job developmentOn-the-job development

• HBS - A Market-Driven Approach to Retaining Talent • PD Net 512778RetainingRetaining

• Training: Best Practices in Human Resource Management • PD Net 511998

• Performance Management and Frontline Mobilization Action learningAction learning

TrainingTraining

ReplacingReplacing• Moving on C Players: Best Practices in Human Resource Management • PD Net 512021

• The War for Talent: Chapter Four - Rebuild Your Recruiting Strategy • PD Net 603138

• Personal Development: Best Practices in Human Resource Management • PD Net 511994

• Perspectives on Corporate Learning in the New Economy • PD Net 512010

• PD Net 615260

• Strategic Redesign of Employee Value Proposition • PD Net 612914

• HBS - A New Game Plan for C Players • PD Net 603146

• contact Christina Palme for a copy of this article • HBS - Employee Retention: What Managers Can Do

• Action Learning Guidelines • contact Christina Palme for a copy of this document

Topic

Note: For further information please refer the People Performance Management section on the Global Organization and Leadership Practice website


62

FURTHER READINGS – ROLE MODELING


Leadershipactions Leadershipactions

Opinion ShapersOpinion Shapers

InteractionsInteractions• Improving Top Team Performance -

CST Toolkit

• Teamwork at the Top

• Top Teams That Get Results

• PD Net 512309

• PD Net 600379

• PD Net 600835

• Enabling Corporate Transformation in a Post Merger Environment

• PD Net 512207

• Real Change Leaders • PD Net 512162

Topic

Note: For further information please refer the following sections of the Global Organization and Leadership Practice website: Change Roles, Leadership Teams


63

FURTHER READINGS – FOSTERING CONVICTION AND UNDERSTANDING


Story developmentStory development

Story deliveryStory delivery• Dialogue-based Planning:

Cascading Strategy into Action

• The Cascadable Story: A Writer's Guide for Use in Dialogue-based Planning

• PD Net 604117

• PD Net 616619

• A Challenge for New CEOs: Telling a Great Story

• PD Net 512168

• Best Practices in Communicating Changes

• PD Net 512195

Topic

Note: For further information please refer the Change Communications section on the Global Organization and Leadershio Practice website


64

FURTHER READINGS – REINFORCING WITH FORMAL MECHANISMS


OrganizationstructureOrganizationstructure

• PD Net 601527• The Formal Organization Design Handbook

• Financial Incentives - A Risky Business

Business processesBusiness processes

• PD Net 512593ManagementprocessesManagementprocesses

Information systemsInformation systems

Rewards,recognition & consequences

Rewards,recognition & consequences

Targets andmetricsTargets andmetrics

• Making Value Happen - Defining Value Drivers

• Business Disaggregation and Corporate Center Design to Achieve Superior Performance (Appendix)

• The Business Process Redesign Almanac - How to Make Overhead Functions More Effective and Efficient

• Making Value Happen - Motivating People for Performance

• PD Net 444CFS

• PD Net 512836

• PD Net 512143

• PD Net 511039

• Effective Top Management

• PD Net 603178

• Streamlining Decision-Making • PD Net 512755

• PD Net 512900• Making Value Happen - Managing Business Performance

• Performance Goals and Evaluation: Best Practices in Human Resource Management

• PD Net 512009

• please turn to BTO for Information on this topic

• Key Performance Indicators (KPI) - A Working Guide

• PD Net 512367

Topic

Note: For further information please refer to the following sections of the Global Organization and Leadership Practice website: Organization Design, Business Performance Management Top Management, Compensation and Incentives

Documents

619024 Intro to the Influence Model