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Ten Commandments for CEOs Seeking Organizational Change

James H. Reynierse

Core values and a focused mission are essential components of these ten rules for implementing change in the organization.

T n our e v e r -

I changing, fast- paced world,

competitive relation- ships can shift quickly when companies respond too slowly to increased competition in their industry group. Succeeding in such a competitive and changing environment demands that

CEOs reshape their organization to meet today's challenges and competitive realities.

But responding to change remains highly elusive because there is a natural resistance to change at all levels within the organization, including at the top. CEOs and other members of the executive suite need to take a hard look at their existing organization and culture, ask tough questions about its appropriateness for the cur- rent competitive environment, and take concrete, implemental steps to forge a preferred culture and drive it downward throughout tile entire organization.

But therein lies the challenge, for few management teams both establish a comprehensive strategy for remaining competitive and take a hands-on approach to implement change inter- nally. By not getting involved, they signal to employees that the change really isn't very important.

A key premise of this article is that cultural change or any organizational transformation is essentially a top-down activity. It cannot be del- egated. If the CEO perceives the need for change, makes it a top priority, and gives it a great deal of time and attention, the organization will change. By the same token, if the CEO offers only limited lip service, needed changes just

won' t happen. This article outlines how the CEO can be an enthusiastic sponsor of change by paying enough attention to implementation to make the transformation take place. Reynierse and Leyden (1992) provide a case study incorporating these steps.

1. S t r a t egy-Dr iven

The process I am advocating will be relatively ineffective without a strategic framework to provide competitive advantage. This process is not a substitute for such a strategy. Rather, the strategy is the starting point that establishes the context for all other steps. However, strategies will be relatively ineffective when management pays insufficient attention to their impact on the work force-- for ultimately it is the work force who will implement the strategy and make it succeed or fail. The point is that unless such a strategic plan is implemented and executed effectively, it will not be fully realized in the competitive marketplace. An overview of this process is depicted in F igure 1.

A company 's business strategies, plans, and goals are the starting po in t - -no t the e n d - - o f this exercise. They formalize the CEO's vision, setting the tone and establishing direction for the company in both the long and short terms. They provide a context for all other activities and decisions, establishing the limits for making many choices along the way. In addition, they deter- mine the direction and boundaries for building the new organizational culture, including molding employee expectations.

Resources are scarce in every organization, and management must accept the fact that it can't do everything. Strategic choices reflect judgments about where companies think they have marketplace competitive advantage so that plans implemented here enable them to grow faster and earn more than their competitors in these market seg-

40 Business Horizons / January-February 1994

ments. Similarly, the resources dedicated to building the organization are determined by this strategic focus.

2. Top-Down Involvement

If something is important, a good rule of thumb is to have a top-down approach to getting it done. Ideally, then, the CEO must get involved. If the CEO attends to the organization, it will im- prove and gain competitive advantage. Con- versely, if the CEO gives it scant time and attention, little organizational growth will occur. In short, the CEO who enthusiastically sponsors a broadly conceived program for building the company is more likely to succeed and reap the benefits down the road. A company-wide initiative needs an enthusiastic and supportive CEO who does not hesitate to play a continuing role during the change process.

But where is the top? And who is the CEO? Building organizations is often better served by dealing with chunk-sized bites rather than the whole company. Particularly for large companies, it often makes better sense to deal with natural strategic business units (SBUs) rather than the entire company. At one level, there are often unique problems or opportunities in a unit or company division. At another level, it is most meaningful for those involved to deal with issues that directly concern them and their business unit.

The approach I am advocating includes de- termining the firm's core values and mission. It is unlikely that every SBU or company division will share the same core values or mission. Individual business units often have unique customers, competitors, product maturity, strategies, and objec- tives. These units need the autonomy to develop their own focus. For such cases the division executive is functionally the CEO for that unit and can provide the vision, enthusiasm, and driving force for success.

Throughout, however, the CEO must remain interested and provide broad support for what is taking place. Even when the primary leadership role resides elsewhere, the CEO must be an ad- vocate for change and reinforce actions taken at these lower levels.

3. Organizational Assessment

Periodically it is valuable to take an objective snapshot of the broader organization. This not only provides information about the company 's strengths and limitations but can also identify how those strengths and limitations measure up to the mission and the core values. Effective organizations have employees who share these values, and a carefully conceived organizational

assessment will identify pockets of agreement and resistance.

Several techniques, including surveys, interviews, and focus groups, are used for these organizational assessments. The organizational dynamics survey (Reynierse and Harker 1986) has been particularly effective, because it provides an objective measure of the underlying values that mold organizations. For example, the survey's broad customer orientation category taps a cultural value related to making customers a priority and satisfying their needs.

Surveys are particularly important because they get every employee involved; everyone has the chance to be heard. Surveys also provide an opportunity for management to pay attention to employees ' concerns and to build their trust. This is achieved when management openly communicates with employees regarding key issues and responds to problems by taking timely, corrective action. At the same time, establishing trust is the first step in getting employees to "buy in" to management 's broader vision.

Figure 1 Overview o f t he Change Process

Strategy- Driven

I Top-Down

Involvement

I Organizational

Assessment

I Clarify

Core Values

I Work Force Participation

Downstream to Work Force

4. Clarify Core Values

Peters & Waterman (1982) have "one all-purpose bit of advice for m a n a g e m e n t . . , figure out your value system. Decide what your company stands for." Today many frequently echo this management theme. Identifying and clarifying core values are central to this approach as well. When they are integrated with a company 's business strategies, core values help provide a focused mission. All too often, companies or their natural business units lack focus; their employees are confused about what the company stands for and what it is trying to achieve. However, when the focus and the mission are clear, they can drive the entire organization or SBU.

Mission statements ideally should be brief, concise, and to the point. They should identify primary business activities, integrate key strategies, and reflect the firm's core values. When we speak about core values we are dealing with many attractive virtues--McLaughlin, McLaughlin

Ten Commandments for CEOs Seeking Organizational Change 41

& Lischick (1992), for example, identified more than 100--and it is tempting to include as many as possible. In nay experience, however, an organization can give proper attention to only a few--say, three to five--clearly stated core values. Anything more will be too diffuse and will only confuse employees and dilute management's efforts. In other words, management has to make some hard choices, and established strategies provide the context for focus.

There are no shortcuts; there is no generic mission statement. To build a focused organization, the management team has to participate in the process. We use a value clarification exercise when working with top and senior management. This exercise consists of 30 corporate values that are relevant (and credible) for business and industry. Each is defined and serves as an effective probe, placing key issues on the table for discussion. Some representative examples are shown in Figure 2. Because many are presented with a different thrust or emphasis, they can generate a provocative and lively discussion.

This value-clarification process gains agreement for key priorities and direction, and fosters team-building through shared values and mission. Similarly, it lays the groundwork for resolving internal differences between functional groups that may have varied goals or priorities. Finally, it sets the stage for driving the process downward through the entire work force so other employees can "buy in" and share the focused mission as well.

Figure 2 Representative Corporate Values

Shareholder Creating increasing value and benefits t?dtw for shareholders and safeguarding their

investment

Business Restdts: Maximizing financial results Rel t t rn/Pr¢fi t

Commi tmen t Cultivating the desire and energy of people to identil:y v,,ith and buy into the success of the organization

Competettl Attracting and keeping knowledgeable, People technically skilled, experienced, and

capable people

Cttstomer Providing products and services of Focus superior value to satisfy ct, stomers' needs

Technological Developing and using the most advanced Leae&t.xbip "state-of-the-art" technologies available

The risk in all this, says Peters (1992), is that management does such a good job that these values become fixed, even though they no longer are appropriate. The necessary caveat here is to return to strategy and competitive marketplace reality. Very simply, if the strategy is no longer appropriate and requires changes, the core values and focused mission probably need to be changed as well. They must therefore be revisited and modified as necessary to be congruent with any new strategies.

A case can be made that because clarifying core values is so central to this approach, it should occur earlier in the process. There are benefits, however, of having it follow the organizational assessment step because this gives management another opportunity to respond to the input and reactions of the work force. Their per- ceptions of what the company really values are important and may indicate that changes are needed.

5. Work Force Involvement and Participation

One of the advantages of the employee survey approach to assessing an organization is that all employees have tile opportunity to participate and express their opinion. In other words, at an early stage in the process they have the chance to level with management, provide an employee perspective, and establish an agenda for later stages.

While we begin the more intensive activities at the top with senior management, we involve lower-level employees, particularly lower levels of management, as quickly as possible. Although every situation will be different and will require different solutions, management should be vigi- lant for opportunities to involve new participants. A valuable tool is the use of focused task forces to address any priority issues that may have emerged from the organizational assessments or team-building sessions. This permits additional employee involvement at the problem-solving and solution-generating stages of the exercise.

A fundamental assumption is that a focused organization requires a work force that shares this focus. The key to successful implementation, then, is the steps that are taken to drive the process downward- - to downstream--so that all employees feel they are a part of this focused mission, hnplementing management's vision demands paying attention to employees, managing their expectations, and responding to their concerns.

Building the firm requires taking action steps that promote the core values and focused mission. I call these steps the "culture carriers." It is through them that senior management can reinforce values consistently and frequently. Put an-

42 Business Horizons /January-Fel)rt, ary 1994

Figure 3 Downstreamtng the Work Force Through the Culture Carriers

I I Communication Inspirational [

Leadership

Culture Carriers

IL I Financial Personal

Focus Recognition

I Training

other way, the "culture carriers" provide direction for marketing the core values and mission with all employees. The five "culture carriers" we have identified are summarized in F igure 3 and will be discussed separately.

6. I n s p i r a t i o n a l L e a d e r s h i p

Our studies of corporate culture indicate that there are two ways management stays in touch with what is going on in the company:

1. By visiting work areas and being visible to their employees. This is inspirational leadership at its best and is similar to the idea of "Managing by Walking Around" (MBWA), as developed by Peters & Waterman (1982) and Peters and Austin (1985).

2. Through the balance sheet and financial focus. In general, however, many top executives emphasize financial performance and focus to the extent that they neglect their leadership roles.

The broad process for organizational change outlined here provides structure for MBWA and for being a "cheerleader." Although executives tend to underestimate their leadership effective- ness, they in fact exert considerable power by virtue of their leadership positions. As DePree (1989) observed, "Leaders need to be concerned with the institutional value system." Each time they go out to a work area and talk to an employee or group of employees represents an opportunity to exercise influence and reinforce the company 's mission and core values. This clearly communicates to employees what is important to the organization and what is expected of them. When the CEO or division head is lead- ing the charge, everyone quickly picks up on it, and any ambiguity regarding what is taking place is quickly removed. The results are multiplied when this leadership role is being exercised by the entire management team.

As an example, the management team of one of my client organizations "made a contract" with

one another during a planning retreat to spend "15 minutes a day" walking around, getting to know employees, and talking with them in each of their subordinate organizations. Though ini- tially they were ambivalent and self-conscious about their task, it soon became an accepted and high-priority activity. They would confront each other daily by asking, "Have you spent your 15 minutes walking around yet today?" This, to- gether with several other steps, quickly led to a turn-around in an otherwise demoralized work force. It was an important step for management to become informed, get on top of operations, get in touch with its people, and communicate direction.

7. Communication

Put as simply as possible, employees cannot accept or implement top management 's vision if they are unaware of it. Frequent formal and informal channels of communication are needed with all employees to introduce the focused mission and core values and reinforce them over a period of time. Executives must make liberal use of meetings, video presentations, posters, news- paper articles, brochures, and so on. If there is a rule of thumb, it is that you can't do too much in this area.

Some of our clients have successfully used "kick-off" meetings in which they celebrated the focused mission and core values, gave ever), employee a wallet-sized card containing tile mission statement, and provided other symbolic i tems--pins, coffee mugs, pencils, hats--that focused on elements within the mission and its values. Primarily held to share information, the meetings were also used to rally employees and build enthusiasm for tile "new" organization. The informal mixing that occurs at such kick-offs is also a valuable time for management to energize employees and talk with them further about the focus.


8. Financial Focus

Well-run companies have a strong financial focus that emphasizes both profitability and cost con- tainment. It can play a significant resource alloca- tion role that simultaneously provides increased funds and resources to programs that support the core values while denying (or at least sharply reducing) funds and resources to established programs that are less important to the mission.

How capital is invested and what activities are expended carry important messages to employees. It is necessary to examine investment decisions in terms of a strategic standard that includes the company 's core values and focused mission. Having done so, it may be necessary to withhold capital or budgetary expense dollars for those projects that fail to qualify under this standard. When capital investments and highly visible expenses are consistent with the values and mission of the company, they will provide support for and reinforce this focused mission among employees. But when inconsistency abounds, employees will be confused and may withhold their support.

9. T r a i n i n g

Training programs should be examined closely to ensure that a disproportionate amount of the training budget is dedicated to the organization's core values. First, make sure training programs are increased or enhanced in areas where skills are needed to carry out the mission and implement the core values. For example, if customer service is valued, significant training implications for many employees relate to it and extend to almost all facets of the company.

A bank client of ours had a service quality problem that was identified by both employees and customers. As part of its strategy, the bank made a significant investment in training that emphasized service quality and product knowl- edge. As a result, employees developed the skills that helped reinforce the customer service core value. The main point, however, is that the firm had to make investment choices. By making a maximum commitment to customer service and dramatically increasing the training budget in this area, the bank declined to fund other activities.

Second, provide systematic training in the core values themselves. Incorporate a section on the company's focused mission in new employee orientation. This is a good time, for example, to pass out any wallet-sized cards or other materials that summarize the values and mission. Similarly, incorporate material on the core values in all or most supervisory and management training programs. Managers and supervisors must set the example where values are concerned. If top man-

agement does not make an effort to get this influential group to buy into and adopt the core values and mission, one cannot expect subordinates to do so. This is especially the case when change is taking place and supervisors and managers are still operating according to the old set of per- ceived values.

Finally, training involves much more than classroom or group activities. Executives should take every opportunity to coach employees on a one-to-one basis, sharing the core values with new people and reaffirming them with long-time employees.

10. Personal Recognit ion Programs

This may be the most influential contributor to gaining focus that we can discuss. Our research consistently shows that employees who feel appreciated for their efforts--that is, are recognized by management for their contributions--are posi- tive and enthusiastic supporters of every aspect of the organization. Similarly, those who do not feel appreciated are negative and critical about the entire organization. Unfortunately, in almost every company, fewer than 50 percent of the employees feel appreciated by management.

At one level, it is important for a firm's com- pensation and pay practices to reflect the core values. This includes job grades, performance appraisals, salary increases, and bonuses. Even more important, formal and informal recognition programs can be linked to the core values. One of our clients developed a "Hot Ideas" program to provide rapid (within a day or two) recognition to employees who had a good idea or who made an important contribution. Key managers had the discretionary authority to give spot awards for productivity, quality, or customer service contributions that matched the core values. These were relatively inexpensive--S100 cash, dinner for two, tickets to a popular show. Another client gave out golf caps with the company name on them to employees who made a special effort on behalf of the company.

Formalized recognition programs, including award ceremonies and recognition dinners, also should reflect the core values. These are particularly important because they are the occasions when top performance is celebrated within the organization and top performers gain wide vis- ibility. If there is a problem in this area it is simply that such occasions occur too infrequently, often only on an annual basis.

More frequent recognition programs are a real option. One of our clients has a monthly celebration for employees who make a special contribution. During an inexpensive catered luncheon, which typically lasts about an hour, executives give the honored employees a special

44 Business Horizons / January-February 1994

award that emphasizes the company 's core values and mission, then heap praise on everyone to let them know how much the organization appreci- ates them. Employees usually leave the luncheon feeling about ten feet tall.

People like it when management recognizes them for a good job. Pats on the back, "Attaboys!" and "Attagirls!" are cheap and can fit into any budget. Linking praise and informal recognition efforts like these with the core values can pro- duce a powerful motivating effect among employees. As Herzberg (1966) maintains, consistently and frequently applied formal and informal recognition programs provide management with a powerful tool to influence employees to live the company 's values and implement its focused mission.

T he starting place for building an organization and paying attention to the work force is clarifying the firm's core values

and developing a focused mission. When there is focus and the mission is clear, you have a driving force that gives direction to the entire organization.

The practical and often inexpensive implemental steps I have identified provide a mecha- nism for incorporating change and getting the entire work force to "buy into" and share the core values and focused mission. These steps provide management with the tools to develop the organization and to build excellence within it. Such companies will have significant competitive advantages in the years that lie ahead.

The common view is that cultural change is very time-consuming, painful, and slow. In my judgment this view is exaggerated. Meaningful transformations can take place relatively quickly and the pain can be reduced when top management consistently follows these ten rules or commandments for systematic cultural change. O

R e f e r e n c e s

M. DePree, Leadership Is an Art (New York: Double- day, 1989).

F. Herzberg, Work and the Nature o f Man (Cleveland, OH: World, 1966).

D.J. McLaughlin, B.C. McLaughlin, and S. Lischick, "Company Values: A Key to Managing in Turbulent Times," in R.J. Niehaus and K.E Price, eds., Bottom Line Results f rom Strategic Human Resource Planning (New York: Plenum, 1992), pp. 261-274.

R.T. Pascale and A.G. Athos, TheArt of Japanese Man- agement (New York: Simon & Schuster, 1981).

T. Peters, Liberation Management (New York: Alfred A. Knopf, 1992).

T. Peters and N. Austin, A Passion for Excellence (New York: Random House, 1985).

T.J. Peters and R.H. Waterman, In Search o f Excellence (New York: Harper & Row, 1982).

B.Z. Posner, J.M. Kouzes, and W.H. Schmidt, "Shared Values Make a Difference: An Empirical Test of Corpo- rate Culture," Human Resource Management, 24 (1985): 293-309.

J.H. Reynierse and P.J. Leyden, "Implementing Organi- zational Change: An Ordinary Effort for an Extraordi- nary Situation," in R.J. Niehaus and K.E Price, eds., Bottom Line Results f rom Strategic Human Resource Planning (New York: Plenum, 1992), pp. 133-148.

J.H. Reynierse and J.B. Harker, "Measuring and Manag- ing Organizational Culture," Human Resource Plan- ning, 9 (1986): 1-8.

James H. Reynlerse is the president of James H, Reynlerse & Associates, Inc,, a human resources consulting firm in Chesapeake, Virginia,
