By Don Ruse
In this new SHRM Executive Network/HR People + Strategy white paper available for download, author and Axiom Partner Don Ruse explores the dynamics facing today’s leaders who must creating lasting change with their organizations.
The pace and scale of change facing many organizations today is daunting, even before you consider that most leaders and managers are much better and more comfortable during “steady state” than during periods of transformation. For leaders, a simple but powerful guiding principle to live by during periods of change is that “it’s not about you, it’s about them”. This is because at its core, leading change is really all about the many conversations that leaders have every day with the people who must do things differently in the future. Conducting the right conversations, at the right time, in a manner that is thoughtful and transparent, is paramount.
In our experience, leaders successful at executing a new strategy or large initiative gear every activity towards 1) aligning everyone towards the new direction; 2) equipping the organization and its people with the required capabilities and skills; and 3) sustaining the change through formal shifts in measurements and rewards, and through leadership that is both supportive and steadfast as the change unfolds. Each of these is absolutely necessary, although insufficient on their own. Each must take place in parallel at all times, albeit each to varying degrees at different stages of the change. Together, they provide the means to manage risk and execute with greater effectiveness and confidence.
The Case for a Better Way of Leading and Managing Change
Research cited in McKinsey Quarterly (November 2016) indicates that only a fraction of strategic plans are effectively executed and that “the reported failure rate of large-scale change programs has hovered around 70 percent over many years.” We believe that most changes in strategic direction fail because leaders fall short in three key areas.
Lack of alignment to the change. Senior management underestimates the time and effort required to achieve clarity about the new future, and to translate that clarity into urgent commitment throughout the organization. Too much emphasis is put on forcing compliance; too little on earning commitment. Too much energy is put into hammering hard on facts and rational arguments to the exclusion of the candid dialogue that can transform fear into heartfelt commitment.
Lack of success in equipping people with competence, and the organization with capabilities. Even seasoned executives are rarely called upon to contribute to a major change initiative. Executing a new strategy calls for significant attention to building the organizational capability and individual competence to lead and manage change. Band-Aid approaches—required reading of an HBR article, a one-day seminar, or a CEO webcast—will not suffice here. Even if clear and committed, the people expected to lead the change cannot succeed if they are depending on an outdated organizational design, and lack sufficient skills and experience to lead and manage change confidently. The resulting uncertainty among key managers drains the energy of those who look to them for leadership.
Lack of focus on sustaining change. You can’t declare victory at the starting line. The temptation for leaders to return to habits that work during stable operation is strong, and doing this too soon will snuff out the fragile early attempts at the new way, and poison any glimmers of ownership among key people. At the same time, as the change moves past the middle stage, lack of toughness in rooting out people and processes that are in the way will destroy momentum.
For example, at one large payments processing organization leaders struggled to take decisive action to address a glaring lack of performance accountability, which was a strong aspect of their culture over many years but a prerequisite to address in order to truly deliver on their new vision and strategy.
Align: Creating Clarity and Commitment
Alignment includes both clarity and commitment. Clarity without commitment gives you informed resistance. Commitment without clarity gives you blind loyalty. The work of alignment decreases across the change, but never ends. Creating alignment requires candid, repeated two-way conversations to translate the strategic plan into action at successively increasing levels of specificity to every person, their unit, and the company as a whole. Keeping these three things in mind will help you stay the course:
Effective communication is not efficient. Count on having to repeat your message several times. Why? At least two reasons. You don’t yet communicate with perfect clarity or in a way your listener can hear. Second, your listener will hear what they want to, even if they listen well.
Be prepared to re-align people weeks and months into the change. When people finally understand what the strategy really means to them, you are going to hear something like “I didn’t know that was what this means to me. I am not on board.”
Be aware that changing habits takes time. Encourage even the smallest signs of people doing things in a new way.
At the early stage of a change initiative, the work of alignment can include any and all of the top team listening to final input from key stakeholders inside and outside the organization, making the few big choices needed at the outset, and holding the first meetings to engage the organization in conversation about the change.
At the middle stage, alignment becomes the work of translating the strategy into increasingly detailed answers to these questions: “What does it mean to me?” and “What does it mean to us?” Here the first instances of “Oh, well, if that’s what this means, then I’m not so sure” begin appearing and must be addressed. And, at this stage, effective change leaders begin to widen the circle of communication to include other groups inside and outside the company.
At the late stage of the change, alignment is a continuous reinforcement of the key aspects of the strategy, thus ensuring new employees consistently hear the right messages. However, the majority of late-stage alignment is the work of aligning customers, suppliers, joint venture partners and other outside groups with the new direction.
Equip: Closing the Gaps Between What We Should Do and What We Can Do Today
The purpose of the second stage—equip—is to close gaps the new strategy has created between the company’s aspirations for tomorrow, and what can be achieved today.
As alignment increases, people accept being part of the required retooling and reengineering of the structures, processes, and policies of the organization. But they also become concerned about their own skill set gaps and their ability to survive, never mind prosper, in the world of the new strategy. They may be excited or concerned about the change in behavior required by the new culture. Whether leaders or individual contributors, they now become more willing to invest time in the learning and organizational re-tooling they and others need.
That said, when it comes to the competence that people need to achieve a new strategy, we have found that the leadership group, however it is defined, must be the first to acquire a toolkit for leading and managing change. In addition, a mindset of candor, transparency, curiosity, patience, passion, empathy, and tough-minded determination is required. After years of trial and error and increasing success, we believe this mindset has three essential components:
- Recognize that the distinction between leading and managing is less about optimizing scarce resources within a known business model (managing), and more about getting people to follow to a place they have never been before (leading).
- Accept that everyone has three choices in the thousands of conversations that lie ahead—to fight, to flee, or to engage. When in doubt, engage.
- Embrace specific skills that are required to stay engaged in conversation with those being led—to keep others from fighting or fleeing, to increase and cement their alignment, and to use the full power of all their people.
Danger: If any of these seem obvious, elementary, or skills relatively senior leaders would have acquired years ago, then prepare to be surprised. Leadership of change fails not because leaders cannot practice advanced and sophisticated analytic and strategic thinking, but because they cannot demonstrate the fundamentals of engaging another person in a way that results in the other person following them with determination to an unfamiliar place.
By ensuring leaders acquire and apply these individual competencies first, while helping others get on board, they show others what it looks like when someone is learning to do something new, and that it’s not just okay to be imperfect, it is expected. If you aren’t making mistakes during a change, you aren’t risking enough.
The remainder of equip is the action required to understand, plan, and implement shifts in two areas: 1) the rest of the company’s talent, and 2) the wiring of the formal and informal organization itself. Many senior HR executives are experienced in driving necessary shifts in the workforce once “strategic” competence has been redefined. They should ensure that the rest of the management team understands that a redefinition can affect every talent process, from recruiting to development.
As to the formal and informal organization, leaders often face and need to resolve issues such as:
Governance and decision rights and the way work is done, particularly across organizational groups and departments.
Redesigning organizations, roles, and rewards so that they’re fit for purpose in the new world.
The division of work across increasingly complex resourcing models, including full-time and part-time employees, individual contractors, and external service providers.
The definition of and following through on the consequences associated with acceptable and unacceptable norms of behavior.
In our clients’ experience, during the early stages of equip the leadership team is comparing the organization and its talent to the strategy, establishing the size and importance of the gaps created by a different strategy, and launching the initiatives required to close the gaps.
In the middle stages, initiatives are underway, and the extra work is beginning to take its toll, as leaders further down in the organization feel the additional load above and beyond their day jobs. In addition, in the middle stage, designs are approved for implementation, and suddenly conversations shift from “I’m on board!” to “Oh, I didn’t know you meant that.”
In the later stages of the implementation of a new strategy, those leading the “equip initiatives” face the fact that many of the original plans for accelerating the development of new competence, and the designs for the new organization that sounded so good at the time, are not fulfilling their promise. A second effort is needed, or people will return to the original ways of getting things done.
Sustain: Making Change Stick
How do successful leaders sustain momentum during times of change? The foundation for sustainability is laid in the early stages, when leaders agree on what success looks like in all areas of the change. This clarity is needed to mark changes in financial, customer, and employee outcomes. It is also needed to see, understand, act on, and learn from both the changes in formal mechanisms such as redesigned processes, and shifts in the stream of daily behavior and decisions that make up the informal organization. No surprise here, formal metrics and the regular forums to consider, interpret, and act on them are needed.
Just as, if not more important, however, are the countless informal moments among people where leaders can—if they are not careful—avoid issues of underperformance, tolerate wasteful practices and structures, or worse, extinguish the fragile beginnings of self-confidence in the new world. Instead, leaders can stop, look a team or a person in the eyes, and have a candid conversation that makes them stand up straighter and smile, change their ways, or—in some cases—start to consider moving on to another place to work.
The essence of these leadership actions in sustaining a change is a difficult but powerful combination of encouraging well-meaning and imperfect efforts by people moving in the new direction, and—especially as everyone enters the later stages of the change—pulling no punches with those who can do what’s needed, but won’t. In both cases, HR can play a critical role in guiding others toward transparency and candor, particularly among managers who have difficultly conducting the tough conversations.
Incidentally, that’s one half of “sustaining” leadership action. The other half is that effective leaders treat processes, structures and policies just as decisively as they do people, based on whether something is helping or hindering the change. Leaving what isn’t working in place—whether a person or a process—poisons progress and demotivates those making good-faith efforts in the new direction.
No two major change efforts are ever exactly alike, even within the same organization. Going in, a leader never fully knows the risks ahead, or how and when priorities will shift over the life of the journey. However, what is certain is that successfully executing new strategic initiatives in any organization demands leaders who are adept at leading and managing change with candor and transparency. In summary, before undertaking major change, the HR leader should raise three fundamental questions:
- How will we create the necessary alignment of our people with our new goals and what it will take to achieve that alignment?
- How will we equip our people with the capabilities to operate in the new way, and how will our leaders learn the skills required to get them there?
- How will we ensure that our peoples’ efforts will be sustained until we attain a more durable state in the new world we want?
Once the leadership team can definitively answer these questions, the chances of success will increase dramatically and the organization will look back on the journey with pride, and will be even more open to further strategic change, knowing next time will be even better.
Contact Don Ruse here. Learn More
By Sean Williams
The recent Wells Fargo settlement—to the tune of $185 million—has given business leaders pause to examine the contributing dynamics. A combination of aggressive cross-selling strategy, insufficient employee monitoring, and incentives misaligned with the best interests of customers set the stage for a massive employee fraud in the creation of unauthorized accounts driven by the desire to earn bonus compensation. Learn More
Hardly unique, Wells Fargo is one of many companies placing aggressive goals on customer-facing employees, most in a direct position to inadvertently do harm, and they must carefully evaluate the strategic, legal, and reputational risks.
Clearly, substantial changes are often necessary to remain competitive as employees adjust to new ways of interacting with customers to deliver profitable growth. While post-Wells Fargo activities may include new value statements and requisite hours of training, actual employee behaviors are much more difficult to monitor, and frequently fraught with blind spots.
But how is a leader to know if employees are upholding and reinforcing company policies and standards rather than potentially destroying value by pursuing individual goals at the expense of customers?
One source of safeguarding against these risks is to employ something many companies already have: a voice of customer program.
How could a voice of customer program help a bank address its blind spots in employee behavior? Obviously, customers will not know—at least not immediately—if a bank employee opened an account for them without their permission. But a voice of customer program employing outreach to recently-opened account holders asking for customer feedback on the sales process—a common activity—can illuminate such a disconnect.
But such an approach is not foolproof in that this type of feedback is solicited only from the small number of customers who have opened accounts, and many will routinely decline the interview for reasons that have little to do with unethical bank behaviors (e.g., customers commonly believe there was a mistake). Beyond customer declinations however, it may be likely that either the email address or phone number designated to the new account is bogus.
However, if the question was asked of any customer conducting any transaction on an active account, it would provide a broad data sample that could easily be used to monitor and evaluate employee behavior, notably illuminating any discrepancies between the customer’s assertion that they have not opened an account and bank records indicating otherwise. More importantly, these disconnects will reveal potential problems in branch locations where new goals have been rolled out, strategies implemented, etc.
Such dynamics transcend the financial services industry, certainly, and an effective voice of customer program can be useful for managing risk from employee behaviors in any company. For example, many automobile manufacturers reimburse dealer service departments for the parts sold for repairs, but not for actual car repair. This creates a subtle mismatch between the ideal activities of the service personnel (repairing cars) and the service for which the manufacturer is paying (installation). Such a disconnect creates easy opportunities to “game the system,” which in turn creates clear risk for the manufacturer.
When a customer returns for the same service on the same vehicle, the manufacturer can safely assume that the repair was not correctly performed on the first attempt. But the manufacturer may be unaware if service personnel created duplicate entries for the same repair, if repairs sold were not required, or if the customer had repairs performed elsewhere.
These blind spots can be easily addressed by asking the right questions of customers. For example, inquiring with a customer as to when the last time a specific repair was performed may indicate if service personnel unnecessarily replaced parts not yet past their lifetime expectancy.
In the insurance sector, companies that are increasing pressure on claims can install new processes and due diligence, but the clear potential to harm claimants means that insurance companies should be auditing customers to ensure such processes are being followed. Manufacturers changing warranties and retailers modifying return policies could also better manage risks by more frequently surveying the customer experience.
Of course, collected customer data may never be perfect—and will be effective only insomuch as the customer remembers interactions. For example, in the earlier banking illustration, the customer could incorrectly remember opening an account, when such a transaction in fact occurred, or inaccurately recall the bank, if they do business with more than one.
But this random noise will not change significantly over time or vary much by location, which are exactly the indicators a bank should be seeking. And the voice of customer data can provide vital information exactly where there are few other options for examining employee behavior. To realize monitoring value of voice of client programs, the programs should be integrated into the strategy implementation and risk management processes. Consider the following five steps:
1) Examine the new strategy with the appropriate cross-functional team of leaders from strategy, sales, marketing or human resources. Identify where the new strategy unintentionally incentivizes employee misbehavior toward customers. Eliminate as many of these incentives as possible.
2) Explicitly list any remaining potential avenues for employee misbehavior. The more specific about the different ways this misbehavior could manifest, the better.
3) Work with the data and analytics function to map out which of these manifestations can be identified today, and which could be monitored through existing infrastructure with some additional work. Think through the analytics and reporting that would be necessary to ensure that what can be seen, will be seen. The remaining manifestations of employee misbehavior are the blind spots.
4) Work with the voice of customer program to shed light on the blind spots, by asking the right questions of the right customers at the right time. Make sure that the voice of customer program and the data and analytics functions work together to produce integrated reporting for the leadership on the manifestations of misbehavior, including rates, trends, and locations. Establish baseline values of customer responses before rolling out the new strategy, goals or incentives.
5) Make sure there are no remaining blind spots. If blind spots remain, or new blind spots are identified later, consider adding a customer survey or other data collection mechanism as necessary to address the new blind spots.
This approach helps ensure that problems are identified before they become widespread, which will help put both executives and regulators at ease while minimizing situations where employees may feel encouraged to act against the best interests of the customer, mapping and monitoring such behaviors to course correct when required.
Like the eternal question, “Which came first, the chicken or the egg?” marketers are asking, “Which comes first, the customer value proposition or the employee value proposition?”
By Aneysha Pearce and Aaron Sorensen
By customer value proposition (CVP), we mean a persuasive statement that captures the reasons why someone should buy a particular product or service. The employee value proposition (EVP) constitutes the most compelling reasons an employee would choose to join an organization and choose to stay.
Best-in-class CVPs and EVPs are distinctive and create the “magnetism” to attract the type of people you want associated with your organization. Both are a critical link to the business strategy and key drivers of long-term profitable growth.
GE provides a great example of CVP and EVP alignment. In September 2015, GE launched its “What’s the Matter with Owen?” campaign on late night TV. Andy Goldberg, global creative director at GE, explained to Ad Age: “The goal is to set up the promise of GE being a digital industrial company, bringing this idea of big iron and big data together under one roof.”
The campaign positions GE in competition with the likes of Google, Facebook, and others for millennial tech talent. That’s important, because as explained in GE’s 2016 annual report, they are investing heavily in “disruptive innovation.” Each spot includes the taglines: “GE. The digital company. That’s also an industrial company.”
That alignment between CVP and EVP is critical because GE needs high-demand talent to execute its business strategy.
In addition to alignment, another important characteristic of great CVPs and EVPs is a deep understanding of their audiences. In some instances, potential employees are also potential customers. But for many B2B companies, their audiences are different (millennials building tech solutions purchased by Baby Boomer COOs and plant managers, for example).
The last thing you want to do is create uncomfortable cognitive dissonance in the minds of either customers or potential employees. So how do marketing and HR make sure that the company’s CVP and EVP are ultimately serving the strategy? Here are some ideas to consider:
1. Reputation roundtable — At least once a year, get the leaders of marketing and recruiting, and any creative resources, in the same room to discuss creative strategy and tactical implementation.
2. Message assessment — Are there any inconsistencies in your messaging?
3. Channel alignment — Compare notes on the use of channels, particularly social media, and identify areas of overlap.
4. Audience analysis — What are the personas of your respective audiences? How can value propositions be tailored to appeal to customers and future employees without losing the essence of the brand?
5. CVP/EVP messaging playbook — An internal guide that illustrates how messaging is altered between customers and employees so that relevant differences are made without compromising the important connection between the two audiences.
Marketing and Human Resources/Talent Acquisition are key players at the strategy table and coordination amongst the groups is a must in driving alignment between the CVP and EVP. The reality is that your organization already has a CVP and EVP whether or not you have gone through the effort of documenting it. This is your reputation and employment brand.
However, the likelihood that the CVP is aligned to and enables the strategy and brand is low if you haven’t taken a close look at it in awhile. Further, an EVP usually has a “shelf life” of 5 years, sometimes less, if your talent portfolio is changing. Progressive companies look at the EVP before it becomes stale and ensure it is consistent with the CVP. Many organizations take advantage of a brand refresh to develop or refine the CVP and ensure the EVP is aligned. Learn More
By Aneysha Pearce
The commonly-held sentiment that the more things change, the more they remain the same, certainly applies to some recent, high-profile and quite surprising leadership missteps we have seen play out publicly with Wells Fargo. The well-documented reputation crisis includes the termination of 5,300 lower-level bank employees who had opened over 2 million customer accounts to meet aggressive cross-sell targets set by Wells Fargo leadership. While such brand-tarnishing stories are not uncommon, it is truly perplexing to see them occur within a company placing high strategic importance on reputational efforts, and one that until recently had been the darling of Wall Street. In today’s social media spinning world, a breach of customer trust of this magnitude is all too easy and can rapidly compromise even the most highly regarded corporate reputations.
Not surprisingly, corporate reputation strength is based on the anchors of trust, admiration, respect, and the good feeling stakeholders have for a company. These drivers don’t change all that much, yet reputational performance does change—and quite dramatically— based on specific events and the relative alignment of the firm’s strategy, organizational model and talent.
The misalignment between management and staff can also be striking and may not be apparent until it is too late. For example, Wells Fargo’s now former CEO, John Stumpf, claimed that the bank’s situation was a result of “wrongful sales practice behavior” and that it “(went) against everything regarding our core principals, our ethics, and our culture.” But one only need to ask Stumpf’s front-line sales associates to hear a different story—one of a sales culture so intense that some workers (even in their San Francisco headquarters and branches) felt pressured into employing deceptive sales practices to make the lofty cross-sell goals. Such an atmosphere, said the associate, “Completely contradicts what (Stumpf) is saying.” The employee described a sales push called “Jump into January,” where associates were expected to sell 20 products a day. “We were all miserable, and it was soul-crushing to walk in every day,” said the associate. It seems obvious that the pressure to achieve such targets created an intense environment.
What can other firms learn from the decline of Wells Fargo’s reputation? A useful way to answer that question holistically is through the lens of Axiom’s “Reputation Management Framework.” Our model begins with the end in mind and is based on years of experience leading this type of work for global clients in highly-regulated industries such as energy, healthcare, financial services and automotive, to name a few.
The model is intuitive, with reputation heavily influenced by the importance of company performance measured against the following dimensions: innovation, products/services, citizenship, governance, workplace, leadership, and financial performance.
Wells Fargo’s decision to put unrealistic pressure on its retail banking team had a cascading effect on the entire organization. To add some dimension to the gravity of the situation, we fielded a study with 500 U.S. general consumers about their perceptions of Wells Fargo’s (and nine other companies’) reputation given the events of late.
From a reputational performance standpoint, Wells Fargo’s current reputation is at the “poor” level with a score of 58 (out of 100). Compared to its retail banking peers, JP Morgan and Bank of America are in the “leading” to “average” range with scores of 76 and 70. respectively. Further, key drivers of Wells Fargo’s reputation from the recent events are putting downward pressure on its overall reputation – with Leadership (49), Products and Services (55), and Corporate Citizenship (52) all either at or well below the “failing” performance threshold.
Recovering from this crisis will require more than a band-aid. It will take a reexamination of the entire organizational model including roles and accountabilities, decision authority, performance measures, work processes and information flows. We often recommend that companies take a step back and analyze their organizational model for reputational vulnerabilities and create an organization design to support behavior that builds reputation, not tears it down.
It will take time for Wells Fargo to unwind the damage done and, most recently, it appears to be taking the right steps to correct its actions—including leadership changes at the top, a new public campaign taking responsibility for wrong-doings, a roadshow to internally communicate the work to be done and, importantly, the realization that it is a long road ahead to rebuild trust with its customers AND employees.
Aneysha Pearce is a Partner at Axiom Consulting Partners, a strategy consulting firm focused on helping clients transform their businesses through a deep and thoughtful understanding of strategy, organization, and talent. Aneysha has over 20 years of experience supporting clients with their growth strategy efforts having partnered with many of the F500 clients in a wide-array of industries including energy, financial services, retail, consumer packaged goods, technology, and healthcare. Aneysha is a frequent media resource, commenting on business, brand, and reputation topics for publications such as Fortune, MediaPost, and 24/7 Wall Street, and has been interviewed by San Francisco KGO Radio. Learn More
By Scott Ahlstrand
Employee engagement strategy is threatened by three outdated myths about how to conduct employee engagement surveys. These myths are undermining their value, wasting the investment and missing the opportunity to gain the deeper insights that can actually lead to better employee performance. See if you’re laboring under any of these value-sapping myths.
Myth #1 – Census
This is the myth that every employee should get the exact same survey. A one-size-fits-all design is said to improve efficiency and organizational momentum, while avoiding employee confusion over why people got different sets of questions.
There is little academic or real-world proof that this belief is valid and, in fact, just the opposite is true. We’ve seen dozens of examples where a more robust design provided enhanced (in quality and quantity) insights. Give 20,000 employees a questionnaire of 40 questions and you’ll get insights on only 40 items. A far better design is to craft a core set of 30 to 35 questions and then create an additional 10 to 15 modules of 3 to 5 questions each. These “modules” can be distributed on a random, geographic, functional or experiential basis. The average survey is still only 40 questions long—but you’ve gained insights into 100 different items across the organization.
Myth #2 – Consistency
Or, as I call it, laziness. According to the consistency myth, each new survey has to match the one before in order to measure progress and trends reliably. Sounds logical, right? The trouble is, organizations are organic not static entities. Your survey instrument needs to change by at least 10% each wave to stay relevant to your current strategy, organizational model and needs, and enable you to uncover timely information that will be useful strategically or tactically. Again, optimized design and proper use of modules and sample sizes can achieve this without impacting your core survey.
Myth #3 – Comparability
It’s easy to fall for the myth of comparability. Management often wants to measure their organization against the competition but, in fact, the value of benchmarking data is a myth. Survey vendors have accumulated a database of companies whose employees have answered the exact same questions (word for word) that your employees are being asked. You are promised that you’ll gain tremendous insights by seeing how your employees stack up against the “industry-wide norm.”
However, the companies in such a database are only convenience-based samples and are not representative of an industry or geography. In fact, you will learn little of value because while industries tend to be consistent, organizations exhibit tremendous variability—variability in how the culture operates, what concepts mean and how they do what they do. Convenience-based comparisons based on standardized surveys won’t help you improve. Instead, customize your questions to your company’s unique culture, situation and needs to uncover your organization’s unique strengths and weaknesses and get the insights that enable meaningful change.
These myths have gained credibility over the years because of the sheer number of organizations that bought into them. But, if we’re honest, we know this outdated approach to employee engagement stalls out over time and provides limited realization of business-wide benefits. Instead, I’d like to see companies move towards more enlightened practices that align better to changing business needs:
- Obsess over improvement rather than comparisons,
- Demand as much accountability from senior leaders as from front-line managers,
- Drive toward targeted actions that leverage organizational strength and remove the barriers to engagement.
How about your company? Is your employee engagement strategy being hobbled by worn-out survey myths and methodologies? Learn More