Knowledge Area Review Executive Team Best Practices July
Knowledge Area Review Executive Team Best Practices July 2012 1
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Executive Team Best Practices Knowledge Area Review Components Section Component Description 1 Executive Summary • Executive summary of key research findings 2 Approach and Summary List of Insights • Framework used to guide research and structure document Detailed Insights and Case Examples • Collection of 1 -2 page summaries based on available research, that 3 • Summary of Insights, organised by Topic o Explain key insight o Identify potential proof points / benchmarks o Cite relevant case example 4 Supporting Material • Potentially useful charts & illustrations supporting some of the insights from Section 3 5 Relevant Extracts from ICG Industry Insights Reviews • Selected articles from the last 12 months of ICG Industry Insights Reviews 3 © Internal Consulting Group 2015
Executive Summary Section 1 4 © Internal Consulting Group 2015
Executive Team Best Practices Executive Summary (1/5) Creating Identity & Brand The importance of an emotional connection in creating a strong executive team identity cannot be understated; for example, BCG cited the example of a large bank at which key executives needed to first “get it” before championing the change cause. In a similar vein, former e. Bay CEO Meg Whitman talks about how building trust and camaraderie is essential to a well functioning executive team HBR gives GE, Johnson & Johnson and others as examples of companies with a reputation for turning out strong leaders that embody the organisation’s value propositions to customers and stakeholders; the 5 steps required to do so are laid out Royal Bank of Canada and Pulte Homes are given as examples of organisations where values such as teamwork, mutual respect, morality and work ethic are modeled to the rest of the organization in order to create a culture of success The concept of championing innovation and learning, citing Barclays Global Investors and General Electric as examples, is explained as being critical to formulating strategies and creating value, particularly for technology-driven companies Finally, this topic closes with an HBR tool that helps organisations assess their own leadership branding capability as a precursor to further work in this area Training & Inducting Leaders An HBR article discussing the building of a Leadership Brand argues that the fundamentals of “Leadership Code” need to first be mastered by Executive Team members. In particular, four elements of the “Leadership Code” should be key components of any Induction or Leadership Development program As part of a broader BCG paper on the subject of “Adaptive” Leadership Teams, the authors argue that the CEO can play a critical role in setting the appropriate context with Executive Team members to drive winning adaptive behavior We then turn to Bank of America, who have developed a best-in-class Executive Induction program, comprising five distinct elements. Furthermore, three key assumptions are at play in the successful delivery of an onboarding process, namely (a) having multiple interventions over the first 12 -18 months, (b) supported by high-quality interactions with (c) multiple stakeholder resources. (Refer Section 4 for additional detail) © Internal Consulting Group 2015 5
Executive Team Best Practices Executive Summary (2/5) Communicating Effectively This topic opens with an older but highly relevant Bain case study on St. George Bank, in which former CEO Gail Kelly’s efforts to underpin a major change initiative with effective communications are laid out in detail We then refer to a London Business School case study of the major transformation at Royal Bank of Canada, which made heavy use of “Leadership Dialogues” between the Executive Team and middle management. These sessions served to open up two-way awareness and engagement as a precursor to a major change initiative 3 M is a company long known for its prowess in innovation – an article in Organisational Dynamics argues that this trait has been ingrained in the company’s culture through both Executive and peer-to-peer communication from the beginning, enabling creativity and effectively creating a strategic asset in the process Finally, in a reversal of the typical flow of communication, HBR hears from Frank Hassan, the former CEO of Schering-Plough on how he created a culture of “Leading from the Front” to leverage the valuable input of frontline managers. He also lays out 3 steps for enabling effective dialogue between the CEO and the frontline. Setting Governance Structure We begin by looking at BCG’s work with the Royal Bank of Canada and how leadership imperatives were aligned at all levels of the organisation. In particular, the authors advocate using high performance teams of leaders to drive urgency, stocking the talent pipeline with future leaders and investing in middle management Booz analyses Google as an example of mobilising the “informal organisation” in order to drive responsiveness, listing some of the ways that Google does this We then turn to an older but still relevant research note from Harvard on Building and Leading Senior teams, where two ideas are explored, namely ‘Managing Paradox’ to get the most out of teams and the power of ‘Splitting Decision Making’ across two groups to improve outcomes Cisco Systems is cited by Booz as an example of a company with a strong talent culture, in particular lauding its use of “Action Learning Forums” as a mechanism to focus top talent on issues that matter for the organisation, often facilitating organisational breakthroughs in the process © Internal Consulting Group 2015 6
Executive Team Best Practices Executive Summary (3/5) Setting Governance Structure (cont’d) Booz recently released a paper on “Unleashing the Power of Teams” which discusses the 5 practices critical to the success of senior leadership team workshops, citing the experience of a consumer products company in some detail Finally, BCG’s work on the power of Role Charters is referenced, in particular their usefulness in clarifying decision rights and boosting collaboration. A role charter template is given Setting Priorities & Focus Areas We open with some sage Mc. Kinsey advice on focusing the senior team only on the issues where they are uniquely positioned to add value, citing the example of a European consumer goods company to illustrate this. In particular, Executive Teams should be focused on projects requiring cross-functional or cross-regional collaboration; the rest can be delegated and managed using clear performance indicators We return to the Royal Bank of Canada transformation example, as analysed by the London Business School, to explore how CEO Gord Nixon branded the change effort, defined a measurable goal and clarified accountabilities in support of the project Nissan is next analysed by Booz as an example of setting “Purposeful Initiatives”, in other words, a sequence of high-priority campaigns that reinforce each other and, importantly, are linked back to a central purpose that is core to the organisation’s values and overall strategy We then explore an in-depth review of how Countrywide Financial revamped its strategic planning process. Key findings included the importance of making planning a corporate priority, linkages across organisational units and dividing responsibility between an “executive committee” vs. a “managing directorate” Harvard’s Robert Kaplan makes the case for having an “Office of Strategic Management” to orchestrategy management processes for the executive team, with key responsibilities including “architect”, “process owner” and “integrator” We close this section with some practical tips from Bain on keeping meetings focused on decisions and actions, generated from client interviews © Internal Consulting Group 2015 7
Executive Team Best Practices Executive Summary (4/5) Managing Results & Performance We return to the Royal Bank of Canada example, this time to highlight the importance of measuring progress at each, small step of a major program or major change effort. A central Project or Transformation Management Office (TMO) can be quite helpful in this regard An insightful Harvard Business Review piece then guides us through the five traps of performance management with some specific ideas on how to avoid them. Furthermore, we see how companies such as Avon, Humana, a European Investment Bank, Clifford Chance, Southwest Airlines and others benefit from tweaks to their performance management metrics and management systems Booz then looks at Aetna, Bell Canada and Campbells as examples of companies where “soft” initiatives were employed to deliver “hard” results. At Aetna, “employee councils” were used to create emotional commitment to a significant change initiative. At Bell, a “community of practice” was created organically to motivate employees. At Campbells, performance targets were tied to simple, precise practices that all could relate to. Mc. Kinsey outlines a blueprint for a Performance Dashboard, useful in particular on large-scale capital projects. At one glance, the Dashboard can demonstrate critical path, cost projections, risk mitigation strategies, mini-projects and progress to date Financial Insights then looks at Performance Management at a number of European Banks, identifying four distinct evolutionary models, namely “Enterprise Performance Kings”, “Technology Engineers”, “Scorecard Wizards” and “Spreadsheet Warriors” We then look at the case study of Old National Bankcorp and how it used a new performance management capability to strengthen its risk profile, enhance management discipline and achieve consistent, quality returns “Net Promoter Score” can be a very useful metric for measuring customer advocacy; an American Express case study is highlighted in a Strategy & Leadership article Finally, we look again to a Bain case study on St. George Bank where a new set of performance metrics and tracking measures were implemented 8 © Internal Consulting Group 2015
Executive Team Best Practices Executive Summary (5/5) Scanning Markets & Rivals An extensive Mc. Kinsey Global Survey on competitive response lists the most common information types gathered on competitors, with news reports, industry group/conference analysis and annual reports topping the list. The same study goes on to analyse responses to competitor moves, noting that in the majority of cases, the response was the single most obvious counteraction. Finally, in choosing which response to make, companies most often used the lens of long- and short-term market share, followed by long- and short term earnings or cash flow, as the primary evaluation metric Another Mc. Kinsey white paper outlines the “Competitor-Insight” Loop as best practice in designing a Competitive Intelligence function, incorporating four key steps which are illustrated in a chart As part of its work on “Adaptive” leadership, BCG observes that companies’ “Sense and Respond” function needs to be well developed in order to ensure that key industry developments are anticipated rather than reacted to Vanguard is an example of a company that used market scanning to observe emerging trends in its industry, allowing them to identify a unique and sustainable product opportunity We then look at the example of a major bank and leading debit payment scheme who built a Radar Capability to periodically update the c-suite with analysis of changes in the competitor pipeline and key trends Finally, we close with a look at “lite wargaming” to uncover rival strategies, as illustrated by an Australian Insurance company’s implementation of this type of tool 9 © Internal Consulting Group 2015
Approach and Summary List of Insights Section 2 10 © Internal Consulting Group 2015
Executive Team Best Practices Framework Describes the Key Topics Covered in this Report (A) Creating Identity & Brand (B) Training & Inducting Leaders (C) Communicating & Engaging Effectively (D) Setting Governance Structure (E) Setting Priorities & Focus Areas (F) Managing Results & Performance (G) Scanning Markets & Rivals (H) Choosing Talent & Diversity (I) Driving Collaboration Key Areas of Focus for BNZ Related topic but of scope © Internal Consulting Group 2015 11
Executive Team Best Practices Summary by Topic: A) Creating Identity & Brand ID Key Insight Case Example(s) Source A 1 Tap into executives’ emotions to drive change Robust plans and success measures not enough, executives need to ‘get it’, thereby internalising the change mandate • Large bank BCG A 2 Adopt a ‘coaching’ mentality with the senior leadership team Team members need to spend quality time together to build trust; regular executive team meetings are important as well • e. Bay • Hospitality company (BCG client) Harvard Business School; BCG A 3 Follow 5 Steps to Create a Leadership Brand Establish leadership basics; internalise external stakeholder expectations; evaluate leaders accordingly; invest in leadership development; and track success • General Electric • Johnson & Johnson • Bon Secours Health System Harvard Business Review A 4 Define the culture clearly at the top levels of the organisation Key values need to be modelled by executives before ‘trickling down’ • Royal Bank of Canada Financial Times A 5 Model morality, work ethic and performance in order to weave the fabric of success Honesty and trust go hand in hand, particularly with senior leaders • Pulte Homes Organisational Dynamics A 6 Champion innovation and learning Support organisational innovation and encourage self-learning • Barclays Global Investors • General Electric Organisational Dynamics A 7 Assess Your Organisation’s Leadership Branding Capability The authors share a tool that assesses leadership branding readiness • n/a Harvard Business Review © Internal Consulting Group 2015 12
Executive Team Best Practices Summary by Topic: B) Training & Inducting Leaders ID Key Insight Case Example(s) Source B 1 Master the “Leadership Code” before building a leadership brand Strategy, Execution, Managing Talent and Personal Proficiency • Canadian Tire HBR B 2 Set the Team Context for Adaptation The best CEOs will set the tone for an ‘adaptive’ executive team • Hospitality Company • Financial Services Company BCG B 3 Bring Together 5 Distinct Elements to Enable Successful Onboarding Candidate Selection, Learning the Business, Learning the Culture, Establishing Leadership Expectations and Organisational Navigation • Bank of America Human Resource Management Review B 4 Implement a Best-In-Class Induction Program for Executives Ensure multiple interventions over the first 12 -18 months supported by high-quality interactions with multiple stakeholder resources • Bank of America Human Resource Management Review 13 © Internal Consulting Group 2015
Executive Team Best Practices Summary by Topic: C) Communicating Effectively ID Key Insight Case Example(s) Source C 1 Communicate Well to Support Major Change Speak to customers, Connect with Employees and Celebrate Successes • St. George Bank Bain C 2 Use “Leadership Dialogues” to Communicate and Engage Well-structured discussions can lay important groundwork for change • Royal Bank of Canada Business Strategy Review C 3 Reinforce the Core Message and Strategy by Socialising Organisational Values Organisational values must be socialised and reinforced • 3 M Company Organisational Dynamics C 4 “Lead from the Front” to Leverage Critical Information from the Frontline Adopting this mentality can create openness throughout the company • Schering-Plough HBR C 5 Follow a three step plan for Effective Dialogue between the CEO and the Frontline Select participants, organise meetings, share output and follow up • Schering-Plough • Pharmacia-Upjohn • Bausch & Lomb HBR 14 © Internal Consulting Group 2015
Executive Team Best Practices Summary by Topic: D) Setting Governance Structure ID Key Insight Case Example(s) Source D 1 Align Leadership at Every Level Drive urgency to mobilise the organisation, stack the pipeline with future leaders and invest in middle managers • Royal Bank of Canada BCG D 2 Mobilise the “informal organisation” Can yield profound improvements in both efficiency and effectiveness • Google Booz D 3 Manage Paradox to Get the Most Out of Teams Need to balance the 4 conflicting forces at the heart of team life • n/a Harvard Business School D 4 Split Decision Making Across Two Groups To Improve Outcomes Use adjacent subcommittees to test thinking and optimise decisions • n/a Harvard Business Review D 5 Use “Action Learning Forums” to Focus Top Talent on Next Generation Products and Organisational Breakthroughs Task small, hand-picked teams to further a top strategic priority • Cisco Booz D 6 Unleash the Power of Teams Move from theory to execution – apply team fundamentals to real business challenges for sustainable improvement • Consumer Products Company Booz D 7 Use Role Charters to Clarify Decision Rights and Boost Collaboration Role charters are a proven tool to enable faster decisions and stronger accountability • n/a BCG 15 © Internal Consulting Group 2015
Executive Team Best Practices Summary by Topic: E) Setting Priorities & Focus Areas ID Key Insight Case Example(s) Source E 1 Focus The Top Team On Where Only They Can Add Value, Delegate The Rest Focus on cross-functional or cross-regional issues, delegate the rest • European Consumer Goods Company Mc. Kinsey Quarterly E 2 Set Out a Mantra, Metrics and Accountabilities to Drive Results Brand the change initiative, define the goal and clarify accountabilities • Royal Bank of Canada Business Strategy Review E 3 Identify “Purposeful Initiatives” That Support A Broader Mandate in Order to Support Significant Change Use a sequence of high-priority campaigns that reinforce each other • Nissan Booz, Strategy + Business E 4 Enhance the Strategic Planning Process Implement a number of key changes to transform strategic planning • Countrywide Financial Handbook of Business Strategy E 5 Set up an “Office of Strategic Management” A small cadre of professionals that orchestrategy management processes of the executive team • n/a Harvard Business School E 6 Follow 9 Practical Tips to Keep Meetings Centered on Decisions and Actions Bain lays out practical tips gleaned from client interviews • n/a Bain 16 © Internal Consulting Group 2015
Executive Team Best Practices Summary by Topic: F) Managing Results & Performance ID Key Insight Case Example(s) Source F 1 Measure Progress at Each, Small Step of a Major Program A highly structured Transformation Management Office can help in this regard as well • Royal Bank of Canada Business Strategy Review F 2 Avoid the 5 Traps of Performance Management Advice and examples on how to avoid them • Multiple HBR F 3 “Soft” Initiatives Can Deliver “Hard” Results Use the power of the ‘informal’ organisation to accelerate change and deliver results beyond what is possible through formal efforts alone • Aetna Insurance • Bell Canada • Campbell’s Stockpot Booz F 4 Use Performance Dashboards to Report on Project Progress They can demonstrate critical path, cost projections, risk mitigation strategies, mini-projects and progress to date • Large Scale Capital Projects in Russia Mc. Kinsey F 5 Consider Four Different Models for Approaching Performance Management “Enterprise Performance Kings”, “Technology Engineers”, “Scorecard Wizards” and “Spreadsheet Warriors” • Medium-sized European bank • Large Pan-European bank Financial Insights F 6 Implement Performance Management Initiatives to Build on Balanced Scorecard Fundamentals A series of changes transformed performance management for ONB • Old National Bank Protiviti F 7 Use “Net Promoter Score” to Gauge the Benefit of Fostering Customer Advocacy The NPS metric helps banks cultivate enthusiastic customers • American Express Bain F 8 Use Scorecards to Deliver the Business Agenda Measure key metrics aligned to strategic priorities to get results • St. George Bank Bain © Internal Consulting Group 2015 17
Executive Team Best Practices Summary by Topic: G) Scanning Markets & Rivals ID Key Insight Case Example(s) Source G 1 Know the Most Common Types of Information Gathered on Competitors • Survey of 1, 825 Global Executives Mc. Kinsey G 2 Recognise that Competitive Responses Are Generally Straightforward • Survey of 1, 825 Global Executives Mc. Kinsey G 3 See How Other Companies Evaluate Their Competitive Responses • Survey of 1, 825 Global Executives Mc. Kinsey G 4 Leverage the Competitor Insight Loop when Designing your Competitive Intelligence Function • n/a Mc. Kinsey G 5 Ensure the Organisation’s “Sense and Respond” Capability is Well-Developed The most effective adaptive teams monitor external forces that drive change in their business environment • Various clients BCG G 6 Incorporate Trends as Key Inputs into Strategic Leadership Systems Business opportunities can emerge from existing or emerging market trends • Vanguard Group Organisational Dynamics G 7 Build A Radar Capability To Monitor Local And Global Business Model Innovation • Disguised payments player and Bank in Australia ICG G 8 Execute “Lite Wargames” To Identify Rival Strategies and Optimise Adapt, Shape And Reserve The Right To Play Strategies • Disguised Australian Bank Mc. Kinsey 18 © Internal Consulting Group 2015
Suggested Reading for Out-of-Scope Topics H) Choosing Talent & Diversity ID Key Insight Case Example Source H 1 Get The Right People On The Team, And The Wrong Ones Off The composition of the top team is often most powerful level to shape team performance • Technology Company Mc. Kinsey – Read article H 2 Leverage Diversity in the Top Team to Generate Better Performance text • 180 public companies in France, Germany, UK and USA Mc. Kinsey – Read article H 3 Put Talent on the Executive Committee Agenda Identify regional and BU talent pools and hold senior management accountable for leadership development • HSBC Booz – Read article I) Driving Collaboration ID Key Insight Case Example Source I 1 Address Team Dynamics and Processes A necessary ingredient of building a top team • Latin American Insurance Company Mc. Kinsey – Read article I 2 Recognise the 6 Dimensions of Effective Teamwork Balance, Alignment, Resilience, Energy, Openness & Efficiency • Various Egon Zehnder International – Read article 19 © Internal Consulting Group 2015
Detailed Insights and Case Examples Section 3 20 © Internal Consulting Group 2015
Creating Identity/Brand A 1 – Tap Into Emotion To Drive Change Key Insight Case Example Tap into Executives’ Emotions to Drive Change After losing market share for some years, Big. Bank (company name disguised by BCG) needed desperately to grow and to raise profits. The CEO and board believed the answer lay in cross-selling and in managing costs more effectively. This strategy demanded unity from the bank’s five highly independent units—units that had operated as classic silos. Internal rivalry and lack of trust were rampant. So was disrespect, following industry stereotypes: retail banking saw the investment-banking unit as a capital hog, with compensation levels disproportionate to its risks; investment banking felt that retail banking didn’t appreciate the complexities of its business; and both units believed that the wealth division was paying out too much to the sales force and not enough to shareholders. Bringing teams and units together seemed an impossible task. But the CEO was firm: he did not want to replace senior management. So how did he trigger a change in behaviour? In situations where change is required, the best laid plans and performance measures may not be enough to engage senior leaders Instead, an emotional connection, where the executive “get’s it” and internalises the mandate for change, is what is required Potential Proof Points / Benchmarks q Implement a 360 -degree feedback program, linked to variable compensation q If required, devise an external intervention to shift thinking and internalise the change mandate, e. g. video, presentation, ‘experience’ First, he instituted a 360 -degree feedback program and made it a major component of executives’ variable compensation. He held facilitated sessions so that team members could work together to advance the new strategy while learning ways to foster collaboration and enterprise-wide unity. It was during one such session that the head of one business unit (we’ll call him Wilson) had an epiphany. Until then, Wilson had seen little upside in the cross-selling strategy for his unit; collaboration meant only more risk with little reward. During the session, the facilitator showed a video of an orchestra conductor coaching a cellist to help her overcome her performance block and gain insight into an important composition. The conductor encouraged her to enjoy her playing more and put aside her fear of making mistakes. He praised his pupil generously to motivate her to keep raising her performance level. He gave her five positive reinforcements for every criticism. [cont’d] Source: ICG Analysis; BCG, “Is Your Team Stuck? Injecting Boldness by Unlocking Leaders’ Emotions”, April 2012 – Read article © Internal Consulting Group 2015 21
Creating Identity/Brand A 1 – Tap Into Emotion To Drive Change (cont’d) Key Insight Case Example [cont’d]… At dinner that night, Wilson replayed the video in his mind. He thought of his son, a talented violinist who was studying at one of the nation’s top music schools. He remembered the succession of teachers who had pushed his son to ever-higher standards of excellence—in the process, dampening his son’s joy and amplifying his fear of making mistakes. As a father, he had regretted this development. Wilson now realized that his son needed to aspire once again in order to overcome his fear of failure and be willing to take risks. It also occurred to Wilson that he himself probably needed the very same attitude in his own efforts to lead the bank to success. The 360 -degree-feedback program turned behaviours around—most markedly in Wilson, who experienced the greatest improvement of any executive that year. The person who had been the most vocal in opposing collaboration was now its strongest proponent. More important, cross-unit sales started to kick in. As Big. Bank’s story illustrates, a CEO can incite behaviour change at the top by developing a strong plan, instituting a new performance-measurement tool, and linking the resulting measurements to a tangible consequence (compensation). But there must also be a moment of truth when the individuals on the team “get it”: when the change they seek becomes a change in their own understanding and, subsequently, their behaviour. Without that internalization, would the linkage to compensation have worked on its own? Or, as is so often the case, would the leaders have eventually gamed the system, without any real change occurring? At Big. Bank, an external intervention (the video) shifted the frame of reference of just one team member. The change in Wilson’s mindset and performance ignited a chain reaction. Team discussions—about everything from financial goals to talent development—shifted from a unit-only focus to a broader enterprise concern. Source: ICG Analysis; BCG, “Is Your Team Stuck? Injecting Boldness by Unlocking Leaders’ Emotions”, April 2012 – Read article © Internal Consulting Group 2015 22
Creating Identity/Brand A 2 – Adopt a “Coaching” Mentality with Senior Teams Key Insight Case Example Adopt a “Coaching” Mentality with Senior Teams Former e. Bay CEO Meg Whitman on her approach to her Senior Team: Too often, senior leaders assume that team members know how to work together effectively; however, they may not know how to “work it out amongst themselves”. In addition, they may have the technical experience but not the human or interpersonal expertise. Therefore, team members • need guidance and coaching around how to be effective team members • need to spend sufficient time with each other to grow and trust each other as a team Potential Proof Points / Benchmarks: q Hold 2 - to 4 -hour long weekly management meetings q Organise periodic all-day retreats to encourage cohesiveness and lay the groundwork for more productive meetings “I figured out early that if we were going to work together as a team we needed to throw the ball around a lot before we could walk out on the court. So we spent a lot of time together, which was at odds with the pressure to get back to work, check voice mail, and check e-mail. But I’ve found that throwing the ball around has been very helpful, because we’re now able to have pretty short and focused discussions, figure out what the point of views are, and make a decision quickly. ” Despite the intensely time constrained internet mentality, Whitman insisted that her team hold two- to four-hour long, weekly management meetings supplemented with periodic all-day retreats. How many executives would have agreed to set such a schedule when revenue was growing at a 49% quarterly rate? Similarly, a recent BCG paper, “Winning Practices of Adaptive Leadership Teams” cited the experience of a hospitality client who benefited from regular executive team meetings: The CEO at a hospitality company cited the importance of weekly meetings to agree on objectives. The team meets every Monday morning for up to four hours to discuss and reach some level of agreement on operational issues, even if is not full consensus. The team leaves the room feeling united about the company’s overall priorities. 23 Source: ICG Analysis; Harvard Business School, “A Note on Building and Leading your Senior Team”, June 2002, Harvard Business School Note 402 -037; “Winning Practices of Adaptive Leadership Teams”, BCG, 2012 – Read article © Internal Consulting Group 2015
Creating Identity/Brand A 3 – Follow 5 Steps to Create a Leadership Brand Key Insight Case Example Follow 5 Steps To Create A Leadership Brand General Electric whose motto is “imagination at work, ” is a diversified company with $163 billion in annual revenue. It is famous for developing leaders who are dedicated to turning imaginative ideas into leading products and services. A GE manager can be trusted to be a strong conceptualist as well as a decisive thinker; an inclusive, competent team leader; and a confident expert in his field. Relatively few companies are able to establish leadership brands. You want your leaders to be the kind of people who embody the promises your company makes to its customers. Leadership brands are developed through the following steps: 1. Do the basics of leadership – like setting strategy and grooming talent – well. 2. Ensure that managers internalize external constituents’ high expectations of the firm. 3. Evaluate leaders according to those external perspectives. 4. Invest in broad-based leadership development that helps managers hone the skills needed to meet customer and investor expectations. 5. Track success at building a leadership brand over the long term. Potential Proof Points / Benchmarks q Develop a reputation for developing exceptional managers with a distinct set of talents Johnson & Johnson, whose credo begins, “We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services, ” earned $53 billion in revenue last year. It is celebrated for developing leaders who provide scientifically sound, high-quality products and services that help heal and cure disease and improve the quality of life. A J&J manager is known for being socially responsible and a stickler for product development and differentiation. She takes a product to market in a disciplined way; she is committed to building consumer trust, to product quality, and to safety. “Good help to those in need” is the mission of Bon Secours Health System, a non-profit health care firm based in Marriottsville, Maryland, that operates a variety of hospitals and nursing care facilities. Consistent with its purpose as a Catholic health care ministry, the 19, 000 -person organization develops leaders who put a premium on “reflective integration. ” That means Bon Secours expects its managers to do more than just run health care units. They must also balance the business of health care with compassion and caring. q Earn trust that employees and managers will consistently make good on the firm’s promises to customers and stakeholders 24 Source: ICG Analysis; “Managing for the Long Term – Building a Leadership Brand”, Harvard Business Review, July-August 2007 – Read article © Internal Consulting Group 2015
Creating Identity/Brand A 4 – Define The Culture Clearly At The Senior Levels Of The Organisation Key Insight Case Example Define the Culture Clearly at the Senior Levels of the Organisation Gordon Nixon makes a point of escaping Canada's frigid winter each January for a Caribbean cruise. But the excursion is more work than pleasure for Royal Bank of Canada's chief executive. His 700 fellow passengers are RBC tellers, administrative staff, junior employees and middle managers who are being rewarded for superior performance. Values such as teamwork and mutual respect need to be modelled at the very top of the organisation in order to permeate through the ranks In addition, senior executives should not be afraid to make changes to their leadership teams in order to take performance to the next level Potential Proof Points / Benchmarks: q Hold an annual ‘all expenses paid’-type event attended by CEO/members of Executive Team to recognise superior performance at junior and middle levels q Clearly articulate the organisation’s values; ensure this is repeated and demonstrated by CEO/Executive Team q Shuffle the Executive Team regularly (every 2 -3 years) Mr Nixon joins the cruises to put into practice the teamwork and mutual respect he has tried to foster among RBC's 73, 000 employees in eight years at the helm of Canada's biggest bank. As he sees it, that culture has played a crucial role in RBC's ability - rivalled by only a handful of other large banks - to ride out the storms that have battered the financial services industry during the past two years. "We don't tolerate fiefdoms and so forth, " Mr Nixon says. "Those are the sort of things that brought down a lot of organisations. " Teamwork and "doing the right thing for the organisation" are non negotiable elements of RBC's culture, Mr Nixon says. "We can have the best trader in the world, but if he doesn't comply with the culture and values of the organisation, we don't want that person being part of the [bank]. ” Mr Nixon says he is "a great believer in ensuring that you've got the right person running your businesses and giving them the rope to make mistakes but also to do the right thing". But, he adds: "You can't be afraid to make changes even when you've got good people. ” Mr Nixon has shuffled the bank's 10 -member executive committee three times during his eight-year tenure. Several top lieutenants have left. The former chief operating officer is now head of strategy. She has been replaced by a 13 -strong operating committee. Source: ICG Analysis; “The Capital Gained from Culture; The Chief Executive of Royal Bank of Canada believes mutual respect and teamwork have helped it ride out the financial crisis”, Bernard Simon, Financial Times, 17 August 2009 – Read article © Internal Consulting Group 2015 25
Creating Identity/Brand A 5 – Model Morality, Work Ethic And Performance … Key Insight Case Example Model morality, work ethic and performance in order to weave the fabric of success To weave the fabric of success, executives must create not only financial but also emotional/psychological ownership based on mutual trust and respect. They do this by role modelling high levels of morality, work ethics and performance. They also do it by sincerely conveying the goals as well as the challenges their organizations are facing. In effect, they translate and communicate their analysis of the business environment and their consequent strategic decisions to employees in the organization. According to Pulte Homes Inc. executive Bill Rieser, trust enables his company to provide excellent customer service and technology-driven advanced construction processes: “When you deal with selling a product such as a home, in our industry, we have to build trust. The customer has to trust us to do the job that they want us to do. And we have to trust each other that we are going to – as a team – be supportive of each other and our business. So honesty and trust go together. Integrity and conducting our business with a high level of morality are things we want to do. ” This role of leaders as buffers becomes critical in technology-dependent environments, where high uncertainty could harm employees’ functioning. It is in these environments that emotional/psychological bonding is so critical. Potential Proof Points / Benchmarks: q Ensure that executives model high levels of morality, work ethic and performance, acting as buffers between employees and the external environment 26 Source: ICG Analysis; “Making All the Right Connections: The Strategic Leadership of Top Executives in High-Tech Organizations”, Sosik et al. , Organisational Dynamics, 2005 – Read article © Internal Consulting Group 2015
Creating Identity/Brand A 6 – Champion Innovation and Learning Key Insight … Champion Innovation And Learning Innovation and Learning represent intellectual capital resources that are vital for technology-driven organizations that wish to be strategically focused Executives who display outstanding strategic leadership manage creativity and innovation using the transformational leadership component of intellectual stimulation to continually challenge and stretch their followers’ ‘‘mental machinery’’ in line with their strategic objectives. They also manage mistakes, in the sense that they accept appropriate levels of miscues as long as learning is achieved along the way. Potential Proof Points / Benchmarks: q Actively encourage new, challenging thinking that lies “outside the norm” q Consider mistakes ‘ok’ as long as learning is achieved along the way; in other words, avoid creating a “no mistakes culture” that can snuff out innovation q Employ creative people who can become a source of innovation for the company and help build intellectual capital Case Example Various technology-driven companies we studied … such as Barclays Global Investors – are using Internet-based systems to connect with key stakeholders to gain the advantage on their competitors. … executives are championing innovation, building communities of practice, and deploying advanced information technology in their organizations. These initiatives forge their connections with customers, suppliers and business partners. For example, Lee Kranefuss of Barclays Global Investors told us: ‘‘I wanted to create an environment where people felt safe to speak up and challenge me! I didn’t want to be the only driver of discussion. I wanted people to think outside the norm and solve problems creatively. I wanted to create an environment where people could make decisions without being second-guessed. ’’ His perspective is in line with Peter Drucker, who has noted that innovation will be the core competency of the 21 st century. … an executive we interviewed from General Electric described it this way: ‘‘Basically I look at all problems as opportunities. I try to look at the glass half full as opposed to half empty. . . if there were no problems there would be no opportunities and therefore no inventions. ’’ In other words, outstanding strategic leadership provides followers with the infrastructure necessary for creativity and harnesses technology to foster learning and innovation in their organizations. Source: ICG Analysis; “Making All the Right Connections: The Strategic Leadership of Top Executives in High-Tech Organizations”, Sosik et al. , Organisational Dynamics, 2005 – Read article © Internal Consulting Group 2015 27
Creating Identity/Brand A 7 – Assess Your Organisation’s Leadership Branding Capability 28 Source: “Managing for the Long Term – Building a Leadership Brand”, Harvard Business Review, July-August 2007 – Read article © Internal Consulting Group 2015
Training & Inducting Leaders B 1 – Master the “Leadership Code” before building a Leadership Brand Key Insight Case Example Master the “Leadership Code” before building a Leadership Brand Canadian Tire works to develop executives who demonstrate all the prerequisites of leadership. The Toronto-based conglomerate, which had Can$8. 3 billion in revenue last year, regularly assesses the abilities of upand-coming managers in each dimension. Those with the highest potential often have towering strengths but need to be challenged in a completely new way in order to grow in other dimensions – or to demonstrate their readiness for the next level. As a prerequisite to building a leadership brand, leaders must first master what is termed the Leadership Code: 1. Master strategy; they need to have a point of view about the future and be able to position the firm for continued success with customers 2. Be able to execute; which means they must be able to build organizational systems that work, to deliver results, and to make change happen 3. Manage today’s talent; knowing how to motivate, engage, and communicate with employees. They must also find ways to develop tomorrow’s talent and groom employees for future leadership. 4. Show personal proficiency; demonstrating an ability to learn, act with integrity, exercise social and emotional intelligence, make bold decisions, and engender trust. An individual leader may have a predisposition in some areas, and should be strong in at least one, but must demonstrate a high level of competence in all of them. Potential Proof Points / Benchmarks: The company encourages such growth by pushing executives out of their comfort zone and moving them into new territory. For example, Canadian Tire recently took the CFO of its financial services division and put him in charge of a retail banking pilot. The firm also moved its retail VP of home products into a position as president of the petroleum division. Managing unfamiliar territory forces executives to learn new skills and not always rely on their core strengths. The results-focused CFO, for instance, demonstrated an ability to inspire and direct a large team during the pilot project. The retail VP had an opportunity to build the strategy for an entire stand-alone small business unit and learn how to engage frontline employees. Over time, the most promising leaders at Canadian Tire will move into assignments that develop all the core skills of leadership. Without excellence in all the fundamentals, leaders can be good, but they will not be outstanding. Once these basics are established, companies can move on to shaping their organization’s leadership brand. q Include the 4 elements of the “Leadership Code” in any Induction or Leadership Development program 29 q Regularly rotate senior leaders in order to force learning of new skills beyond core skills Source: ICG Analysis; “Managing for the Long Term – Building a Leadership Brand”, Harvard Business Review, July-August 2007 – Read article © Internal Consulting Group 2015
Training & Inducting Leaders B 2 – Set the Team Context for Adaptation 30 Source: “Winning Practices of Adaptive Leadership Teams”, BCG, April 2012 – Read article © Internal Consulting Group 2015
Training & Inducting Leaders B 3 – Bring Together 5 Distinct Elements to Enable Successful Onboarding 31 Source: “Accelerating leadership performance at the top: Lessons from the Bank of America's executive on-boarding process”, Human Resource Management Review, 2007 – Access article © Internal Consulting Group 2015
Training & Inducting Leaders B 4 – Implement a Best-In-Class Induction Program for Executives Key Insight Case Example Implement a Best-In-Class Induction Program for Executives Underlying the Bank of America's on-boarding process is a set of fundamental assumptions that guide the design features of the program. These assumptions are the product of ‘lessons learned’ from earlier experiences with on-boarding interventions and experiments. While some organizations have developed formal onboarding interventions, the typical approach tends to be quite limited in scope and does little to effectively ‘on-board’ an executive leader. Instead, Bank of America’s approach comprises: • selection phase • entry phase > first 90 days • mid-point phase > 100– 130 days • final phase > 1 year Potential Proof Points / Benchmarks: q At selection, ensure leadership ability and cultural fit are considered with expertise and experience q On entry, offer on-boarding tools and processes, orientation forums, and coaching and support q At mid-point, give newly appointed executives written and verbal feedback from a select list of their key stakeholders q In the final phase, give the new executive 360 degree, benchmark feedback against the leadership model: leadership competencies, expectations, derailing behaviours, and core values 1. The first baseline assumption is that successful on-boarding occurs over time during the first year to eighteen months on the job. As such, any on-boarding process must be supported by multiple interventions instead of a single event say at entry into the role. These interventions must occur at intervals over the executive's first year to 18 months rather than solely within the first few months into the job. 2. To be effective, on-boarding must be supported by multiple resources especially in terms of stakeholder resources. To engage solely the new executive's superior (the hiring executive) is not sufficient to ensure a successful on-boarding experience. Rather the fullest possible spectrum of stakeholders must be involved in selection, entry and on-boarding phases. 3. Finally, interventions are completely dependent upon the quality of the interaction between the executive and their stakeholders. A purely paperwork-driven or bureaucratic process will not succeed. The approach must therefore focus on the quality of dialogue and interaction rather than documentation and formal processes. These assumptions have profoundly shaped the on-boarding interventions that the Bank of America deploys. For example, the bank's program employs multiple phases and interventions and engages the many stakeholders in a simple transparent process to achieve a broad range of outcomes. It is important to note, however, that executive on-boarding is only one of several processes that the Bank of America deploys for the leadership development of its senior talent. q Ensure induction occurs through multiple interventions over time by multiple stakeholders Source: “Accelerating leadership performance at the top: Lessons from the Bank of America's executive on-boarding process”, Human Resource Management Review, 2007 – Access article © Internal Consulting Group 2015 32
Communicating Effectively C 1 – Communicate Well to Support Major Change Key Insight Case Example Communicate Well To Support Major Change Australia’s St. George Bank provides a clear example of how to build a winning culture. When Gail Kelly became St. George’s CEO in 2002, she recognized immediately that the Sydney-based bank had much more potential than was reflected in its stock price. The new strategy, Kelly quickly decided, was to create a strong focus on delivering excellent service to customers. That would require preserving the bank’s friendly, outgoing culture while introducing a new, more rigorous set of performanceminded values. It would take firm, decisive leadership, new levels of accountability and a vision dynamic enough to excite all 8, 500 of the bank’s employees. The key to achieving the change, Kelly knew, was building a stronger culture by “working with the grain” of the existing one. Culture change can be a long journey—and one that requires tireless leadership. Consistent, sustained communication of the required behaviours is critical. It’s important to celebrate victories—large and small— but never to declare victory outright. Potential Proof Points / Benchmarks: q Set expectations about the necessity for change, the type of new culture required and how it will result in success. q Use simple language and/or analogies to help the concept ‘stick’ q Align the leadership team around a common vision and required behaviours. Encourage staff to “walk the talk” by having CEO and Executive Team first do the same themselves Energy is Kelly’s personal signature and crucial to her effort at cultural transformation. She relentlessly communicates and celebrates the new ideal with big gestures that model new behavior. When Kelly talks about how St. George had to change, she does so with a clear and gentle analogy: a vine and a trellis. St. George’s passion for the business and its care for its customers was “a fantastically growing vine” she told employees wherever they gathered. The trouble was, she said, the bank lacked a firm trellis—the framework of management, discipline and strategy to keep the vine growing in the right direction. Bigger banks had a rigid trellis but little vine— ultimately a weaker position, she said. The key was to build a trellis to help the vine grow in the right areas and with the right support. Kelly communicates her customer-centric message directly to customers by getting out and talking to them … She expects other executives to have closer contact with the frontline as well … [cont’d] Source: ICG Analysis; “Building a Winning Culture”, Bain & Company, 2006 – Read article 33 © Internal Consulting Group 2015
Communicating Effectively C 1 – Communicate Well to Support Major Change (cont’d) Key Insight Case Example [cont’d] These gestures certainly make for good PR. But they also send a powerful message that the CEO and her team are serious about change. “I’m trying to show by my behaviour that I am tackling these issues, ” Kelly said. Kelly is as solicitous with employees as she is with customers. She encourages employee emails and answers them personally. Her messages often include personal details about her vacations or children, and employees respond in the same spirit. Senior managers get calls on their birthdays, building camaraderie. And staff is encouraged to bring “all of themselves” to work so that they connect at more levels with colleagues and customers. Kelly also makes it a point to celebrate achievement whenever it’s appropriate. She has championed a traditional peer-based recognition system called the “Star Awards, ” which, in the past, sometimes celebrated seemingly unprofitable behaviour. Kelly kept the awards, but now “they reward the kinds of customer focus we want to encourage, ” she said. None of these wins translates to a new culture overnight, but the results show that St. George is clearly pointed in a new direction. “We talk about it as a journey, ” Kelly said. “Not a 100 -meter dash, not a marathon. ” Kelly and her team have consistently delivered double-digit earnings growth over the last four years, and the stock recently hit a new high. The transformation has improved staff and customer advocacy levels and delivered outstanding returns for shareholders. 34 Source: ICG Analysis; “Building a Winning Culture”, Bain & Company, 2006 – Read article © Internal Consulting Group 2015
Communicating Effectively C 2 – Use “Leadership Dialogues” to Communicate and Engage Key Insight Case Example Use “Leadership Dialogues” to Communicate and Engage [Royal Bank of Canada CEO Gord Nixon] knew he had to persuade unit leaders to relax their grip on their businesses if RBC were to achieve its full potential. Moreover, he had to accomplish this without the compelling threat of a burning platform. Before RBC embarked on an ambitious transformation program, CEO Gord Nixon launched a series of facilitated conversations with senior managers across the bank which proved crucial to the eventual success of the transformation Potential Proof Points / Benchmarks: q Organise “Leadership Dialogues” with top leaders across the entire organisation, in order to drive two -way enterprise-level awareness & engagement q Leverage “Leader’s Exchanges” for junior executives / high potential managers As a result, he launched a series of leadership development initiatives from late 2001 through 2003. Organized in sessions of 30 to 40 senior managers and executives, these interventions were geared toward enhancing executives’ awareness of the advantages of enterprise (versus unit-level) leadership at RBC. In keeping with the approach to the interventions, these sessions were named “The Leadership Dialogues” to underscore the importance of two-way exchange that would characterize the nature of the executives’ time together with the CEO. The dialogues were also intended to cultivate an honest and open climate in which executives could pose and explore difficult questions about what kinds of changes were necessary at RBC. These dialogues were developed in partnership with an external consultancy and were led by the CEO and members of his top executive team. They provided a unique vehicle for fostering both leadership development (understanding the role and characteristics of leaders) and culture change (understanding the power of enterprise and business leadership simultaneously). A parallel version of the dialogues, “Leaders’ Exchanges”, was delivered by alumni of the dialogues aimed at more junior executives and high potential managers in order to provide a multi-level, integrated message about RBC’s new direction and style of working. 35 Source: ICG Analysis; “Notes on a Transformation”, Bigsby et al. , Business Strategy Review, London Business School, Autumn 2007 – Read article © Internal Consulting Group 2015
Communicating Effectively C 3 – Reinforce the Core Message and Strategy by Socialising the Values Key Insight Case Example Reinforce The Core Message And Strategy By Socialising Organisational Values Consider 3 M Company, an organization known for its highly innovative organizational culture. 3 M’s culture teaches its employees to approach their work in the most creative ways possible. The creative way 3 M employees get things done has led to various innovative products. It is not enough to pontificate an inspiring core message and develop a brilliant strategic plan. The organizational values that underlie the core message and the skilful execution of the strategic plan must be socialized and reinforced to followers through a strong organizational culture. Organizational culture describes the norms, values and work practices shared by leaders and followers of an organization. The values, norms and expectations underlying a strong culture can substitute for external management controls aimed at followers’ compliance and create effective ‘‘internal controls’’ aimed at followers’ identification seen in highly empowered workforces. For example, a 3 M scientist once spilled chemicals on her tennis shoe—and came up with Scotchgard! Similarly, the ubiquitous Post-it note was invented when one 3 M chemist developed a “low-tack”, reusable, pressure-sensitive adhesive which was met with limited interest internally until a colleague used it to anchor his bookmark in his hymnbook and realised it could have other, more practical uses. This second colleague then developed the idea further by taking advantage of 3 M’s “permitted bootlegging” policy. These examples illustrate that a positive and strong culture makes an organization not only a desirable place to work, but also a more innovative and effective place to work. In essence, culture becomes a strategic asset. Potential Proof Points / Benchmarks: q Ensure that every employee knows what the organization’s values are q Establish a strong culture which socialises and reinforces values (such as innovation in 3 M’s case) that underlie the successful execution of the company’s strategic plan 36 Source: ICG Analysis; “Making All the Right Connections: The Strategic Leadership of Top Executives in High-Tech Organizations”, Sosik et al. , Organisational Dynamics, 2005 – Read article © Internal Consulting Group 2015
Communicating Effectively C 4 – “Lead from the Front” to Leverage Information from the Frontline Key Insight Case Example “Lead from the Front” to Leverage Critical Information from the Frontline Former Schering-Plough CEO Frank Hassan on how he did it: Frontline managers are arguably the most responsible for a company’s success or failure • typically make up 50 -60% of management ranks • directly supervise up to 80% of the workforce • must motivate and bolster the morale of those doing the work, and oversee execution • represent an all-important feedback loop to the CEO/Executive Team CEOs and their executive teams wishing to “lead from the front” must: 1. Make time for regular interactions with selected frontline managers 2. Take the “trivial” seriously, as often it will uncover even larger issues at play 3. Decide when to go deep on certain issues 4. Use the dialogue to ensure senior managers take frontline perspectives into account 5. Appeal to a higher purpose (e. g. helping individual consumers) when motivating front line staff 6. Empower the Front without undermining the Middle or short circuiting the chain of command Potential Proof Points / Benchmarks: q Hold regular CEO or Executive Team “Dialogues” with selected frontline managers, following the guiding principles above “Soon after I first became a CEO, I decided that I would meet with representatives from the frontline community, both formally and informally, on every site visit I made, to communicate my vision and solicit their perspectives and concerns. I continued to hold formal business reviews with the local general manager and his or her team. But I also met with frontline managers without any local top management present. We called these meetings CEO Dialogues, and over the years, my staff and I developed some simple rules for making sure that they were effective. (See Insight C 5, “Follow 3 Steps for Effective Dialogue Between the CEO & Frontline”). “In my experience, frontline managers are the key to bringing such an organization to life. After all, they are directly responsible for managing the vast majority of a company’s employees and, therefore, have exceptional leverage on company performance. How they feel about senior management and the company as a whole influences the way they lead their people. When they are engaged and energized, they communicate that to employees. The result is a charged-up and aligned organization. ” “In addition, frontline managers are central players in a company’s business strategy. Many executives assume that talking strategy with these managers will only distract them from focusing on their specific roles. I couldn’t disagree more. In my experience, the hardest thing about strategy is the execution. How well frontline managers understand the company’s strategy and their own specific role in it will in large part determine whether that strategy is successful. It’s the CEO’s job to communicate the strategy to them directly and get them to own it. ” Source: ICG Analysis; “The Frontline Advantage”, Fred Hassan, Harvard Business Review, May 2011 – Read article © Internal Consulting Group 2015 37
Communicating Effectively C 5 – Follow 3 Steps for Effective Dialogue Between the CEO & Frontline 38 Source: “The Frontline Advantage”, Fred Hassan, Harvard Business Review, May 2011 – Read article © Internal Consulting Group 2015
Setting Governance Structure D 1 – Align Leadership at Every Level Key Insight Case Example Aligned Leadership is Effective Deep Within the Organisation The Royal Bank of Canada (RBC)—Canada’s largest bank—had experienced a significant drop in financial performance. By 2004, after ten years of top-quartile performance, shareholder returns had fallen to the fourth quartile. Through careful analysis and by talking with employees from the frontline through senior management, CEO Gordon Nixon recognized that fixing organizational and people issues would be critical for improving financial performance and competitive advantage. Collaboration was poor across businesses. The executive team’s decision-making disciplines had slackened—decisions were made slowly and without consistent analysis and transparency. And the organization structure, which was costly, was also leading to low levels of employee engagement. Effective leaders: • Think strategically • Set the pace • Allocate resources • Build engagement • Drive accountability • Drive results High performance organisations create leaders at every level through 3 primary levers: 1. High Performance teams of leaders drive urgency and direction; in the face of ambiguity they are able to mobilise the organisation and collaborate 2. The pipeline is stacked with future leaders whose skills are matched to future needs; typically as many as 60% of top management roles are filled internally 3. Middle managers embrace and translate strategy; they are seen as important, are invested in and actively monitored to strengthen their engagement and skills The senior leadership team created a comprehensive transformation program that addressed operations, culture, and structure. The bank’s management ranks were restructured, and initiatives that focused on revenue growth and cost reduction were put in place. To ensure the success of these initiatives, each leadership layer created its own role charters, so performance expectations and accountabilities were clearly laid out. Potential Proof Points / Benchmarks: The senior team clarified its expectations for leadership behaviours and revised the performance management system to reward achievement of financial targets and agreed-upon behaviours (such as welcoming challenge, being solution oriented, and taking an enterprise-wide instead of a siloed perspective). To keep the effort on track, the bank rigorously managed the three-year transformation by establishing clear targets and accountabilities. q Ensure that collaboration is a key part of the corporate ethos The plan worked. Three years after the completion of the transformation in 2007, RBC’s stock price had doubled, far outstripping the gains of its peers. 39 q Have a strong bias towards promoting internal candidates to senior roles; track the talent pipeline Source: ICG Analysis; “High-Performance Organisations – The Secrets of Their Success”, BCG, September 2011 – Read article © Internal Consulting Group 2015
Setting Governance Structure D 2 – Mobilise the “Informal Organisation” Key Insight Case Example Mobilise the “informal organisation” Google has retained a start-up culture while growing at a rapid pace because its leaders have paid attention to striking the right chord between the formal and the informal. Where other companies of Google’s size would emphasize formal structures and procedural policies, Google has managed to protect its greatest asset—a healthy informal organization. It has consistently stayed on the cutting edge of technological advancement, in part because of its informally-charged collaborative energy and innovative spirit. When companies rely too heavily on the formal organization, they pay for it in responsiveness. And when they rely too heavily on the informal organization, they tend to lose rigor and efficiency. However, as the Google case study illustrates, successfully mobilizing the informal organization so that it balances with the formal can yield profound improvements in both the efficiency and effectiveness of any company and its workers. To foster an open environment and the free flow of ideas, Google has architected its workspaces to facilitate surges of creativity and to energize workers. With open pods instead of offices, lava lamps in the lobby, and exercise balls on each floor, the Google complex is really a kind of campus in which employees at various levels can intermingle. Potential Proof Points / Benchmarks: [. . . ] q Empower the “informal organisation” through: The physical environment is not the only way in which Google cultivates its informal organization. As policy, Google employees are encouraged to spend 20% of their time working on projects of their own choosing and design. To turn ideas into products, Google employees will often join “grouplets” with other like-minded people to form a kind of working group. These “grouplets” are completely informal: they have no structure, minimal budgets, and almost no decision-making authority. But they are full of passionate people who chose that project because they were curious and ready to commit themselves. Ultimately, this commitment to cultivating the informal organization and integrating it with the growth of the formal organization is what has enabled Google to maintain its high level of inventiveness. o Open office design to enable collaboration o Flexible approach to structuring working hours o Encouragement of small but passionate working groups 40 Source: ICG Analysis; “Mobilising the Informal Organisation”, Booz, 2009 – Read article © Internal Consulting Group 2015
Setting Governance Structure D 3 – Manage Paradox to Get the Most Out of Teams D 4 – Split Decision Making Across Two Groups To Improve Outcomes Key Insight Manage Paradox to Get the Most Out of Teams Split Decision Making Across Two Groups To Improve Outcomes Team work is a process of managing paradox. There are four conflicting forces at the heart of team life: • Embracing individual differences and collective identity and goals • Fostering support and confrontation among team members • Focusing on performance and learning and development • Relying on managerial authority and team member discretion and autonomy The most effective team leaders are able to adapt their behaviour to suit the situation. Potential Proof Points / Benchmarks q Avoid taking a “win/loss” loss mindset, instead try to establish a collaborative problem-solving mentality Senior teams are required to make many important decisions about complex and ambiguous matters The amount of task-relevant information and vested interest possessed by individuals can vary depending on the decision being tackled • Can be problematic when information sharing is asymmetrical, as can be the case when cross-functional teams are being deployed In order to mitigate this, the team leader can propose subcommittees in order to maximise participation and information sharing • Can split decision making across two groups, with the first group researching and proposing a solution, and the second group offering critiques and counterproposals q Allow constructive conflict (task, not interpersonal) and creative abrasion to enable productivity This will not only improve information sharing, it will force team members to consider how proposed solutions will impact other aspects of the business other than their own q Tolerate mistakes as sources of learning in order to encourage risk taking and innovation Potential Proof Points / Benchmarks: q Give autonomy to team members to balance the authority of the leader q Use adjacent subcommittees to facilitate better decision making Source: ICG Analysis; “A Note on Building and Leading Your Senior Team”, Linda Hill, Harvard Business School, June 2002 – Read article © Internal Consulting Group 2015 41
Setting Governance Structure D 5 – Use “Action Learning Forums” to Focus Talent Key Insight Case Example Use “Action Learning Forums” To Focus Top Talent On Next Generation Products And Organisational Breakthroughs To reinforce Cisco Systems Inc. ’s culture of innovation through collaboration, Vice President for Development Annmarie Neal and Senior Vice President of Emerging Technologies Marthin De Beer created a series of high-profile Action Learning Forums designed to concentrate the company’s top talent on next-generation technology and organizational breakthroughs. In the forums, 10 -person teams cross every conceivable line —rank, function, generation, geography, and gender—and work together for three months with the assistance of a psychologically savvy coach to further one of the company’s top strategic priorities. Venture capital prize money is awarded to winning teams, guaranteeing that the best business plans are funded and will get off the ground. A talent culture is made up of the values, beliefs, behaviours, and environment required to attract, engage, and retain committed and competent employees. Companies that embrace a talent culture and feature it as a key element of their corporate brand consistently outperform companies that do not. A talent culture must be led from the top and can be achieved and sustained only if it is hardwired into a company’s processes. One such process is the use of focused, cross-functional teams to work on specific projects Potential Proof Points / Benchmarks q Use “Action learning forums” to harness talent, apply energy to issues that matter and seed organisational breakthroughs Billions of dollars’ worth of new value creation have been generated by these Action Learning Forums. Just one idea—Smart Grid, which revamps energy grids to make them faster and more cost effective—is projected to deliver US$10 billion of revenue over the next five years. Perhaps more important from a talent perspective, 20 percent of those who participated in these teams have been promoted, and only 2 percent of these highpotential employees have left the company. The forums have been a powerful and defining element of Cisco’s talent culture. 42 Source: ICG Analysis; “Global Talent Innovation — Strategies for Breakthrough Performance”, Booz & Company, 2009 – Read article © Internal Consulting Group 2015
Setting Governance Structure D 6 – Unleash the Power of Teams Key Insight Case Example Unleash the Power of Teams A consumer products company had just undergone a substantial global reorganization, a confusing ordeal that in the heavily matrixed organization led to uncertainty about roles and responsibilities along with costly delays in crucial decision making. And this was happening as the company’s underlying sales and market share were already declining. Booz has identified 5 practices critical to the success of senior leadership team workshops: 1. Apply the fundamentals of team performance to actual business needs, connecting performance objectives and team discipline. 2. Focus on the “hard side” of teaming in order to establish a clear case for how teaming and leadership attributes will generate results. 3. Clarify the critical choices of when and how— discussion group, single-leader, or real team approach—that will enable teams to work in the appropriate mode for the performance situation they face. 4. Focus the discussion on defining and facilitating trade-offs and tensions within and between teams. Explicitly look for tension and ways to make the tension productive 5. Ensure that the workshop has built-in follow-up procedures (e. g. to discuss team purpose, performance, restructuring or leadership approach) To get the organization back on track, 30 workshops in 15 countries were set up with the top senior management teams—representing 70 percent of the company’s business as well as high-priority areas—with the goal of helping them to maximize their potential and the business’s returns in the company’s reorganized operating framework. During each of the workshops, teams framed the organizational needs under the new approach and explored leadership tools, concepts, and methodologies—for example, the different types of teams and when to use them, the development of effective sub-teams, and the best methods for designing and running meetings. They collectively identified opportunities, prioritized them, and defined action plans. The results of the workshop were significant, and the impact was immediate. Roles, responsibilities, and key interfaces were clarified. Strategic priorities were established, allowing senior teams to focus where it mattered most. Disciplined meeting structures were created, with clear agendas and efficient information sharing; indeed, agenda items were reduced by as much as 70 per cent and meeting times were greatly minimized, saving each group member as much as half a day per week. Follow-up working sessions about how the teams themselves could work more effectively with one another only added to the value of this process. [cont’d] 43 Source: ICG Analysis; “Unleashing the Power of Teams — From Theory to Execution”, Booz & Company, 2011 – Read article © Internal Consulting Group 2015
Setting Governance Structure D 6 – Unleash the Power of Teams (cont’d) Key Insight Case Example Potential Proof Points / Benchmarks: [cont’d] q Identify distinct opportunities, ideally using real-life projects, for teams to learn and practice teaming skills. Specifically, structure senior workshops as 20% teaming fundamentals theory vs 80% applying theory to current business issues. In a company with more than 100, 000 employees, these senior leadership workshops were critical to implementing the new organizational framework quickly and to building momentum for this change in the broader organization. After the broad successes enjoyed by the senior teams, the groundwork could be laid for widespread teaming focusing on business improvement and better results throughout the organization. Senior leaders often accomplished this by instilling teaming behaviours and concepts in their direct reports. And though the process was not entirely viral and training was necessary at lower levels, starting at the top made it easier to demonstrate to the organization the value, importance, and rudiments of teaming know-how. Since this strategic teaming effort began, the consumer products company has enjoyed growth in sales and total shareholder return that has significantly outperformed the industry. q Clearly address critical elements such as skills required, meeting structure, leadership roles and decision-making (the ‘hard side” of teaming) q Implement formal and informal “reminder mechanisms“, after the fact, ensure consistent repetition of these behaviours. 44 Source: ICG Analysis; “Unleashing the Power of Teams — From Theory to Execution”, Booz & Company, 2011 – Read article © Internal Consulting Group 2015
Setting Governance Structure D 7 – Use Role Charters to Clarify Decision Rights and Boost Collaboration 45 Source: “Role Charters – Faster Decisions, Stronger Accountability”, BCG, 2011 – Read article © Internal Consulting Group 2015
Setting Priorities & Focus Areas E 1 – Focus The Top Team On Where They Can Uniquely Add Value Key Insight Case Example Focus The Top Team On Where They Can Uniquely Add Value The CEO and the top team at a European consumer goods company rationalized their priorities by creating a long list of potential topics they could address. Then they asked which of these had a high value to the business, given where they wanted to take it, and would allow them, as a group, to add extraordinary value. While narrowing the list down to ten items, team members spent considerable time challenging each other about which topics individual team members could handle or delegate. They concluded, for example, that projects requiring no cross-functional or crossregional work, such as addressing lagging performance in a single region, did not require the top team’s collective attention even when these projects were the responsibility of an individual team member. For delegated responsibilities, they created a transparent and consistent set of performance indicators to help them monitor progress. Many top teams struggle with purpose and focus; common pitfalls include: • failure to set or enforce priorities and instead try to cover the waterfront • failure to distinguish between topics they must act on collectively vs. those they should merely monitor Which in return, results in: • jam-packed agendas that no top team can manage properly • energy-sapping meetings that drag on far too long and don’t engage the team Potential Proof Points / Benchmarks: q Focus the Executive Team only on projects requiring cross-functional or cross-regional collaboration q For other issues, delegate responsibility and put in place clear performance indicators to monitor progress This change gave the top team breathing room to do more valuable work. For the first time, it could focus enough effort on setting and dynamically adapting cross-category and cross-geography priorities and resource allocations and on deploying the top 50 leaders across regional and functional boundaries, thus building a more effective extended leadership group for the company. This, in turn, proved crucial as the team led a turnaround that took the company from a declining to a growing market share. The team’s tighter focus also helped boost morale and performance at the company’s lower levels, where employees now had more delegated responsibility. Employee satisfaction scores improved to 79 percent, from 54 percent, in just one year. q Extend leadership of specific initiatives to the next level down, freeing the Executive Team to focus more on prioritisation and resource allocations Source: ICG Analysis; “Three Steps to Building a Top Team”, Mc. Kinsey Quarterly, February 2011 – Read article 46 © Internal Consulting Group 2015
Setting Priorities & Focus Areas E 2 – Set Out a Mantra, Metrics and Accountabilities to Drive Results Key Insight Case Example Set Out a Mantra, Metrics and Accountabilities to Drive Results In the spring of 2004, [Royal Bank of Canada CEO Gord] Nixon, working with an outside consultancy, stepped up his efforts to address RBC’s acceptable-yet-unremarkable financial results. He made a strategic choice: initiate a complete reinvention of RBC. He created a mantra for deep change and named the effort the “Client First Transformation”. Nixon also defined a measurable goal, “market leadership by 2007”, that was ambitious enough to inspire commitment but not so lofty as to appear unattainable. RBC’s position in the market could easily be measured, so leaders could clearly assess the company’s progress toward the goal. Nixon then chose a metric to represent the goal: top quartile performance against a group of North American peers. Translated into precise financial objectives for the early years, the goal stipulated that RBC would need to generate specified net income targets for each of the next three years. In kicking off a major transformation effort, RBC CEO made sure to • ‘Brand’ the change effort with a mantra • Define a measureable goal • Identify transformation champions to execute and be accountable for results In doing so, he galvanised and focused the organisation around the most important issues Potential Proof Points / Benchmarks: q Strategic direction is clear and can be easily communicated at all levels of the organisation q The organisation’s goal is clear and measurable q Accountability for results is clear, those who are on the hook are bought in This objective, and its accompanying metric, resonated with RBC’s existing culture. The company had been the recognized leader in the Canadian financial services industry for most of its existence; therefore, RBC’s managers were more likely to see the stated goal of market leadership as both feasible and challenging, even if the targets were ambitious. However, merely declaring a transformation, then articulating a compelling vision and measurable goals for the effort, would not be enough. Transformation champions must also identify and execute additional key ingredients for success: excelling at process execution, generating widespread buy-in, creating organizational alignment, relentlessly communicating the steps in the transformation journey and weaving in accountability until momentum builds and takes hold. 47 Source: ICG Analysis; “Notes on a Transformation”, Bigsby et al. , Business Strategy Review, London Business School, Autumn 2007 – Read article © Internal Consulting Group 2015
Setting Priorities & Focus Areas E 3 – Identify “Purposeful Initiatives” That Support a Broader Mandate Key Insight Case Example Identify “purposeful initiatives” that support a broader mandate in order to support significant change When Carlos Ghosn came to Nissan in 1999, the company was moribund. Ranked as the number-three auto manufacturer in its region, it was suffering from $30 billion in debt and was viewed as inefficient and sluggish on product development. Ghosn almost immediately began to articulate a purpose: The combined Nissan–Renault company would become a new kind of automobile company, a “global alliance” (as he put it) that was truly multicultural, and better positioned than any other company to bring automobiles to every part of the world. Neither Nissan nor Renault had the capabilities to achieve this purpose at the time. Ghosn set a three-part program in motion to bring Nissan to the point where it could fulfil its part. Extending the premise that significant change takes place through action, the purpose of strategic initiatives needs to be considered. Once articulated, leaders can frame a campaign: a sequence of highpriority campaigns that reinforce one another and that people throughout the enterprise feel comfortable with, even if those actions represent a dramatic shift in direction. Effective strategic leadership requires whittling down the list of possible strategic initiatives to a manageable set; perhaps three successive waves of activity, with four to six projects at one time, each designed to build the capabilities needed for the next wave. These initiatives are also deliberately experimental. When some of them start to fail (as some inevitably will), the organization and leadership can adjust and learn from their mistakes. Potential Proof Points / Benchmarks: q Answer fundamental questions on purpose before designing a campaign of strategic initiatives that build upon each other over time Ghosn began the first phase, a cost-cutting strategic initiative called the “Nissan Revival Plan”, by announcing a set of audacious goals: Nissan would raise the ratio of operating income to sales margin to 4. 5 percent and reduce consolidated debt to less than ¥ 700 billion (US$6 billion) by 2002. The automaker achieved those aims a year ahead of schedule. The second campaign, which started in 2002 and was called “Plan 180”, set new fiveyear goals of zero debt, a million-car sales increase, and 8 percent return on sales; Nissan achieved each within three years. By late 2007, the company had cash reserves of $165 billion, and was midway through its third initiative, christened “Value Up”, with the goal of achieving 20 percent return on invested capital, in part through renewed emphasis on innovative products. Each campaign has helped build the capabilities needed for the next one. And although “Value Up” is behind schedule, the complexity of the challenges facing Ghosn’s alliance has increased, and his success is uncertain, the revival remains the only successful automobile company turnaround since the 1980 s. 48 Source: ICG Analysis; “A Blueprint for Strategic Leadership”, Booz & Company, strategy+business, Winter 2007 – Read article © Internal Consulting Group 2015
Setting Priorities & Focus Areas E 4 – Enhance the Strategic Planning Process Key Insight Case Example Enhance the strategic planning process Countrywide Financial Corporation is a consumer Financial services business. Since 1969, the Company has grown from a small entrepreneurial venture to a very large (Fortune 200) international company. Today, CFC consists of 17 major business units, operating in five business segments — mortgage banking, and insurance, capital markets. In 2004, the company had more than $8 billion in revenues, more than $58 billion in assets, and more than 35, 000 employees. A detailed case study on Countrywide Financial lays out their revamped strategic planning process (Refer also appendix). Some of the key changes made include: • Make planning a corporate priority • Dedicate resources to support planning • Adopt a common planning template • Develop priority objectives — key objectives that receive the most management focus • Craft an approach to issues of linkages across organisational units, and ensure that business units follow-through on plans • Monitor progress throughout the organisation Potential Proof Points / Benchmarks: q Establish an “executive committee” to support the CEO and COO in providing corporate-level oversight and leadership for the planning process. Committee's membership includes the CEO, the COO and their direct reports (senior managing directors) as well as a select group of managing directors q Establish a “managing directorate” (all managing directors) accountable for providing division-level oversight and leadership for the planning process Countrywide, at one time the largest mortgage banker, was now (in 2000) fourth in the mortgage industry. The company's larger competitors, with greater financial resources, had grown through acquisitions (a strategy that was not available to Countrywide because of capital constraints). Countrywide's core strategy — being the “branded” price leader — was becoming increasingly difficult to sustain. Thinking was beginning to change, but it was going to be an evolutionary process. Planning has always been a part of Countrywide's culture. The company has always had a well-established strategic planning function, and the leaders of the operating groups have always prided themselves on their strategic capabilities. However, the growth and diversification experienced during the 1990 s made the business more complex. Management needed to address not only new industry segments and larger operating units, but increased organizational complexity as well. The entrepreneurial spirit combined with a measure of autonomy that had long been part of Countrywide's culture now presented a management challenge. While it helped to create a vibrant, nimble operating environment, management recognized the need to avoid counterproductive organizational “silos” and foster a spirit of crossorganizational cooperation. [cont’d] Source: ICG Analysis; Eric Flamholtz, Stanford Kurland, (2006), "Making Strategic Planning work: a case study of Countrywide Financial", Handbook of Business Strategy, Vol. 7 Iss: 1 pp. 187 – 193 – Access article 49 © Internal Consulting Group 2015
Setting Priorities & Focus Areas E 4 – Enhance the Strategic Planning Process (cont’d) Key Insight Case Example [cont’d] Stan Kurland, Countrywide, COO, realized that the company needed a new, more sophisticated strategic planning process. A new approach was necessary to manage the company's rapid growth and to regain its industry leadership. The intent was to evolve from a company that embraced planning to one that possessed a fully integrated and effective long-term planning process/system. The company took several steps to modify the planning process and supporting infrastructure. First, Stan Kurland, decided to make the process a corporate priority. Next, management dedicated the proper level of resources to strategic planning, restructured the planning process throughout the company, defined or redefined the participation of various organizational players in the process, and developed a methodology for staying focused on priority objectives. Countrywide has also developed electronic scorecards to facilitate monitoring the progress made against each priority objective. The scorecards measure key financial and non-financial metrics for each objective. They are designed to allow real time performance tracking against established criteria for each objective. Scorecards also facilitate the mapping of responsibility and accountability for objectives and related measures to appropriate teams and divisions. In all, the scorecards represent a tangible reporting system that fosters communication among management. Countrywide was able to accomplish this in a period of about two years. The implementation of a strategic planning system is an evolutionary process, dependent on varying internal and external factors. By its nature, the strategic planning process can never be seen as entirely complete or perfected. As a result, Countrywide continues to refine its strategic planning process, and to-date it has delivered some very significant results. Source: ICG Analysis; Eric Flamholtz, Stanford Kurland, (2006), "Making Strategic Planning work: a case study of Countrywide Financial", Handbook of Business Strategy, Vol. 7 Iss: 1 pp. 187 – 193 – Access article © Internal Consulting Group 2015 50
Setting Priorities & Focus Areas E 5 – Set up an “Office of Strategic Management” Key Insight Set up an “Office Of Strategic Management” An Office of Strategy Management (OSM) is a small cadre of professionals that orchestrategy management processes for the executive team. Responsibilities include: 1. Architect which designs and embeds any missing strategy and operations management processes into strategy execution. Ensures that all the planning, execution, and feedback processes are in place, and that they are linked together in a closed loop system. 2. Process owner for several strategy and operations management processes, such as those to develop the strategy, translate the strategy, and orchestrate the senior management strategy review meetings. 3. Integrator of many existing activities. This is challenging because organisational and functional units already have primary responsibility for processes such as budgeting, communications, human resources planning and performance management, IT planning, initiative management, and best practice sharing. The OSM must work with the existing owners of these processes to ensure they become aligned to the strategy. Potential Proof Points / Benchmarks: q Drive the operations plan and budget from the revenue targets in the strategic plan q Have regular, perhaps monthly, meetings of the senior management team which focus only on strategy 51 Source: ICG Analysis; “Strategy Execution and the Balanced Scorecard, Q&A with: Robert S. Kaplan”, Harvard Business School, August 2008 – Read article © Internal Consulting Group 2015
Setting Priorities & Focus Areas E 6 – Follow 9 Practical Tips to Keep Meetings Focused on Decisions & Action Key Insight Description 1. Black. Berry bags Two companies ask participants to put their Black. Berrys and other mobile devices in a ziplock bag. The meeting organizer collects them at the beginning of the meeting and distributes them at the end. The all-too-simple point: We’re here to focus on decisions, not on what’s happening in the outside world. 2. Decision Declaration At the end of the meeting, one client suggests, ask the group to say, Here is what we decided today. Make sure everyone is on the same page, every time. If people postpone a decision, acknowledge that the group decided not to decide. Track how often this happens, and see whether the rate declines over time. 3. Personal Participation Here’s how a healthcare company does it: Before moving from discussion to decision, the meeting leader asks each participant what he or she would decide and why. The decision maker gets additional input; everyone else gets practice in listening and then articulating their thinking. 4. Sacred Symbols One company puts a foot-high statue of an elephant in the middle of the conference table. The moral: When you’re discussing a decision, don’t ignore the elephant in the room. Another places a carved wooden hippo on the table for the first part of the meeting, when the purpose is to wallow in ideas. When it comes time for a decision, the leader removes the hippo: No more wallowing 5. Stand-up Sessions Plenty of companies have short stand-up meetings at the start of a day, usually to review the status of projects. But as for the longer meetings—aaah, those comfy conference room chairs, just the place to relax for a while. A suggestion: Try having fewer chairs than participants (or no chairs at all) when you get together to make a decision. You’ll be amazed how quickly people come to closure. 6. RAPID Reminders We’re fans of the decision tool RAPID®, which helps companies assign decision roles to particular individuals. (RAPID is a loose acronym for the key roles: Recommend, Input, Agree, Decide and Perform. ) A couple of companies put RAPID posters on the walls of meeting rooms for easy reference. Others put the word on everyone’s ID badges. It’s all just a way of reminding people to pay attention to their roles in this decision. 7. Regular “role calls” Another RAPID-related technique from a client: Go around the room at the beginning of a meeting, and ask each person what role he or she is playing in the decisions at hand. No role? Sorry, you’re in the wrong meeting. Also, if senior people habitually send delegates when the leaders themselves should be there, ask the delegates to leave. It might hurt, but it will get attention—and it may get the senior people there next time 8. Do-over denials Are too many meetings devoted to revisiting previous decisions? Just say no. One client recommends refusing to reconsider a decision unless there’s a very good reason for doing so. A side benefit is that people will make sure to attend the meeting that’s making the decision, knowing they can’t reopen the discussion next week. 9. Principles in Practice Ultimately, the value of a meeting comes down to what everyone does and says in the course of it. Try this: At the end of each meeting, run through a checklist to see if the meeting lived up to the values you’re trying to inculcate. Honest debate? Coming to closure in a reasonable period of time? Accountability for each decision role? You can phase out this technique over time as more people understand what’s expected. Source: “Decision Insights - Refresh, refocus and remind: Nine practical tips to keep meetings centered on decisions and action”, Bain & Company, 2012 – Read © Internal Consulting Group 2015 article 52
Managing Results & Performance F 1 – Measure Progress at Each, Small Step of a Major Program Key Insight Case Example Measure Progress at Each, Small Step of a Major Program Royal Bank of Canada held to two maxims for tracking organizational performance on the transformation, starting with what gets measured gets done, followed by there’s no point measuring only the final outcome of an initiative. Executives realized early that, if the effort failed, it would be virtually impossible to take corrective action at the 11 th hour. Instead, progress would have to be measured at each small, relevant step during implementation. Monitoring progress at key intervals would serve as a vital opportunity to make corrections in the implementation process – and increase the odds of ultimate success. RBC used a highly structured Transformation Management Office to track and monitor the progress of a major change effort This analogy can be extended to any major strategic program or initiative that the company’s success depends on Potential Proof Points / Benchmarks: q For major projects/initiatives, measure progress at key implementation milestones q Use a central Project or Transformation Management Office as the conduit between the project itself and the Executive Team, with status reports fortnightly [CEO Gord] Nixon used the Transformation Management Office as the vehicle to track and monitor the progress and performance of RBC’s change journey. Headed by a key RBC executive who reported to the CEO, the TMO comprised a small team of six programme managers, each experienced in RBC’s key divisions and support functions. The TMO acted as RBC’s engine for embedding accountability throughout the enterprise. Staff members prepared status reports every two weeks and discussed questions, concerns and successes with top management. Not surprisingly, elements of the business landscape changed over time and original initiative profiles often required modification. Nevertheless, thanks to the TMO tracking process, unit leaders continually knew how close the company was to its goal of market leadership and what they needed to do next to move it even closer. Though RBC’s Client First Transformation journey will continue to evolve, the effort has already begun paying big dividends. Between the launch of the transformation in the fall of 2004 and the first quarter of 2007, RBC has posted nine consecutive quarters of top quartile results – clear achievement of its market-leadership goal. Compound annual earnings growth hit 30 per cent in 2005 and 2006; and, also in 2006, RBC recorded net income of C$4. 7 billion. Source: ICG Analysis; “Notes on a Transformation”, Bigsby et al. , Business Strategy Review, London Business School, Autumn 2007 – Read article © Internal Consulting Group 2015 53
Managing Results & Performance F 2 – Avoid the 5 Traps of Performance Management Key Insight Case Example Avoid the 5 traps of performance management When Marc Effron, the vice president of talent management for Avon Products, was trying to determine whether his company was doing a good job of finding and developing managers, he came up with the idea of creating a network of talent management professionals. Started in 2007, the New Talent Management Network has more than 1, 200 members, for whom it conducts original research and provides a library of resources and best practices. How to avoid the five traps: 1. Measure how well you’re doing, using benchmarks from outside the organization. 2. Look for measures that lead rather than lag the profits in your business. Use the quality of managerial decision-making as indicator of success. Look at what you’re doing and aren’t doing. 3. Determine the right measure to use. 4. Diversify your metrics, as it’s a lot harder to game several of them at once. Vary the boundaries of your measurement, by defining responsibility more narrowly or by broadening it. Loosen the link between meeting budgets and performance. 5. Be very precise about what you want to assess, be explicit about what metrics are assessing it, and make sure that everyone is clear about both. Potential Proof Points / Benchmarks: The U. S. health insurer Humana, recognizing that its most expensive patients are the really sick ones (a few years back the company found that the sickest 10% accounted for 80% of its costs), offers customers incentives for early screening. If it can get more customers into early or even preemptive treatment than other companies can, it will outperform rivals in the future. The managers of one European investment bank … measure performance by the outcomes of deals they’ve turned down as well as by the outcomes of deals they’ve won. If the ones they’ve rejected turn out to be lemons, those rejections count as successes. q Identify and measure leading (as opposed to lagging) indicators of success Clifford Chance replaced its single metric of billable hours with seven criteria on which to base bonuses: respect and mentoring, quality of work, excellence in client service, integrity, contribution to the community, commitment to diversity, and contribution to the firm as an institution. q Diversify metrics to avoid gaming; choose the right metric based on what needs to be measured and assessed (understanding cause and effect relationships in the process) To reduce delays in gate-closing time, Southwest Airlines, which had traditionally applied a metric only to gate agents, extended it to include the whole ground team – ticketing staff, gate staff , and loaders – so that everyone had an incentive to cooperate. 54 [cont’d] Source: ICG Analysis; “The Five Traps of Performance Measurement”, Harvard Business Review, October 2009 – Read article © Internal Consulting Group 2015
Managing Results & Performance F 2 – Avoid the 5 Traps of Performance Management (cont’d) Key Insight Case Example [cont’d] Office supplier Staples … lets [managers] exceed their budgets if they can demonstrate that doing so will lead to improved service for customers. In looking for a measure of customer satisfaction, the British law firm Addleshaw Booth (now Addleshaw Goddard) discovered from a survey that its clients valued responsiveness most, followed by proactiveness and commercialmindedness. Most firms would interpret this finding to mean they needed to be as quick as possible. Addleshaw Booth’s managers dug deeper into the data to understand more exactly what “responsiveness” meant. What they found was that they needed to differentiate between clients. “One size does not fit all, ” an employee told me. “Being responsive for some clients means coming back to them in two hours; for others, it’s 10 minutes. ” 55 Source: ICG Analysis; “The Five Traps of Performance Measurement”, Harvard Business Review, October 2009 – Read article © Internal Consulting Group 2015
Managing Results & Performance F 3 – “Soft” Initiatives Can Deliver “Hard” Results Key Insight Case Example “Soft” Initiatives Can Deliver “Hard” Results In 2002, Aetna was in a nosedive. The company had been battered by bad publicity and unstable leadership and was losing US$1 million a day. Three earlier turnaround efforts (focused largely on the formal organization) had failed, effectively derailed by informal elements of a deeply engrained culture. In most successful turnaround situations, the soft (informal) accelerates behaviour change and performance results beyond what would have been possible through hard (formal) efforts alone. People need to be encouraged and motivated to change their behaviour by those around them as much as they need to be incentivised from the top. When the informal and formal are in balance and aligned, the performance results and strategic advantages that accrue are tough to beat. Both alignment and integration matter for an obvious but very compelling reason: The informal organization can do some things much better than the formal—and vice versa. Potential Proof Points / Benchmarks: q Use “employee councils” resting on shared values to create emotional commitment to key strategic initiatives q Identify a core group of evangelists and encourage peer-to-peer sharing of best practices in order to create a larger “community of practice” To unite the company and turn it around, Dr. John Rowe, then chairman and CEO; Ronald A. Williams, then COO; and others engaged all levels of the organization and created evangelists formal change. Their unorthodox approach of “employee councils” created emotional commitment and strong informal support. But the core of the program rested on shared values—what became known throughout the company as “restoring the pride. ” Where earlier efforts had failed, Rowe’s pride initiatives succeeded. Within five short years, Aetna rose like a phoenix from near bankruptcy. In his attempt to turn around [Bell Canada], then CEO Michael Sabia tugged at all the “formal” levers: sharpening strategy, redesigning structures, and realigning priorities. And yet he still couldn’t get enough behavioural traction on the front lines to change the customer experience. His solution was to take a small group of high-performing supervisors and try to “clone” them. These managers knew what kind of front-line behaviours were critical to improving the customer experience, and they were adept at motivating employees to deliver. Sabia started with an informal group of 40 and focused on peer-to-peer sharing of best practices and motivational techniques. Within two years, by word of mouth alone, the group grew into the largest “community of practice” at the company, with more than 2, 000 members. And when the program delivered quantifiable results, it proved to formalistic sceptics that informal motivational mechanisms could yield significant, tangible gains. . Source: ICG Analysis; “Fast Track to Recovery — Leading outside the Lines Can Turn Survivors into Winners”, Booz & Company, 2010 – Read article © Internal Consulting Group 2015 56
Managing Results & Performance F 3 – “Soft” Initiatives Can Deliver “Hard” Results (cont’d) Key Insight Case Example [cont’d] Campbell’s Stock. Pot division was increasingly unprofitable, and its sales were slowing. There was no clear strategy and little commitment or adherence to company values; morale was low, and teamwork nonexistent. Ed Carolan, then vice president and general manager of Stock. Pot, and his management team believed that creating a personal connection to the work itself could turn things around. First, they led a bottom-up program to develop a new set of core values. Then they made a critical advance: They tied performance targets to the values in simple, precise ways that every employee could relate to. For example, the metric of “pounds per day” motivated all shifts to work together to maximize a day’s production—the metric was meaningful at an individual level while also driving collaborative effort. Carolan believes that personal connection to the work not only creates a high level of commitment and motivation but also delivers measurable performance improvement. 57 Source: ICG Analysis; “Fast Track to Recovery — Leading outside the Lines Can Turn Survivors into Winners”, Booz & Company, 2010 – Read article © Internal Consulting Group 2015
Managing Results & Performance F 4 – Use Performance Dashboards to Report on Project Progress 58 Source: “Large-scale capital projects – setting priorities”, Mc. Kinsey, undated – Read article © Internal Consulting Group 2015
Managing Results & Performance F 5 – Consider Different Models for Performance Management Key Insight Case Example Consider Four Different Models for Approaching Performance Management One medium-sized savings bank still had a batch reporting system, updated monthly. Their value proposition was to be the low-cost player, hence the strict financial and other controls. Growth was one of the highest of any of the banks. There were no self-service technology tools, but the bank was investing heavily in a data warehouse with analytical tools and many new performance measurement analytics. The distribution of and access to performance management information was traditional, the bank also used advanced metrics, including Activity-Based Costing, balanced scorecards, total quality management, and highly disciplined service level agreements. Managers felt exposed to stiff competitive pressure, and they frequently benchmarked themselves against other banks in many ways using their performance management metrics. They also maintained many customer and operational metrics. Their reports included some automatic forecasts so that managers could see where they were going, and not just where they had been. They were not heavy users of segmentation analysis, but did analyse customer behaviours in order to promote effective cross selling. While they did not use the most advanced analytics like customer life time value or share of wallet, or total levels of STP, they did use many standard metrics in a very disciplined way, and are currently focused on extending their human capital metrics. Financial insights looked at performance management system effectiveness, alignment of metrics against strategies and the extent to which advanced technology was deployed, to identify 4 models: 1. “Enterprise Performance Kings” were the most advanced banks that in most cases are investing heavily with a view to improve their effectiveness. 2. “Technology Engineers” describe those banks who had quite good tools but little strategic alignment, and rather low effectiveness scores. They were not spending on performance management, and did not perceive particular shortfalls. One bank did, however, want to improve its integration capabilities with third party market data. 3. “Scorecard Wizards” had developed advanced analytical scorecards but were currently distributing only monthly reports using a few tools. [cont’d] 4. “Spreadsheet Warriors” were struggling, used fewer analytics and measurement metrics, and used the least technology support for performance management. These banks all operate in protected markets, and felt they had little control over their own IT capabilities, due to outsourcing commitments. These banks also had low effectiveness ratings Source: ICG Analysis; “Performance Management Drives Improvement at European Banks”, Financial Insights, June 2005 – Read article 59 © Internal Consulting Group 2015
Managing Results & Performance F 5 – Consider Different Models for Performance Management (cont’d) Key Insight Case Example Potential Proof Points / Benchmarks: [cont’d] q Develop reliable measurement tools that cover financial targets, customers, business processes, technology, human capital and their relationship to return on capital The large Pan European bank is currently rolling out a major set of performance management system enhancements including a data warehouse and a new analytical dashboard aimed at improving performance management across a large number of jurisdictions and currencies. Their current systems provide online access, but updating is done weekly, with mostly financial metrics, and analytical tools are available only to the central planning team. However, there is poor integration across the group. Since the strategy is to focus on growth and use global hubs and shared services to reduce cost/income ratios it is critical that their performance management system is able to give them the necessary insight into costs and profitability. Instead of building out the range of balanced scorecards, they are focusing on standardizing their existing indicators across all the companies in the group. q Provide an online environment with appropriate access for all levels of management enables better and faster decision-making as well as timely and consistent measurement of results q Use planning tools and processes to enable effective linkage between departments, lines of business, and the enterprise level. In doing so, eliminate dysfunctional manual steps and provide integration between strategy formulation, business planning, and execution’ q Develop analytical processes and tools to explain variance against plans, to test "what-if" hypotheses and recovery scenarios, and improve decisionmaking 60 Source: ICG Analysis; “Performance Management Drives Improvement at European Banks”, Financial Insights, June 2005 – Read article © Internal Consulting Group 2015
Managing Results & Performance F 6 – Implement Performance Management Initiatives Key Insight Case Example Implement performance management initiatives to build on balanced scorecard fundamentals Old National Bancorp’s implementation of a new performance management capability – a transformation driven by executive leadership’s desire for greater accountability throughout the organization – has delivered a number of strategic benefits, including improvements in its three strategic imperatives: Ensure the scorecard has meaningful links between the business units and performance of the organisation. The tool needs to be used to hold people accountable. Potential Proof Points / Benchmarks: q Identify similar-sized companies (not competitors) as a peer group for benchmarking purposes. Choose peers which are high-performers based on their historical results. q Set up a finance committee of the board, which receives regular financial reports, as means of strengthening the message of accountability and links with the board. • Strengthen the Risk Profile: Old National analyzed the potential financial impact of the Federal Reserve Board Regulation E rules changes before the changes were finalized; then, the company adjusted fees on other product lines to offset the revenue loss the rules changes would eventually cause. Additionally, Old National was one of the first banks to return all of its Troubled Asset Relief Program (TARP) money to the U. S. Treasury Department. • Enhance Management Discipline: Rather than completing its annual budget two months into the new fiscal year, Old National now finalizes and approves its annual budget two months before the fiscal year begins. Additionally, the forecasting process, which previously was conducted almost entirely by the corporate finance team, is now a collaborative, and more accurate, effort: The finance function owns the process and tools while the business units own the data. • Achieve Consistent, Quality Returns: The new budgeting, forecasting and reporting capabilities have freed up corporate finance personnel to focus more on the future growth opportunities and less on the manual gathering and review of data related to past performance. 61 Source: ICG Analysis; “Old National Bank — A Leader in Performance Management”, Protiviti Inc. , 2011 – Read article © Internal Consulting Group 2015
Managing Results & Performance F 7 – Use “Net Promoter Score” to Gauge Customer Advocacy Key Insight Case Example Use “Net Promoter Score” To Gauge The Benefit Of Fostering Customer Advocacy The systematic nurturing of new-customer relationships is a discipline that now comes naturally at American Express. Senior managers, troubled by the periodic peaks in attrition among new customers, saw a big opportunity to get more value out of their customer-acquisition investments by helping new card members discover service features that best suited their needs. Digging into new-customer data, they discovered that defections increased sharply in the initial months after customers signed up for a card and, again, following the one-year anniversary. The problem: Customers most likely to close their accounts did not understand the benefits the card offered or had chosen a level of membership that did not deliver the best value. The ‘‘Net Promoter Score’’ (NPS) is a measurement developed by Satmetrix Systems, a Silicon Valleybased software and services firm that specialises in customer experience management. The NPS is derived from customer surveys that ask respondents to rate, on a zero-to-10 scale, how likely they would be to recommend a company’s products or services to a friend. The NPS is calculated as the percentage of respondents whose likelihood of recommending is very high (measured as a score of 9 or 10) minus those who say they are unlikely to recommend (a score of 0 -6) or are, at best, passive buyers (indicating a score of 7 or 8). Potential Proof Points / Benchmarks: q Incorporate Net Promoter Score into core performance metrics in a balanced scorecard, particularly for businesses where referrals are a key source of new customers Setting out to become better attuned to the needs of the customer, the product team developed initiatives to teach new card members how to take advantage of the card’s features and benefits. First, American Express representatives personally call high-potential customers to explain membership privileges and ensure that they have selected the card that delivers the best value. Then, tracking the member’s initial card-use patterns, the company reaches out again by mail or follow-up call to finetune the service and increase its value to the cardholder. The card-member education and retention program has yielded a significant improvement in American Express’s returns on its new-customer acquisition investments. Persuaded by the success of this effort, customer advocacy in the card division is now one piece of a larger effort to increase the Net Promoter Score and strengthen customer partnerships throughout American Express. 62 Source: ICG Analysis; Cornel Wisskirchen, Dirk Vater, Tim Wright, Philippe De Backer, Christine Detrick, (2006), "The customer-led bank: converting customers from defectors into fans", Strategy & Leadership, Vol. 34 Iss: 2 pp. 10 – 20 – Read article © Internal Consulting Group 2015
Managing Results & Performance F 8 – Use Scorecards to Deliver the Business Agenda Key Insight Case Example Use Scorecards To Deliver The Business Agenda [After building a cohesive management team at St. George, Gail] Kelly’s next step in building a high-performance culture was to demand accountability and create the organizational framework to support it. The frontline is where sustained cultural change can have the greatest impact on a company’s performance. A culture of accountability is best achieved by holding people accountable for actual delivery, rather than spending energy on a formal “culture change” program. Culture is a means to an end, not an end in itself. Winning cultures are best measured through the dayto-day activities of the frontline. Potential Proof Points / Benchmarks: q Use scorecards to evaluate performance, at all levels of the organisation The process began at the top. She assigned one of the newly hired executives, Peter Clare, to come up with a new set of metrics and tracking measures—many of them focused on customer service and customer loyalty —to assure a new level of rigor at St. George. At St. George’s business-banking division, Greg Bartlett, the division leader, asked his staff to make double-digit improvements in year-over-year profits and operating income. In return, he extended a new degree of trust to managers who were held accountable for running a profit center and making decisions as if it were an independent business, not merely an appendage of a larger organization. Scorecards became an integral part of the evaluation process at the bank, and metrics that tracked customer service and advocacy became at least 15% of each employee’s score—including Kelly’s. Managers were required to come up with explicit customer service strategies to shift the culture’s focus away from creating discrete financial products and toward service strategies and cross-selling. In Bartlett’s organization, especially, it was important to make customers feel valued. He placed key managers in the profit centers so St. George could approach important customers as a unified team, and he got to know most of the bank’s larger business customers personally. 63 Source: ICG Analysis; “Building a winning culture”, Bain & Company, 2006 – Read article © Internal Consulting Group 2015
Scanning Markets & Rivals G 1 – Know the Most Common Information Gathered on Competitors 64 Source: “How companies respond to competitors: A Mc. Kinsey Global Survey”, Mc. Kinsey, 2008 – Read article © Internal Consulting Group 2015
Scanning Markets & Rivals G 2 – Recognise that Competitive Responses Are Generally Straightforward 65 Source: “How companies respond to competitors: A Mc. Kinsey Global Survey”, Mc. Kinsey, 2008 – Read article © Internal Consulting Group 2015
Scanning Markets & Rivals G 3 – See How Other Companies Evaluate Their Competitive Responses 66 Source: “How companies respond to competitors: A Mc. Kinsey Global Survey”, Mc. Kinsey, 2008 – Read article © Internal Consulting Group 2015
Scanning Markets & Rivals G 4 – Leverage the Competitor-Insight Loop to Design a CI Function 67 Source: “Getting Into Your Competitor’s Head”, Mc. Kinsey, 2009 – Read article © Internal Consulting Group 2015
Scanning Markets & Rivals G 5 – Ensure the Organisation’s “Sense and Respond” Capability is Developed Key Insight Case Example Ensure the Organisation’s “Sense and Respond” Capability is Well-Developed A pharmaceutical company holds weekly market- briefing team meetings to specifically discuss the competitive environment and its impact on the core strategy. The team distributes a summary to the broader leadership team. Said an executive from the company, “It’s important for the executive team to be highly attuned to and driven by external market and competitive data, especially in a global environment. ” Adaptive teams systematically use multiple real-time filters and amplifiers of information to monitor the external forces that drive change in their business environment. They use the information to proactively question how external forces could affect the company’s business. Filters often take the form of customized data mining, market research, dashboards, and war rooms. Such tools enable teams to excel at reading external signals, connecting disparate trends into meaningful patterns, and putting in place mechanisms that allow them to collectively separate the signal from the noise. When early-warning signs flash red, the teams are in a position either to consciously act differently or to choose not to act—ahead of the curve. Potential Proof Points / Benchmarks: “Adaptation is about knowing how you are trying to adapt, ” said an executive at a financial services company. “For example, how is the market changing relative to our behaviour and experience? We are not reading about news after it’s occurred; instead, we are in the know before it is reported. ” “It’s not about consensus decision making, but consensus information gathering so that people are informed and can assess as many factors and pieces of information as are necessary, ” said an executive in a financial services company. “Poor-performing teams react to internal versus ‘proact’ to external. ” “Things evolve so quickly, senior teams need to anticipate challenges and scenario-plan what may happen, ” said an executive in the hospitality industry. q Ensure that key industry developments are anticipated rather than reacted to q Develop internal capabilities (or consider outsourcing) to put in place mechanisms to scan markets and competitors 68 Source: “Winning Practices of Adaptive Leadership Teams”, BCG, April 2012 – Read article © Internal Consulting Group 2015
Scanning Markets & Rivals G 6 – Incorporate Trends as Key Inputs into Strategic Leadership Systems Key Insight Case Example Trends are a key input into strategic leadership systems The Vanguard Group, the world’s largest pure no-load mutual fund company, is an example of a company who proactively responded to an observed trend in the marketplace. Collecting existing and emerging trends within particular industries is a vital input to a strategic leadership system. Executive leaders are often described as being responsible for interpreting events and defining reality for followers. As a result, they frame the way followers experience events so that followers can make sense out of their personal and strategic situation. These events emerge out of the business market or environment which serves as the context for strategic leadership and is ripe with various organizational opportunities and threats. Executive leaders must be particularly astute in recognizing these opportunities and threats so that strategies can be created and adapted in a manner that is responsive to the market. Jack Bogle started Vanguard in 1975 because he felt that shareholders were not well served by the standard practice in the mutual fund industry, where funds are burdened by fund management companies seeking profits through their servicing of the funds. His dream, dubbed the ‘‘Vanguard Experiment, ’’ was that its shareholder would create their own management company to provide – at cost – the administrative services they needed. Today, Vanguard is considered by industry experts as a trend-setter and technology leader in employing e-business strategies and building solid relationships to meet the growing needs of investors. Potential Proof Points / Benchmarks: q Create an organisational capability to monitor market developments and feed them into new product or service development efforts 69 Source: ICG Analysis; “Making All the Right Connections: The Strategic Leadership of Top Executives in High-Tech Organizations”, Sosik et al. , Organisational Dynamics, 2005 – Read article © Internal Consulting Group 2015
Scanning Markets & Rivals G 7 – Build a Radar Capability Key Insight Case Example Create structured monitoring devices After worrying incessantly about yet another bright and shiny object appearing in the payments landscape, a major bank and then the leading debit payment scheme built a radar capability. Most corporate and business strategy functions rely on ad-hoc strategy reviews and annual plan updates as well as inform access to media search lists and anecdotal evidence of new or emerging trends and rivals Radar like systems which periodically update the csuite with empirical analysis of changes to the competitor pipeline and key trends can ensure confidence that scanning and rival strategies are better understood Potential Proof Points / Benchmarks q Design and build a radar system q Present radar system as a regular update or as part of management by exception reporting This capability comprises numerous tools, of which two stand out: 1. A competitive rival pipeline which accurately and periodically tracks the “realistic” time for the development and realisation of a rivals business (or innovation) in the market place. • This analysis (see example Appendix Y) is now periodically refreshed and major changes in position are reported as part of a quarterly update to executive. • Major announcements and other informal channels still occur, but much of the noise (and hubris) around rival evolution is now avoided • These pipelines are often built for both domestic markets and as an aggregation of leading global innovations 2. A trend evolution analysis which accurately articulates and then updates executives on the development of key trends which impact their business. • This analysis allows executives to agree the major trends which will impact them and their business • It then agrees the most likely trajectory for that trend given the current market context ad most relevant forecasts • It then updates executives periodically on changes in key trends which avoid the boiled frog syndrome or slow moving but important trends which catalyse adaption in the underlying strategy q Feed radar system into planning processes 70 Source: ICG Analysis; unpublished IP © Internal Consulting Group 2015
Scanning Markets & Rivals G 8 – Execute “Lite” Wargames to Identify Rival Strategies Key ‘Insight Case Example Use “Lite” Wargames To Uncover Rival Strategies A major Insurance company was wondering how to best respond to a major new state regulation. This change will create the potential for rapid changes to competitive intensity and customer shopping and switching. Wargames are the most sophisticated way to identify rival strategies. However, they are also the most expensive, typically costing AUD$500 K and up. Many of the advantages of Wargames can be uncovered without the expenses by running a lite Wargame that relies more on rival strategy identification than sophisticated modeling of the real time impact of these strategies on industry revenue and profit pools The client wanted to understand how to they could use more sophisticated scenario analysis and or lite Wargaming techniques to best reveal rival strategies. They subsequently developed a capability which they called “Lite” Wargaming. This capability allows them to apply Wargaming tools and techniques (briefing books, scenario analyses, rival team enactment, strategy and response analysis). This capability, previously unaffordable, is now accessible to other departments to be applied to other critical market changes. Potential Proof Points / Benchmarks q Identify a relevant discontinuity q Build a “Lite” Wargaming capability as an extension of the corporate strategy capability q Deploy where appropriate 71 Source: ICG Analysis; unpublished IP © Internal Consulting Group 2015
Supporting Material Section 4 72 © Internal Consulting Group 2015
Supporting Material Examples of Organisations Whose Leaders Embody the Brand 73 Source: “Building Leadership Brand”, Harvard Business Review, 2007 – Read article © Internal Consulting Group 2015
Supporting Material Timeline for Bank of America Executive Onboarding Process 74 Source: “Accelerating leadership performance at the top: Lessons from the Bank of America's executive on-boarding process”, Human Resource Management Review, 2007 – Access article © Internal Consulting Group 2015
Supporting Material Key Tools Used in the Bank of America Executive Onboarding Process 75 Source: “Accelerating leadership performance at the top: Lessons from the Bank of America's executive on-boarding process”, Human Resource Management Review, 2007 – Access article © Internal Consulting Group 2015
Supporting Material Characteristics of Highly Effective Companies 76 Source: “High-Performance Organisations, The Secrets of Their Success”, BCG, September 2011 – Read article © Internal Consulting Group 2015
Supporting Material Key Learnings from a Bank Transformation Program 77 Source: “Notes on a Transformation”, Bigsby et al. , Business Strategy Review, Autumn 2007 – Read article © Internal Consulting Group 2015
Supporting Material Enhancing the Strategic Planning Process at Countrywide Financial 78 Source: ICG Analysis; Eric Flamholtz, Stanford Kurland, (2006), "Making Strategic Planning work: a case study of Countrywide Financial", Handbook of Business Strategy, Vol. 7 Iss: 1 pp. 187 – 193 – Access article © Internal Consulting Group 2015
Supporting Material Performance Management Framework 79 Source: “Rapid Restructuring – How Banks Need to Respond to the Financial Crisis”, Booz, 2009 – Read article © Internal Consulting Group 2015
Supporting Material Six Characteristics of Best-in-Class Business Intelligence 80 Source: “Beyond the Dashboard – Unleashing the True Value of Business Intelligence”, Booz, 2010 – Read article © Internal Consulting Group 2015
Supporting Material 5 Traits of Adaptive Leadership Teams 81 Source: ICG Analysis; “Winning Practices of Adaptive Leadership Teams”, BCG, April 2012 – Read article © Internal Consulting Group 2015
Supporting Material Radar System: Rival Pipeline (sanitised Payments example) Development Stages 0 No identification of entry Marketing 1 2 Build awareness Initial market survey 3 Signalling Public declaration of interest Exploring alliances/partners 4 Committed resources Entry planning Establishing network Building presence/c apabilities Entry planning Establishing network 5 6 Achieving critical mass Ramp up of adoption in targeted market segments Established competition Expansion Direct threat to incumbents Selected Examples Typical Timeline 2 -3 years 1 -2. 5 years 1 -2 years Source: “Sanitised ICG Client Radar System’ © Internal Consulting Group 2015
Supporting Material Radar System: Key evolutional trends (sanitised General Insurance example) Customer Behaviour Personal Lines Competitive Behaviour Government / Opposition / Media / Advocacy Willingness to shop & temporarily self insure 20% shop Brand preference / price sensitivity No change in preference or sensitivity Material shift in brands shopped/ price sensitivity Conservative Intensity of competition for customers No change More competition from small players Broad based aggressive competition Degree of promotion of shopping Low key Deliberate but low key campaign Major effort – e. g. , comparison site Orderly management of transition Extent of shift in FY 13 GWP for FSL liability purposes Group Financial /Industry Pressures 60% shop//material selfinsure Stance toward FSL collection/gaming Intrusiveness over FSL reduction pass through Commercial Lines 40% shop Highly proactive gaming Formal monitoring and requirements No Government oversight No transition arrangements; changes in deadlines No transition arrangements but deadlines met No shift Legislated transition with tapering etc. Large shift Group imperative to maintain profit level (your team) Mandate to sacrifice some short term profit Normal expectations to deliver profit target Industry financial pressures/impact on price increases No material events/’normal’ cost increases Above normal cost increases/material industry profit pressures Major 1 HFY 13 event/ substantial re-pricing required Source: “Sanitised ICG Client Radar System’ © Internal Consulting Group 2015 83
Supporting Material “Lite” Wargaming overview Wargaming helps create a distributed view of potential stakeholder reactions Iterations during wargame Formulate contingent strategy given scenario outcomes Reaction of client, other players/stakeholders Definition • Dynamic simulation tool for exploring complex strategic situations and partially role playing likely stakeholder actions and countermeasures Advantages Disadvantages • Allows for many stakeholders to be involved in the strategy formulation process • • High involvement in the process (learn by doing) and transparent findings build strong buy-in Can be time and labour intensive (we will be running a “lite wargame” with limited modelling capabilities) • The number of scenarios and discontinuities explored is very limited (other high probability game changers should be desk checked) • Dramatically increases awareness and accuracy of stakeholder positions and their likely actions (which can feed other strategy processes) • Increases understanding of the industry and different points of view, develops teamwork Source: ICG Wargame IP © Internal Consulting Group 2015
Supporting Material “Lite” Wargaming in practice (sanitised General Insurance example) Participants in game Game briefing materials • A number of teams representing key stakeholders in the insurance industry • • Teams comprise 4 -6 people. A team leader from the client is pre -allocated All participants receive high level operating instructions and rules, a summary of the Victorian home insurance landscape, and their individual team profile to help them optimise their game playing Game operations Rules of the game • Game begins with a short kick-off briefing and last minute Q&A • • After receiving the game context and objectives, teams will move to a work area to agree and document their strategies Teams must use the information at hand to act in the interests of the stakeholder they represent and ‘in character’ with that stakeholder • A control room runs the game, orchestrates the teams, interprets individual stakeholder and team decisions and feeds back results • Teams must abide by the law and game protocols • Teams must follow instructions given by the control group in the initial briefing • Teams may submit requests to the control group for industry collaboration and lobbying or public announcements – the control group has discretion to decide if such requests will be granted • Public announcements may be made throughout the game (e. g. new regulation, media releases or updated rules) to solicit team actions Game learnings and synthesis • Lessons learned and implications for insurance strategy will be integrated into the response strategy Source: ICG Wargame IP © Internal Consulting Group 2015
Relevant Extracts from ICG Industry Insights Reviews Section 5 86 © Internal Consulting Group 2015
Relevant Extracts from ICG Industry Insights Reviews Choosing Executive Talent Reference Issue date Source Relevance “Do you have the right leaders for your growth strategies” August 2011 Mc. Kinsey This intriguing paper combines extensive company performance data from Mc. Kinsey’s granularity of growth database with executive search firm Egon Zender’s performance appraisals. The resulting overlap of 5, 560 executives from 47 companies provides analysis of various correlations between executive competencies and company performance. If you thought excellent leaders are uncommon, you are right, just 55 of the sample scored an average of > 6 (out of 7) and just 10% had an above average score. So do better leaders (or leadership teams) make better companies or better companies make ‘higher scored’ leaders? Mc. Kinsey at least point to higher revenue growth performance for leaders (and leadership teams) with higher competency scores. At the very least this research points to the criticality of understanding customers’ evolving needs – or the competence of creating customer impact. Importantly, you need to target 19% to 40% of your executives scoring above 6 in this competence to be likely or highly likely to generate above average growth. “Diagnosing Your Top Team’s Span of Control” June 2012 Booz This article by industry veteran Gary L Neilson tackles the difficult issue of organisational design and the right composition of the “top team” of CEO direct reports. The article touches on some key issues and provides a few pointers, but is largely just a teaser for an online diagnostic tool. The tool uses an algorithm based on five situational dimensions to provide a starting point for discussion. A more detailed perspective on the key issues is provided in the companion article published in the April 2012 Harvard Business Review. 87 © Internal Consulting Group 2015
Relevant Extracts from ICG Industry Insights Reviews Increasing Diversity Reference Issue date Source Relevance “Hard-Wiring Diversity into your Business” July 2011 BCG This short article contains an excellent framework (exhibit 4) for conceptualising structural enhancements to the talent lifecycle which will lead to improved diversification. “Changing Companies’ Minds About Women” October 2011 Mc. Kinsey Making the argument that all the obvious barriers have been broken down, this report helpfully highlights some best practice targets and makes the case for a number of ideas to break down the remaining invisible barriers. Best practice companies include: Pitney Bowes, where 38% of vice presidents are women, and Shell Time Warner where more than 40% of the senior executives in operating divisions are women. Some of the more compelling ideas include: • Follow the lead of the CEO of Pitney Bowes who learned that the most productive newly-hired salespeople were women, found out why, and then used this as the catalyst for a broader program • Treat diversity as no less important than major market share growth or cost reduction programmes • Track diversity not just at the executive level, but also in the pipeline • Evidence of the strong correlation between women at the top and stronger financial performance. 88 © Internal Consulting Group 2015
Relevant Extracts from ICG Industry Insights Reviews Driving Employee Engagement Reference Issue date Source Relevance ”What Executives Really Need to Know About Employee Engagement” July 2011 Accenture A well written and informative paper that helps executives to list their employee engagement scores. Whether a timely reminder of better practices or the starting point for a response to recent poor scores, Accenture’s Institute for High Performance delivers well researched insights, interesting and relevant case studies and some new ideas on how to engage. Their three key messages include: • Creating meaning through a well-articulated and compelling future • Engendering trust and respect by making it safe to take risks and ensuring colleagues support each other • Creating a sense of partnership by balancing high energy periods with recovery periods and ensuring work expectations don’t become unreasonable “How Leaders Kill Meaning at Work” February 2012 Mc. Kinsey An “Executive Book Summary”-style article based on Teresa Amabille’s (HBR Professor) and Steven Kramer’s (Researcher) book The Progress Principle: Using Small Wins to Ignite Joy, Engagement and Creativity at Work. It highlights the concept of inner work life: “the constant flow of emotions, motivations and perceptions that constitute a person’s reactions to the events of the work day”. The findings, based on research of nearly 12, 000 daily electronic diaries of professionals at seven North American companies, highlight four traps for leaders to avoid. Specifically, these are: sending mediocrity signals; having strategic attention deficit disorder; playing Corporate Keystone Kops; and setting irrelevant Big, Hairy Audacious Goals. Like so many of these books, when you get into the specifics, it sounds so very obvious – however this article provides a timely reminder for leaders that their behaviour and remarks can so easily undermine their objectives. © Internal Consulting Group 2015 89
Relevant Extracts from ICG Industry Insights Reviews Improving Culture, Driving Change & Generating Executive Feedback Reference Issue date Source Relevance “Demystifying Corporate Culture” November 2011 AT Kearney A very solid article which would be better titled: “Aligning Culture with Strategy for Peak Performance”. High employee engagement can realise as much as a 50% improvement in operating revenues. AT Kearney use case studies from P&G and Apple to demonstrate that neither good strategy nor good cultural alignment alone will produce peak performance. The P&G Case is especially relevant to those with an interest in innovation and extended enterprises. The article also includes a simple but helpful alignment framework and several very high quality culture diagnostic frameworks to help those wanting to do this essential work themselves. “Developing Better Change Leaders” June 2012 Mc. Kinsey This article provides a case study in change management based on the authors’ experiences at a global industrial company undergoing transformation. Three examples from the transformation are used to illustrate the impact of improving the “soft skills” of managers leading the change. The article concludes by generalising some lessons proposed as relevant across all transformations. “Top Executives Need Feedback – Here is How They Can Get It” October 2011 Mc. Kinsey Within this article, Robert S. Kaplan (co-author of the Balanced Score Card) offers two important tips for successful top executives: 1. Foster coaching relationships with subordinates and encourage them to do the same. While trust will take time to build, the resulting change in perceptions of leadership skills and culture will prove very valuable 2. Periodically task a team of more junior up-and-coming executives to take a clean sheet of paper and answer the question: ‘If you were building this enterprise from scratch, what would it look like? ’ 90 © Internal Consulting Group 2015
Relevant Extracts from ICG Industry Insights Reviews Creating High Performance Organisations Reference Issue date Source Relevance “High Performance Organisations: The Secrets of Their Success” October 2011 BCG This report delivers a distillation of key success factors from some of BCG’s most experienced organisational development practitioners. Unlike some competitors and academics, there is no attempt to empirically derive these factors – it’s simply a good amount of text that nicely summarises a lot of ‘better practices’ in leadership, organisational design, people management, change management and culture and engagement. The paper also includes six mini case studies which are a blend of client case advertorials and some novel practices. This includes Google’s rule of three thirds in its HR function: ensure a third of the team are solid traditional HR functionalists, ensure a third are ex-management consultants to solve problems and bring cross-functional and cross-business expertise, and ensure the final third have advanced degrees, running experiments and generally raising the bar. There are two particularly compelling new ideas in the article. Firstly, the idea of Role Charters: unlike most job descriptions, they are drafted by employees and refreshed regularly. They focus on accountabilities and decision-making rather than activities. Secondly, the notion of explicitly filling roles with one of three archetypes: change agents, domain experts, and safe pairs of hands. “Winning Practices of Adaptive Leadership Teams” June 2012 BCG The article makes the argument that leaders can no longer manage the levels of turbulence, volatility and internal and external dynamics without a team effort. As a consequence, BCG has developed a major new framework called adaptive leadership. The framework is based on four team foundation principals and five behavioural traits. The four foundation principles are: Distributed Leadership; Optimal Talent Mix; Clear Charter and Mutual Trust. These basics are complemented by five traits: One Voice; Sense and Respond; Information Processing; Freedom within a Framework; and Boundary Fluidity. © Internal Consulting Group 2015 91
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