Insigniam Quarterly Fall 2014 - Change Management
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Transcript of Insigniam Quarterly Fall 2014 - Change Management
VO L U M E 2 , I S S U E 3 | Fa l l 2 014
THE BEAUTY OF EVERYDAY TRANSFORMATIONS
Flipping the Switch For CEO Daniel Hager, reinventing his family’s energy company was a highly charged experience.
Where the Rubber Meets the RoadFor Japanese tire manufacturer Bridgestone, traction comes from bridging international and cultural gaps.
RAVISHING RESULTS
Mary Kay CMO Sheryl Adkins-
Green says lasting transformations need not stop
traffic.
HOW MARY KAY HAS SUSTAINED 50 YEARS OF RADIANT SUCCESS
™
Change and transformation are not the same. Change, by its very nature, is rooted in being different or better
than what has been and is currently being done. Change is a product of the past.
Transformation is putting the past where it belongs, in the past, and not letting it determine the present or the future. Far from it. Yet leaders of companies, large and
small, continue to crave change rather than triumph with transformation.
— NATHAN OWEN ROSENBERG
CO-FOUNDING PARTNER, INSIGNIAM
RRecently, during a lively dinner conversation with a large group
of friends, the subject of change was brought up. A dear friend of mine, herself
a C-Suite executive, made a point that change is not only inevitable but also
necessary for growth and survival.
While I hardly dispute the value of adaptation, who wants to simply survive?
Far too often, people confuse change — a product of the past — for transformation,
which is the process of unlocking uncharted possibilities that are completely new
and revolutionary.
But transformation, whether you’re cultivating an entirely new corporate culture
or bringing a groundbreaking new product to market, can be risky. Consider the
iPhone, something I consider to be a transformational product that created, not just
added, value. Had the product been based on a gimmick or billed as being able to
offer an experience beyond its capabilities, not only would Apple’s reputation —
and stock — have paid a price, but so too would have consumer sentiment. This
could have had a negative impact on R&D investments as demand for over-hyped
smartphone products dwindled.
As we know, this was not the case. Not only has the iPhone been wildly
successful but it has also transformed the way we interact and communicate. As is
our position at Insigniam, transformations almost always require many large, critical
initiatives to be executed simultaneously toward a unified goal, without losing any
altitude in current operational efficiency — something we refer to as Breakthrough
Performance.
But do all transformations look the same? Hardly. In the case of our cover story
— an interview with Mary Kay Chief Marketing Officer Sheryl Adkins-Green
— the cosmetics giant’s transformations were calculated and measured, and have
resulted in more than 50 years of sustained success. On the other hand, in the case
of Hager Group, it took a transformational leader in the form of CEO Daniel
Hager to reinvent his family’s company into an unstoppable competitive force —
one not only intent on surviving, but thriving.
With that, I present our fall issue, focused on the challenges and successes
wrought by transformation. Transformation can be treacherous, but on behalf of
everyone at Insigniam, we look forward to partnering with you along each step of
the journey to help you arrive at a destination you can only imagine.
LETTER
FALL 2014 INSIGNIAM QUARTERLY 1
Shideh Sedgh Bina
Founding Partner, Insigniam
TRANSFORM YOUR DEFINITION OF TRANSFORMATION
FALL 20142 INSIGNIAM QUARTERLY
26DOES YOUR CULTURE FUEL YOUR STRATEGY?Shideh Sedgh Bina, Insigniam
The results of your business are a product of action
— and culture decides the action in your company.42
STOKING THE FIRES OF TRANSFORMATION Nathan Owen Rosenberg, Insigniam
Think change and transformation are the same?
It’s time to change your perception.
52PREVENTING CROSS-CULTURAL BURNOUT Jeff Bounds
How Japanese tire manufacturer Bridgestone
treaded cultural issues to gain market traction.60
THE SKY’S THE LIMIT FOR AT&TJoe Guinto
How continual transformations put the telecom
giant at the forefront of cloud-based solutions.
FEATURES
THE BEAUTY OF EVERYDAY TRANSFORMATIONSAccording to Mary Kay
CMO Sheryl Adkins-
Green, lasting corporate
transformations don’t
always stop traffic.
Sometimes, the
understated can yield
ravishing results.
COVER STORY34
TABLE OF CONTENTS
FALL 2014 INSIGNIAM QUARTERLY 3
EDITOR-IN-CHIEF Shideh Sedgh Bina
EXECUTIVE EDITOR Nathan O. Rosenberg
CHIEF FINANCIAL OFFICER Ralph Gotto
DIRECTOR OF WORLDWIDE Karen Turner
CLIENT SERVICES [email protected]
DIRECTOR OF SPECIAL PROJECTS Alexes Fath
PUBLISHER Gordon Price Locke
EDITORIAL DIRECTOR Amy Robinson
MANAGING EDITOR Jonathan Ball
CREATIVE DIRECTOR Kyle Phelps
ASSISTANT ART DIRECTOR Emily Slack
PRODUCTION MANAGER Pedro Armstrong
IMAGING SPECIALIST John Gay
DIRECTOR OF CLIENT SOLUTIONS Jas Robertson
ACCOUNT DIRECTOR Cory Davies
EDITORIAL QUERIES
750 N. Saint Paul Street
Suite 2100
Dallas, Texas 75201
www.dcustom.com
214.523.0300
For advertising information, contact Jas Robertson at
214.937.9811 or [email protected]
Insigniam Quarterly is published by D Custom, 750 Saint Paul Street, Ste. 2100, Dallas, Texas 75201. Copyright 2014 by Insigniam. All rights reserved. Letters to the editors may be sent to Insigniam Quarterly c/o D Custom, 750 Saint Paul Street, Ste. 2100, Dallas, Texas 75201. No part of this publication may be reproduced in any form or by any means without prior written permission of the publisher and Insigniam. Printed in the U.S.A. Magazine patents pending. For subscriptions, please visit www.insigniamquarterly.com.
Q U A R T E R LY
VOLUME 2, ISSUE 3 | FALL 2014
“Change is the law of life and those who look only to
the past or present are certain to miss the future.”
— U.S. PRESIDENT JOHN F. KENNEDY
THE TICKERTransformation, by the numbers.
BLOOD, SWEAT & TEARSDaniel Hager, CEO, The Hager Group
How Hager — a worldwide leader in electrical
engineering — flipped the switch.
FROM THE BOARDROOM Is your board the master chef behind innovation?
WRITING THE BOOK ON TRANSFORMATIONAuthor and Harvard professor Rosabeth Moss Kanter
on navigating successful transformation.
IQ BOOSTScott Beckett, Insigniam
The power of coordinated action.
IS YOUR OUTSOURCING SOCIALLY RESPONSIBLE?Elisabeth Gegner, Insigniam
Outsourcing need not result in the all too familiar “blood
on the floor.”
2014 EXECUTIVE SENTIMENT SURVEY What keeps 80% of executives up at night? Find out.
TRANSFORMATION IN THE DRIVER’S SEAT For Faurecia — a world leader in auto parts —
revolutionizing results began by reengineering
corporate culture.
0410
14
64
18
4856
DEPARTMENTS
On the coverMary Kay CMO
Sheryl Adkins-Green
Insigniam and its publisher, D Custom, distribute this editorial magazine to share the opinions and insights of companies and their leaders on impactful global business issues. Insigniam Quarterly’s inclusion of a company or individual does not indicate that they are a client of Insigniam. Remuneration is not provided for editorial coverage. Individuals appearing in Insigniam Quarterly have done so with direct consent, or provided consent by a designated authorized agent in addition to being disclosed on the magazine’s audience and purpose.
MINI-FEATURES
22
™
FALL 20144 INSIGNIAM QUARTERLY
THE TICKER
Seven years ago, Home Depot’s stock price and sales
lagged that of its main –— yet considerably smaller –—
competitor, Lowe’s. Chairman and CEO Frank Blake
set out to transform the company just as the financial
meltdown of 2008 began to transform every market
across the board.
Blake changed how Home Depot marketed its
products. Rather than continue to tailor advertisements
to contractors and cater to the handyman, the company
began running television commercials for a new primer-
painter combo with women doing much of the work.
And while it used to be a joke that trying to find someone
in an orange apron to help you find your way through one
of the cavernous big box retailer’s stores was impossible,
Blake also changed that. He put more employees on the
floor, inspiring them to be attentive, while boosting their
pay and instructing them to focus on the customer first.
Everything else fell into place as employees responded
to that environment.
In August, after reporting robust quarterly sales that
once again bested those of Lowe’s and topped analysts’
estimates, Home Depot announced Blake will transition
his CEO duties to Craig Menear, the company’s president
of U.S. retail, while retaining the chairman role effective
November 1.
Menear certainly has his work cut out for him as
Home Depot’s profit has increased for five straight years.
Second-quarter revenue rose 5.7 percent from a year
earlier while same-store sales climbed 5.8 percent for
the three months ended June 30. Not to mention Home
Depot’s share price is up 127 percent since Blake
took over.
HOME DEPOT’S CEO HAMMERS DOWN RESULTS
FALL 2014 INSIGNIAM QUARTERLY 5
5.7%
5.8%
127%
increase in
second quarter
revenues from the
previous year.
sales increase
for three months
ended June 30.
increase in share
price since Blake
took over.
BY THE NUMBERS
FALL 20146 INSIGNIAM QUARTERLY
THE TICKER
APPLE’S MOST EXCITING OFFERING: CEO TIM COOKIn early September, Apple CEO Tim Cook played to a full
house at the Flint Center for Performing Arts — the same venue
where the original Mac was announced more than 30 years
ago — to introduce Apple’s newest products. Co-founder and
former CEO Steve Jobs made Apple events into a marketing
spectacle, and since Jobs’ death Cook has struggled with finding
his stride on a stage that Jobs once commanded.
But this event, perhaps because it ostensibly featured the first
set of products fully overseen by Cook, was different. There
was an energy that got journalists and consumers alike excited
about the new products and had many surmising that the most
exciting new product unveiled was Cook himself in the role of
Apple’s transformational leader.
Cook and company witnessed positive results from his
showing less than one week later.
According to a report from The
Wall Street Journal, preorders for the
iPhone 6 and 6 Plus exceeded 4
million in just 24 hours. And both the
tech and financial worlds are buzzing
about Cook’s “one more thing,” the
Apple Watch, which is the company’s
first new product in four years.
While no one can fully replace an innovative visionary
like Steve Jobs, it’s clear that Apple is in the business of
creating not just cutting-edge technology, but also the kinds
of transformational leaders that will keep them ahead of
the competition.
Honda Motor Company, billed as
Japan’s second-largest auto manufacturer,
has a unique corporate culture; one that
is constructed around the idea of fixing
problems and spurring innovation. All of the
company’s associates dress in white jumpsuits
with their name stitched on the chest. Every
employee, from chief executive to the person
turning the screwdrivers, wears this uniform
to smooth out any sense of hierarchy and
promote an environment where everyone’s
opinion matters — regardless of title or
seniority.
As Jeffrey Rothfeder discusses in his
new book Driving Honda: Inside the World’s
Most Innovative Car Company, the concept
of waigaya leads directly to “significant
improvements in productivity, process, and
performance that would otherwise have
been absent.” In practice, Honda encourages
spontaneous meetings filled with off-the-
cuff remarks as a way to solve problems and
gain access to insights and opinions across
the corporate spectrum.
Case in point, Rothfeder says, was an
issue that arose at an assembly plant after a
worker discovered an issue with a handful
of camshafts. Due to limited space under
the hood, factory workers assumed the
entire engine would have to be removed
from the vehicle to repair and remedy the
issue. Following waigaya, a small team of
assemblers and managers met to discuss
solutions in real time.
Just as managers were making plans to
ship the affected cars to another factory for
servicing — a sizeable production setback
— an assembly worker suggested a way to
fix the camshaft without having to remove
the engine; a process that a worker had seen
performed at a sister plant.
Strategy + Business, which profiled
Rothfeder’s book, noted that the plant
supervisor remarked, “If we had used the old
style of management at Honda that says ‘do
it this way’ … we would be literally sliding
engines in and out of cars every day, not
knowing that [one of our associates] would
think [of a] better way.”
WAIGAYA: HONDA’S SECRET TO SUSTAINED SUCCESS
“IF WE DON’T INCLUDE OUR ASSOCIATES IN THE DECISION MAKING, WE’RE IGNORING POTENTIALLY OUR MOST VALUABLE ASSET.”- HONDA EXECUTIVE
When people matter — change management matters.
Advancing the Disciplineof Change Management
As
so
cia
tio
n of Change M
ana
ge
me
nt
Professionals
ACMP
Fostering the change management profession ACMP offers the space to learn, share, and cultivate
professional change practices to achieve your organization’s intended outcomes and results.
We are the Association of Change Management Professionals — Change is our focus. Learn more by
visiting: www.ACMPGlobal.org
8 INSIGNIAM QUARTERLY FALL 2014
TOP LINE
TRANSFORMATION BY THE NUMBERSCOMPILED BY GEOFF WILLIAMS
“IF WE HADN’T IMPROVED THE RELIABILITY OF HARLEY-DAVIDSON PRODUCTS, THE COMPANY WOULDN’T BE HERE TODAY.”
Former IBM CEO Lou Gerstner, who took a company on the verge of bankruptcy in the 1990s
and transformed it into a powerhouse. It’s currently No. 35 on Forbes’ list of the largest
companies in the world.
The amount of money future rival Microsoft invested in Apple in 1997, when
the company was on the verge of bankruptcy and Steve Jobs, co-founder
of Apple, needed an infusion of cash to help transform the company
from producing PCs to restructuring the entire product line. We hear the
company is doing pretty well now.
35no. Transformation of an enterprise begins with a sense of
crisis or urgency. No institution will go through fundamental
change unless it believes it is in deep trouble and needs to
do something different to survive.
Cash flow pre-Microsoft investment
Cash flow after Microsoft investment
Z
— Richard Teerlink, in 2003, commenting on the
turnaround the company had after 1982 when it
was $90 million in debt. $150 million
INSIGNIAM QUARTERLY 9FALL 2014
Amount Ford Motor Company was losing in 2008 — each day.
But the company was already working on a comeback. Mulally
was named CEO in 2006 and that year mortgaged all of Ford’s
assets for $23.6 billion in loans. Believed to be a desperate
move at the time, it’s now seen as a shrewd one.$83 MIL
LIO
N
According to a 2002 industry study, when an organization’s change management is implemented successfully, ROI is143 percent. That is, businesses can expect to make 43 cents for every dollar spent on OCM.
ARE YOU LOSING, OR MAKING, MONEY?
$2.6 billionFord Motor Company’s profits in the second quarter
of 2014. CEO Alan Mulally transformed Ford by
simplifying the company’s organizational structure,
cutting operating costs, and improving efficiency — as
well as offering a simpler, more innovative product line.
2014SECOND QUARTER
PROFIT$2.6 BILLION
2014FIRST QUARTER
PROFIT$1.3 BILLION
“THERE IS A DIFFERENCE BETWEEN MOVING QUICKLY — WHICH NETFLIX HAS DONE VERY WELL FOR YEARS — AND MOVING TOO FAST, WHICH IS WHAT WE DID IN THIS CASE.”
— NETFLIX CEO REED HASTINGS
800,000The number of subscribers that Netflix lost in the third quarter of 2011.
610,000The number of subscribers Netflix gained in the fourth quarter of 2011.
60%PRICE HIKE
7
In the aftermath of major changes in 2011, in which the company attempted to spin off its DVD mail service into a new business called Quikster, and instituted a 60 percent price hike.
FALL 201410 INSIGNIAM QUARTERLY
FLIPPING THE SWITCH ON TRANSFORMATION
Hager Group, an independent, family-owned company founded in 1955 by the father and uncle of current
CEO Daniel Hager, has grown steadily since its inception,
growing organically as well as acquiring other manufacturers
of electrical and related systems used in residential, commer-
cial, and industrial buildings.
The acquisitions have averaged about one a year over a 20-
year period. While each newly acquired
business added to the company’s bot-
tom line (as a privately held company,
Hager Group isn’t required to divulge
its financial results), it also meant the
corporation was continuing to add dis-
parate brands and organizations, all with
their different sales teams, different ad-
ministrative executives, and different
ways of conducting business.
By the time Daniel Hager became
part of the company’s management in the middle of the last
decade, Hager Group — based in Blieskastel, Germany —
had grown to two-dozen different brands, often operating
with the same customer base through the same sales channel.
As a result, customers viewed Hager Group as a product
specialist company rather than offering a broad portfolio. Cus-
tomers would often buy one product from Hager, but might
BY PHIL BRITT
For Daniel Hager, CEO of Hager Group — a worldwide leader in electrical engineering — transforming his company’s business model was a highly charged experience.
BLOOD, SWEAT & TEARS
FALL 2014 INSIGNIAM QUARTERLY 11INSIGNIAM QUARTERLY 11
buy a related product from a competitor. To advance to the
next level, in which the customer would turn to Hager Group
for full solutions like an energy distribution system rather than
for individual component(s) of the system, Hager Group had
to change its focus from a product focus to a solution focus —
a major transformation in the way the company historically
conducted business, Daniel Hager says.
IMPROVED VALUE PROPOSITION
In 2006, Hager developed a transfor-
mational strategy — one that focused on
branding — that the company began ex-
ecuting in 2008.
“It was a dramatic change in our infra-
structure,” Hager recalls. “With 24 brands,
you’re not able to convince the mind of the
customer what your value proposition is.”
The transformation from a product-
based company to a solutions-based com-
pany necessitated that Hager Group re-
design their marketing and organize their
internal structure differently to deliver
these promised solutions. Hager knew that
his future, as well as that of the company as
a whole, relied on the successful transfor-
mation of the company from a brand focus
to a solutions company.
“We needed to break barriers, which we
hadn’t done in the past. You cannot have
different silos from a solutions perspective; so we started melt-
ing down the barriers between internal groups,” Hager says.
“Taking out the different brands and focusing on one brand
with one value proposition enabled us also to focus on one
solution to meet the market needs and forget about what we
might lose emotionally.”
It also meant a long-term focus on the company’s strategy
and direction according to Hager. “The most critical issue was
to determine where we were headed in the future.”
“This holistic approach to transforming the Hager value
proposition is the key to their success,” says Katerin Le Fol-
calvez, Insigniam partner. “Too often we see companies at-
tempt to transform their brand-model without reconstituting
their organization to be a match for
the new proposition. A brand-model
transformation is a total enterprise
transformation and Daniel Hager and
his team understood that.”
His uncle and father had turned
over control of the company to a non-
family CEO in 1988, a person Hager
had to convince of the new direction
for the company.
If his presentation or the execution
of it failed, he might not have ascend-
ed to the CEO position, he may have
been out of the company entirely. He
needed the support of the CEO and of
other key personnel in order to move
forward with his planned strategy.
“I had to ensure that I was showing
the commitment needed. The cred-
ibility of the organization was at stake,”
Hager says. “It was a difficult time for
me and those I convinced to follow
me. We didn’t know what to expect from the present CEO.
He had his own way of functioning. We had to convince the
CEO and other key people that this was the right way of
moving forward.”
Hager started with a group of 10 core people to launch
his vision, and brought others on board through “a lot of
“TOO OFTEN WE SEE COMPANIES ATTEMPT TO TRANSFORM THEIR BRAND-MODEL WITHOUT RECONSTITUTING THEIR ORGANIZATION TO BE A MATCH FOR THE NEW PROPOSITION.” — KATERIN LE FOLCALVEZ, INSIGNIAM PARTNER
TIMELINE
1955Hager Group is founded.
1962Develops new logo and corporate identity.
1969Rotary Fuse carrier is invented.
1974 Launches the first modular system on the French market.
FALL 201412 INSIGNIAM QUARTERLY
BLOOD, SWEAT & TEARS
one-on-one discussions.”
From the time the change in direction was envisioned in
2006 to the launch in 2008, there were large commitments in
time, with numerous two-day working sessions.
From the initial group of 10, Hager
developed a leadership committee of 30
to drive the transformation and the di-
rection of the brands. “Herein is another
critical success factor,” says Insigniam
partner, Marie-Caroline Chauvet. “Dan-
iel and the top leadership also took on
reinventing themselves as leaders in order
to be effective in executing on the new
model. That took courage and wisdom.
In turn, this led to a transformation of the
Hager culture.”
Rather than the top-down manage-
ment style of the past, the new strategy
also relied on a collaborative management
style, with more input from managers and
employees not in the C-Suite.
“It’s something that our people
weren’t used to … we were creating a
space where we could discuss and build the future together,”
says Hager, who admits, in hindsight, that implementing the
change in strategies was a more daunting challenge than he
had initially envisioned. “There were a lot of dragons to fight.”
Though there was some hesitation among a few of the
company managers and employees, there wasn’t a forklift
change in terms of personnel. Most who didn’t embrace
the new direction of the company immediately did so
over time.
“Some left because they didn’t want to cope with the new
culture,” Hager says, though he let time (people retiring, leav-
ing the company for promotions, etc.) handle the majority of
the personnel shift.
“One of the key success factors of this transformation was
Daniel Hager’s determination to build on the company’s in-
credible cultural assets rather than change
everything,” says Chauvet. “The branding
transformation became a way to express
Hager’s commitments to all of its stake-
holders in a very clear and tangible way.”
Rather than 24 different brands, the
Hager brand today consists of products
ranging from energy distribution through
cable management and wiring accessories
to building automation and security sys-
tems. Other brands of the Hager Group
are Berker, Daitem, Diagral, Efen, and
Elcom. These have a clear value proposi-
tion to defined customers and through
defined sales channels; different from that
of the Hager brand.
“Some of the brands now are bigger
than they ever were before,” Hager says.
The company’s solid growth has contin-
ued as well, something that Hager doubts would have been
as strong without the transformation in focus.
LOOKING AHEAD
Though the focus on solutions rather than products “is now
part of our culture,” according to Hager, the transformation
is continuing. Such a change was much more involved than
Hager envisioned when he first proposed it. But it also set the
tone for the next transformation for the company, which he
also expects to lead.
Hager Group will soon develop its 2020 strategy, termed
1982Industrialization of the first residual current circuit breaker.
1988Begins manufacturing 6 and 10kA MBCs.
1991ISO 9001 certification.
TIMELINE CONTINUED
“DANIEL AND THE TOP LEADERSHIP ALSO TOOK ON REINVENTING THEMSELVES AS LEADERS IN ORDER TO BE EFFECTIVE IN EXECUTING ON THE NEW MODEL.”
— MARIE-CAROLINE CHAUVET, INSIGNIAM PARTNER
FALL 2014 INSIGNIAM QUARTERLY 13
Project 2020, which will focus on expansions beyond Eu-
rope to become a truly global organization, as well as further
growth into the servicing of residential, commercial, and in-
dustrial building systems.
Hager also expects to further refine the company’s focus
to be solutions-driven, with different systems controlled on
a common platform — such as through mobile technologies
— and he seeks to position Hager Group in the thick of the
B2B portion of that market. And he’s prepped and ready to
meet a few more dragons along the way.
FROM THE INITIAL GROUP OF 10, HAGER DEVELOPED A LEADERSHIP COMMITTEE OF 30 TO DRIVE THE TRANSFORMATION AND THE DIRECTION OF THE BRANDS.
1997Launch of the Quadro series.
2004Acquisition of Atral in France.
2006Hager develops a transformational strategy, one focused on branding.
2008Hager begins implementing its transformational branding strategy.
THE BOARDROOM
Your board of directors can facilitate and advance transformational change, or hinder it. Just like a well-meaning
chef who’s heavy handed with the salt shaker, sometimes
an attempt to guide change actually results in bitter failure.
So how do you ensure your attempts will result in success?
It begins with avoiding common pitfalls.
According to Gallup’s Business Journal, more
than 70 percent of change initiatives fail.
From resistance to change and dependence
on legacy systems to a lack of executive
consensus and unrealistic expectations, all
are regularly cited as hallmarks of failure.
If there was a secret recipe to board
involvement, it would be the oft-repeated
“nose in, fingers out” philosophy. Using the
recipe analogy, Cynthia Pharr Lee says, “The
board would be involved in selecting the menu and approving
the recipe, but certainly not measuring out the ingredients.”
Lee is president of C.Pharr & Co. and is an independent board
director at several companies. This includes the 15 years she spent
on the board of CEC Entertainment, Inc., the company that
Too many cooks in the kitchen can sour your transformation initiatives. So what’s the perfectrecipe for board involvement?
BY STACEY CLOSSER
IS YOUR BOARD THE MASTER CHEF BEHIND TRANSFORMATION?
FALL 201414 INSIGNIAM QUARTERLY
FALL 2014 INSIGNIAM QUARTERLY 15
operates and franchises Chuck E. Cheese’s restaurants.
It’s the difference between being a hands-on operator and a
strategic business advisor, she says.
“Management runs the company. The board does not,”
says Greg Pratt, chairman of Carpenter Technology Corp., an
international iron and steel developer with $3 billion in total
assets. It can be tempting when things are going haywire to
overstep the board function, so it’s imperative to keep that role
top-of-mind. “You have two duties,” says Pratt. “A duty of loyalty
and a duty of care. As a fiduciary, your role is very different than
your role as manager.”
CHOOSE THE BEST INGREDIENTS
The first step to being a positive, contributing influence
during times of organizational change happens long before the
strategy sessions; it happens when each member of
the board is selected. Just as it is with any secret sauce,
the better the ingredients, the better the outcome.
“After integrity, strategic judgment is probably the
most important characteristic for a board member,”
says Lee. “It helps to have lines of business experience
and it certainly helps to have diversity in experience in
the boardroom, but the value of good judgment can’t
be overstated.”
The trait Martin Coyne likes to see most on a board:
experience in successful change management. These
are board members who possess the fortitude to
work the plan, to support the management team
through unforeseen obstacles, and to adapt when
circumstances dictate. “The road to change is
bumpy,” says Coyne, who serves on the board of
directors for Akamai Technologies, which posted a
2013 annual revenue of $1.58 billion, up 18 percent
year-over-year. “If it was smooth, it would be easy.”
Coyne recounts a time when a CEO attempted to
drive change even as key people in the organization
weren’t buying into it. “When you waver on the
commitment of ‘Here’s where I want to go to and
why,’ and people detect that wavering, it’s incredibly
disruptive and can become dysfunctional,” he says.
Board members should possess excellent
communication skills, including the ability to ask
questions and the ability to listen to others on the
board. And continuous learning is a given: “Good
directors are constantly working and reading and
learning. If you’re not, you fall behind so quick
you’re like a dinosaur,” says Coyne.
RESEARCH AND ASK QUESTIONS
Much of the board’s role revolves around information
gathering — asking the right questions in a way that promotes
collaboration and provides oversight to management, as well as
researching industry trends and possible risks.
For example, when it comes to an acquisition, “Hopefully
the CEO has the most knowledge of the transaction,” says
Tony LeVecchio, who serves on the board of directors for
ViewPoint Financial Group, which is listed on The NASDAQ
Global Select Market, and is chairman of its Audit Committee.
But LeVecchio is quick to point out: “No one person can or
should decide everything.”
The CEO and management team can be expected
to understand the market dynamics, competitor threats,
and organizational strengths and
weaknesses. The executive team is also
responsible for creating the strategy.
In years past, the “imperial CEO”
would give a strategy presentation and
the board would give the thumbs-up.
That process has given way to a more
collaborative relationship. Today’s well-
constructed board uses its broad range
of experience to evaluate the strategy
Cynthia Pharr Lee, president of C. Pharr & Co. and formerly an independent board director at CEC Entertainment, Inc., the company that operates and franchises Chuck E. Cheese’s, notes that a company’s board is most effective when a “nose in, fingers out” approach is utilized.
FALL 201416 INSIGNIAM QUARTERLY
THE BOARDROOM
and guide management through the process of due diligence.
“A good board will discuss and debate the amount of risk
in the strategy — the risk of executing on the strategy and the
risk of not executing on it,” says Coyne.
CREATE METRICS FOR SUCCESS
The board’s role, with management, is also to determine the
key performance indicators (KPIs) for the change initiative and
then hold fast to them. Those indicators might include revenue,
but not always.
“I operate in a manufacturing company, and I believe there’s
a direct correlation between your safety record and how you are
managing change,” says Pratt. “It gives us a window into what’s
going on in the company.”
As an executive and as a board member, Coyne prefers to hear
about hard numbers versus descriptive adjectives. For example,
the statement, “Sales are going great” is not as useful as, “Sales
are up 23 percent.” Concrete, measurable metrics are valuable
in denoting important milestones and raising red flags. “If you
don’t have a clear path on how you’re going to measure the
progress, you leave yourself open for failure,” says Coyne.
BE PREPARED TO RESPOND, INNOVATE
Well-informed directors are assets to the organization,
especially when change quickly comes from outside sources.
As recently as five to 10 years ago, boards would meet annually
to discuss strategy at focused retreats. “In a world changing as fast
as it is now, you have to have continuous strategy discussions at
every meeting,” advises Coyne. It might be a competitive review,
an assessment of the business model, or hosting an industry
expert guest speaker.
Companies attributed with revolutionizing an industry are
often labeled as disruptive. Coyne sees it another way: These
“IN A WORLD CHANGING AS FAST AS IT IS NOW, YOU HAVE TO HAVE CONTINUOUS STRATEGY DISCUSSIONS AT EVERY MEETING.” — MARTIN COYNE, BOARD OF DIRECTORS, AKAMAI TECHNOLOGIES
FALL 2014 INSIGNIAM QUARTERLY 17
companies begin not by trying to disrupt the marketplace,
but by attempting to improve their offering (faster, cheaper,
better) through continuous innovation. “If you do that long
enough, it becomes disruptive,” he says. “It’s an evolution versus
a revolution.”
ACCEPT THAT FAILURE IS
A (VERY REAL) POSSIBILITY
Change initiatives’ high failure rate doesn’t surprise or even
scare experienced board members, many of whom would guess
the number is even higher than 70 percent at times.
LeVecchio has learned successful due diligence requires
establishing a thorough process and parlaying that with prior
experience. “But when you find out you’ve missed something,
you just have to deal with it and move forward,” he says.
Or as Coyne says, “Learn fast from failures.”
Boards get in trouble when they spend too much time doing
deep dives on performance, says Pratt. You won’t find where
you’re going using the rearview mirror.
“However good your plan is, when you get on the field, your
plan changes,” he says. “You need to be in a position to respond
to that change.” For example, when Pratt’s board decided to
split the role of chairman and CEO, the CEO chose to leave
instead of accepting what he perceived as a reduced role. The
board acted quickly and named Pratt interim CEO while they
searched for a replacement. The process expanded the board’s
aperture, giving it wider access to senior management and vice
versa. “It worked out splendidly,” Pratt says. What began as an
unplanned executive departure turned into an opportunity for
improved internal communication.
There will be times when a third party is needed to resolve
internal conflict, either within the board itself or between the
board and the management team. Pratt recommends using
outisde firms that can provide direction, competitive analysis,
and other fact-based research. “Everybody is entitled to their
own opinion, but there is only one set of facts,” says Pratt.
THE TAKE AWAY
Members on boards of directors have a choice: Be a catalyst for
transformation or be an impediment. Successful transformation
— regardless of the overarching goal — requires boards to
strategize, ask questions, commit to a plan, and prepare to change
course at any moment. And, of course, go easy on the salt.
TRANSFORMATIONAL STATS
70%of change
intiatives fail
71%of executives are only “somewhat
prepared” to generate the
needed level of innovation
42%of leaders are frustrated with their employees
47%of executives blame culture as the biggest roadblock to innovation
* TRANSFORMATIONAL STATS TAKEN FROM INSIGNIAM’S EXECUTIVE SENTIMENT SURVEY
FALL 201418 INSIGNIAM QUARTERLY
While most perceive global outsourcing as an increasingly popular cost-cutting tactic — with Plunkett
Research, Ltd., estimating the industry at $507 billion in
2014 — the savvy business manager recognizes it as much
more; nothing short of a powerful growth strategy. By taking
the long view with a social conscience, outsourcing need not
result in the all too familiar “blood on the floor,” which can
mean a long-term loss of a company’s muscle strength. Rather,
a much stronger business case can be made for outsourcing
as a strategic tool to free up and elevate the capability and
performance of existing resources, all while achieving targeted
cost savings. Indeed, this is the stuff of business transformation,
which only happens when employees see what the future
holds with new eyes, approach it without fear, and take charge
of their destiny to intentionally
build this new future.
Of course, this approach, coined
Socially Responsible Outsourcing
(SRO), is of a higher order and is
easier said than done. Why? First,
outsourcing as a cost-savings
initiative occurs as incompatible
with social responsibility or
“investing in people.” And, second,
executives may perceive SRO as
complex, requiring them to rethink their approach every
time the market changes.
THE OUTSOURCING LANDSCAPE
Plunkett estimates that today’s highest areas for outsourcing,
defined as the hiring of an outside company to perform a task
otherwise performed internally, include: 1) logistics, sourcing,
and distribution services; 2) information technology services,
including the creation of software and the management of
computer centers; and 3) Business Process Outsourcing (BPO)
areas such as call centers, financial transaction processing, and
human resource management. However, these traditionally
“non-core” functions are really just a starting place as
outsourcing companies themselves become more sophisticated
IS YOUR OUTSOURCING SOCIALLY RESPONSIBLE?
BY ELISABETH GEGNER, INSIGNIAM CONSULTANT
Outsourcing need not result in the all too familiar “blood on the floor,” which can often impact a company’s strength over the long-term.
FALL 2014 INSIGNIAM QUARTERLY 19
in their capabilities. Expect Knowledge Process
Outsourcing (KPO) to become commonplace,
with outsourced workers performing business
tasks that require judgment and analysis.
Examples including patent research, legal research,
architecture, design, engineering, website design,
market research, scientific research, accounting and tax return
preparation are potential tasks that already are going offshore.
One driver for KPO could well be the emergence of a new
level of automated systems such as forms classification and
data capture. As these systems get better, DATAMARK, Inc.,
predicts that they will displace outsourced staff who are currently
performing dull, low-skill repetitive tasks like healthcare coding,
which is going through dramatic changes in the U.S. due to
adoption of ICD-10 standards. This sets the stage for a new level
of outsourcing workers with more sophisticated skills.
However, DATAMARK predicts that the transition is still
approximately two years away, due in large part to a lack of
industry standards and a reluctance on the part of companies
to adopt the new technologies. More use of mobile apps for
business functions also is likely, along with a range of new
cloud services. Look for Business Process as a Service (BPaaS)
applications beginning to crop up on a consumption or
subscription basis.
Offshore choices for outsourcing are also expanding.
While China and India have bolstered
their economies significantly thanks to
outsourcing opportunities that have created
tens of millions of jobs, it deserves mention
that they no longer are the only game in town.
As labor costs and infrastructure issues plague
China and India, companies are looking to the Philippines,
Malaysia, and Indonesia, which Plunkett says were among the
most promising Southeast Asian outsourcing destinations in
2013. Near-shoring and re-shoring also are growing trends.
Examples include the U.K. outsourcing to Eastern Europe, or
a U.S. or Canadian company outsourcing to Mexico or Latin
America. The obvious reason is that outsourcing can be very
difficult to control, with companies finding management issues
less challenging when the companies are closer to home.
TAKING CARE OF YOUR OWN
These trends are still no substitute for the institutional
knowledge and dedication of an existing workforce — any
company’s most valuable asset. One example of effectively
leveraging the advantages of outsourcing while preserving
internal talent can be found in an early effort at SAP, the
Germany-based information technology giant. In the early
2000s, under the leadership of Carol Wilson, then-chief
information officer and current senior vice president for
EARLY EFFORTS AT
SAP (ABOVE) WERE
JUST ONE EXAMPLE
OF EFFECTIVE
OUTSOURCING.
FALL 201420 INSIGNIAM QUARTERLY
work place services at T-Systems, SAP sought to reinvent its
internal IT department, realigning employees who spent most
of their time maintaining operations to more strategic roles.
Because SAP had never outsourced to an offshore consultancy
company, this was a controversial departure from the norm. The
business case behind the initiative was threefold: 1) lower costs
by reallocating work often performed by external consultants
to SAP resources; 2) achieve the benefits of more standardized
processes; and 3) elevate the level of value
and services provided to SAP IT customers.
The first order of business was to define
the new direction through scenario
simulation and then broadly communicate
this new future across the organization,
as well as to key stakeholders, including
unions and the press. Because outsourcing
had gotten a bad name, especially in the
German media, allaying fears was perhaps
the most challenging hurdle to overcome.
In this sense, inspiring people to actively
participate in the transformation and
perform at a higher level was crucial. This
was accomplished by focusing on two key
points: 1) Employees were encouraged to
choose their future by going through an
orientation and development process to
take on new roles; and, 2) The success of
the project rested on employees’ thoroughly transferring critical
knowledge to other SAP colleagues and to the third party taking
over their tasks. This required a fundamental shift in a culture
that valued and rewarded resident expertise and was imperative
to delivering on all three elements of the business case.
In an unprecedented move to gain trust, one non-negotiable
item was no layoffs. “The risk of this mandate proved small,”
Wilson recalls, because “the business case was good to develop
our own people. Most had multiple years of experience on the
lower end of the IT food chain and had a propensity to learn. It
was better to pull people up the learning curve, versus spending
a fortune with independent consultants to fill the gaps.”
Quelling and ultimately eliminating employees’ fear also
required answering a very fundamental question: “What
is going to happen to me?” To provide an adequate answer,
SAP identified core roles based on the re-defined vision, and
then actively engaged employees and
their supervisors in assessing aspirations,
strengths, weaknesses, and overall fit for
the new opportunities. Driving the overall
effort were the 4Rs (Right people with
the Right skills, in the Right place and
with the Right partner), guided by
principles of fairness, transparency, and
the promise of a better future.
Rather than “assessment,” the
process was coined “Orientation and
Development,” and, as such, provided
ongoing coaching, training, and career
development support. “This helped
employees determine the next steps of
their career and see where they compared
to the open market,” Wilson explains.
Ultimately, the onus was on employees to
choose new roles, with SAP suspending its
standard performance evaluation process for two years to allow
time to become proficient.
One area that pollinated a number of new opportunities was
SAP’s newly created project management office. Led at the time
by Mark Hutchins, who is now with TCS, a multinational IT
service company headquartered in India — one of SAP’s original
partners — it helped delineate between roles that maintained
operations (non-core) versus ever-changing service projects
SAP IDENTIFIED CORE ROLES BASED ON THE RE-DEFINED VISION, AND THEN ACTIVELY ENGAGED EMPLOYEES AND THEIR SUPERVISORS IN ASSESSING ASPIRATIONS, STRENGTHS, WEAKNESSES, AND OVERALL FIT FOR THE NEW OPPORTUNITIES.
FALL 2014 INSIGNIAM QUARTERLY 21
(core). “It was through the core projects,” says
Hutchins, “that we were able to build career
paths to support the organizational change.”
Facilitating this shift were SAP managers,
whose role was to coach employees through
the process while ensuring that the transition
to the overseas resources progressed smoothly.
Involving the managers was key, as lack of
cooperation from middle management is one
of the largest contributors to failed change.
This approach made them partners with
the responsibility for success placed on their
shoulders. Ultimately, middle managers were
the “superheroes.”
Armin Kaltenmeier, today SAP global vice
president of corporate audit, was one such
manager in the hot seat. Reflecting back, he
says, “We communicated it to employees as
an extended workbench and asked them not
to look at the overseas resource as an outsider
but as part of the team. As an organization we
were still responsible for delivering great work;
we just needed to be smart and more efficient
about how we did it.”
However, training the outsourcing resources
proved to be a grueling “painful exercise,”
Kaltenmeier recalls, requiring considerable
patience, particularly at the beginning. “The
outsourcing companies were experiencing
a lot of turnover at the time and we were
constantly retraining new resources. At some
point we established a core team that could
train its new team members, but it was only
after six to 12 months that we were able
to harvest the fruits and see results.” Again,
fundamental to this was setting the right
context so that the “experts” were willing to
freely share their knowledge.
On a personal level, Kaltenmeier adds
that it was difficult letting go of existing
responsibilities, no matter how much business
sense this made. “Along with being good
for the company, we had to convince our
employees that ‘this is good for you. You’ll be
learning and growing,’ which turned out to
be very positive,” setting an example for other
departments to emulate.
To understand what the employees he
managed were going through, Kaltenmeier
willingly participated in the assessment process
alongside them, a decision he says benefitted
him greatly. “What I found was that I was
strong in leading and managing teams. I
also was strong at setting vision and leading
people to follow the vision. It personally gave
me confidence and helped me see where my
career could go.”
FINDING A BALANCE
Ultimately, as companies go about
the business of outsourcing in a socially
responsible way, Wilson challenges others
to find the strategic balance between being
fair and improving the bottom line. “In
many ways SAP was a luxurious situation,”
she recalls, “We really were quite generous
to the employees. It was the first time SAP
had done outsourcing and it was their first
time to use a partner in India, so we were
not under a lot of pressure and we were able
to budget enough money to do it right. Still,
she says, “there are ways to manage, even
without access to the extraordinary funding
that we had.” What any organization can
always do is “give people a choice, coach
them, and help them grow,” as part of the
process. Since leaving SAP, she says she
has seen the process work at a number of
other companies, including Microsoft and
PriceWaterhouse Coopers.
On a broader level, being socially
responsible when outsourcing also helps
to protect and preserve culture. With
the growing trend toward specialization,
Hutchins cautions companies to think
twice about outsourcing the majority of
entry level jobs. “It’s a moral dilemma,” he
explains. “If you eliminate the entry level
people who have traditionally worked their
way up, what happens to your culture? The
specialists don’t know you like your own
people do.”
Successfully managing people and performance aspects of outsourcing depends on:
1 Positive branding and buzz around the transformation from the beginning through quick wins, structured communication, and early enrollment of key stakeholders
2 Collaboration and partnership with key constituencies, including unions
3 A smooth transition of the retained organization
4 Retention of high performers needed in the new structure
5 A “high performance organization structure” aligned to the future vision and strategy
6 A transparent, fair, and reliable selection process, resulting in the right people with the right skills in the right place
7 Quick and effective knowledge transfer to the third party
8 A short performance ramp up for the “new” organizations: both retained and outsourced
9 Managers actively leading the transformation, rather than falling victim
q Alignment and strengthening of leaders and talent management processes to support continuous performance improvement
TOP 10 BENEFITS FROM SOCIALLY RESPONSIBLE OUTSOURCING
FALL 201422 INSIGNIAM QUARTERLY
Author of Change Masters: Innovation and Entrepreneurship in the American Corporation, Rosabeth Moss Kanter knows what it takes to navigate successful transformation. Do you?
WRITING THE BOOK ON TRANSFORMATIONAL CHANGE
BY GEOFF WILLIAMS
FALL 2014 INSIGNIAM QUARTERLY 23
Every company and industry goes through transformational change, if for no other reason than society and
industries are always changing. Nothing ever stays the same. But
companies should want to go through transformation changes
on purpose and on their own terms — rather than having it
thrust upon them.
If that seems rather obvious, that may be in part due to
Rosabeth Moss Kanter’s book Change Masters: Innovation and
Entrepreneurship in the American Corporation, a business classic
about how corporations can successfully and dramatically
evolve. It hit bookshelves in 1983 to great acclaim and was
named by the Financial Times as one of the most influential
business books of the 20th century. In the 21st century, Kanter
has been no less influential. She holds an endowed chair, the
Ernest L. Arbuckle Professorship, at Harvard Business School,
specializing in teaching strategy, innovation, and leadership for
change. Kanter, who has 23 honorary degrees from colleges
and universities, has been named to numerous lists, such as the
Times of London’s “50 Most Powerful Women in the World.” Her
last book, SuperCorp: How Vanguard Companies Create Innovation,
Profits, Growth, and Social Good was named one of the best 10
books in 2009 by Amazon.com.
FALL 201424 INSIGNIAM QUARTERLY
In other words, any conversation about transformation should
begin by talking with Kanter. She can’t offer any CEO a recipe
for transformational change. Nobody can; like snowflakes and
fingerprints, every company’s challenges are different. But
when it comes to going through a transformational change
successfully, Kanter says that there
are some characteristics that every
successful organization shares.
A WILLINGNESS TO LET GO OF
WHAT BROUGHT SUCCESS
You shouldn’t reinvent yourself
just for the sake of it, and a dramatic
transformation needn’t mean your
company stops doing what it’s always
done best. As Kanter observes, “Delta
went through a transformational
change, but they’re still an airline.”
“One of the dilemmas of trying to
transform a company is that you need
to have top management who really
believes that you have a model for the future,” Kanter says. “And
that can be challenging because the old model may still have
merit. So you have to be willing to let go of your legacy in order
to try something new, or to think about what aspects of the
legacy business are worth preserving for the future.”
The shareholders sometimes will stand in the way as well,
Kanter adds. “You can’t cut your way to growth. You have to
invest your way to growth. But if you aren’t doing well financially,
sometimes investors won’t let you invest.”
A CULTURE THAT EMBRACES INNOVATION
Kanter cites what she calls the innovation pyramid as being
the best strategy for executives who want their company to
explore and discover new business frontiers.
“At the top of the pyramid, you have a few big bets, and
you invest really big in those bets,” she says. “So if you’re in
manufacturing, you might focus on related area services. At the
middle of the pyramid portfolio, you’re funding promising new
ventures, but you really don’t know yet whether they’ll pay off.
And at the bottom of the base, you put a little funding into a
lot of ideas, including improving existing products and services.
And you might borrow a portfolio strategy in the same way an
investor does. If you’re a giant company in the Fortune 100 or
200, you might have 60 or 70 experimental projects, where you
expect 10 percent to pay off in a big way, 10 percent to fail, and
the others will wind up somewhere in the middle.”
“If you’re a smaller company,” she adds,
“maybe you have a dozen projects.”
Kanter says that the innovation pyramid
is designed as such to win the argument
that “you don’t get innovation without a
marketplace of ideas.”
She suggests that even companies
with visionary, transformational leaders
— think of the late Steve Jobs — would
benefit from this approach. “Even if you
have a genius at the top, he or she might
not always be right. You need employees
and customers to weigh in, and that’s why
the culture matters,” Kanter says.
Kanter cites Gillette, now owned by
Procter & Gamble, as a company that
mastered the innovation pyramid. For many years, the company
had focused on unveiling the latest and greatest in new razors,
but eventually management came to realize that those big
blockbuster products were always going to be spaced out —
YOU CAN’T JUST STARE OUT THE WINDOW AND BELIEVE YOU HAVE A SENSE OF WHAT’S GOING ON OUTSIDE — YOU HAVE TO INVITE THE OUTSIDE INTO YOUR OFFICES.
GILLETTE’S FUSION SHAVING SYSTEM CAME ABOUT FROM THE COMPANY’S DECISION TO INNOVATE ACROSS THE BOARD, MAKING THE COMPANY A MASTER AT UTILIZING THE INNOVATION PYRAMID.
FALL 2014 INSIGNIAM QUARTERLY 25
and that between their big product splashes, they could be trying
to gain market share with additional product offerings. So the
company began innovating across the board, and that’s how the
battery-powered (Gillette manufactures
Duracell batteries) Oral-B toothbrushes
and the five-blade, battery-powered
Fusion shaving system both came to be.
Gillette’s innovations, however, weren’t
limited to what they sold but how the
company operated, making improvements
in marketing, human resources technology,
and even in its legal department.
And, of course, it sounds like a lot of
common sense, but it can be difficult to
execute. “It’s easy to say that we’re going
to fund innovation, but you have to make
investment decisions today, and every
division is going to argue that you should
invest in them, and it’s not always clear
what you should invest in. And executives
can think they’re open and shoot down
every idea, and they can rightfully say that
it’s difficult to decide to bet on something
unknown and uncertain when you have
a clear business already. But when you
manage to transform your company
through new concepts that excite the
company and energize its people, you can
sometimes do great things.”
A COMPANY THAT REFLECTS THE OUTER WORLD
You can’t just stare out the window and believe you have
a sense of what’s going on outside — you have to invite the
outside into your offices. In other words, the people you meet in
the hallways and see at the cafeteria should look like the public
your company serves.
“The emphasis on having a diverse workforce and knowing
how to work with a diverse workforce is talked about, but not
enough,” Kanter says.
Kanter also sees a pressing need for corporations to attract
the millennial workforce.
“We give lip service to new
workplace models that are much more
flexible, but companies need to be able
to handle people who work part-time,
shared jobs because we’re going to lose
a lot of talent if we don’t,” Kanter says.
“Already, the millennial generation isn’t
interested in working for big companies.
They want to be entrepreneurs.”
Kanter adds: “There also isn’t
enough emphasis on how big and
small companies can work together. Big
companies can embrace the talent and
drive at smaller companies by investing
in them and learning from those small
companies, by helping them grow
and sometime by being partners. Big
companies want the connections from
the smaller, leaner companies, but they
don’t know how to work in a different
way because by definition, established
companies have routines and processes
and small startups don’t.”
It’s a symbiotic relationship, Kanter
suggests. Smaller companies benefit
from tapping into a bigger company’s
distribution network, and the bigger companies benefit from
being exposed to fresh ideas, Kanter says. And, regardless of size,
a business that needs to transform itself in a hurry needs to be
agile-thinking and nimble enough to act quickly.
Because as Kanter says, “It’s never totally clear when you have
to decide that you need to change. When it is totally clear, it’s
often too late.”
“ONE OF THE DILEMMAS OF TRYING TO TRANSFORM A COMPANY IS THAT YOU NEED TO HAVE TOP MANAGEMENT WHO REALLY BELIEVES THAT YOU HAVE A MODEL FOR THE FUTURE,” KANTER SAYS.
ROSABETH MOSS KANTER’S CHARACTERISTICS SHARED BY SUCCESSFUL ORGANIZATIONS
1 2 3A willingness to let go of what brought success
A culture that embraces innovation
A company that reflects the outer world
FALL 201426 INSIGNIAM QUARTERLY
DOES YOUR CULTURE FUEL YOUR STRATEGY — OR DOES IT
DEVOUR IT?The results of your business are a product of action — and culture decides the action in your company.BY SHIDEH SEDGH BINA
INSIGNIAM QUARTERLY 27FALL 2014
FALL 201428 INSIGNIAM QUARTERLY
The investigation doesn’t pinpoint a single cause of this failure. But it unequivocally
states that a dysfunctional corporate culture was a primary hurdle standing in the
way of GM’s expressed strategy of producing high-quality and reliable automobiles.
Over and over the report details a culture that prevented employees from raising
and addressing safety issues and prevented managers from taking responsibility.
The lack of accountability was so endemic that there was even an internal
language for it. “One witness described the GM phenomenon of avoiding
responsibility as the GM salute; a crossing of the arms and pointing outward
toward others, indicating the responsibility belongs to someone else, not me,”
write the investigators. To be clear, GM is just the most recent and high profile
demonstration that Drucker’s observation was accurate. There are plenty
of other equally distressing cases of
culture trumping strategy. Conversely,
a company culture that meshes and
strengthens strategy — so evident
at successful companies like Google,
Apple, and Under Armour — can yield
exceptional performance and innovation.
So how do you get a clear perspective
on exactly what your corporate culture
is and ensure that you have one that fuels
your strategy rather than devours it? And
just whose responsibility is it to create that
winning culture?
The first step toward shaping culture
in a positive and intentional way is to
understand what culture actually is and
how it operates. Music is an apt way to
think about culture and its pervasive
influence in a company. Like music at a
concert or a dinner party, or even in an
elevator, culture is in the background yet
very much influencing the actions we
take in the foreground.
It sets the tone, pace, and
tempo of our actions,
allowing for certain
things and prohibiting
others; some music
encourages toe tapping,
for instance, while other
tunes demand that you
get up and dance. In the
case of culture, each action
reinforces the “music”
and serves to make it
even louder and more
pervasive. And when you
consider that all corporate performance
and its results are a product of action, it
becomes immediately clear why culture
trumps strategy in driving corporate
performance. And if the culture, or music,
is not harmonious with the strategic
dance you want to encourage, it’s just
not going to work.
The good news is that you are not
stuck with the culture you have. In fact, in
our work supporting strategy realization,
Management guru Peter Drucker’s famous observation
that “culture eats strategy for breakfast” is as valid today as
ever. For proof, one only needs to read through the 300-plus-
page report that details the causes of the General Motors
ignition switch failures, a debacle that led to numerous
accidents and deaths and the recall of millions of automobiles.
M
FALL 2014 INSIGNIAM QUARTERLY 29
we often have to work with executives to catalyze a cultural transformation.
This is a task that, quite frankly, is best engineered by outsiders who can assess
it dispassionately and can see the different facets of the culture without having
been blinded by being part of it. And we have found that revealing the existing
culture goes a long way toward unhooking it. But in order to alter the culture,
you must first clearly see and understand your current culture.
We have pinpointed nine specific facets of corporate culture. You can use this
framework to discern — and if needed, begin to alter — the culture that arises
from the mass of human interactions that take place each day in your company.
LANGUAGE AND NETWORK OF CONVERSATIONS
One can argue that every aspect of work in an enterprise involves some kind
of conversation. So the content, structure, and distribution of the conversations
of an enterprise are its most potent mechanism for reinforcing culture.
Simply paying attention to how people in a company interact, what they
talk about, the language they use, and how their conversations are structured is
essential. This is a standard practice for us when we are asked to work on strategy
implementation or culture initiatives: We go in and interview employees to get
a clearer sense of the music they’re dancing to by paying attention to the content
and structure of their conversations. We worked with a company where one of
the important success factors for their new strategy was collaboration. Yet when
we met with senior executives, we heard repeatedly about email wars, which told
us plenty about a deeply ingrained, adversarial atmosphere of “gotcha” at the
company. And you can be sure that “gotcha” was going to trump collaboration.
The remaining eight facets are all found in the conversations people are
engaged in together and with customers and suppliers.
CUSTOMER ORIENTATION
Since all enterprises exist to serve the needs of some set of customers, how the
customer is viewed, served, and interacted with is another important window
into culture. One hospital system we worked with had set for itself the strategy
of becoming a national leader in patient service, satisfaction, and outcomes.
Despite this patient-first aspiration, when we interviewed hospital executives
and staff, nobody spoke about the patients without prompting. Yet they waxed
on and on about financial concerns. When we asked, we inevitably were told that
“of course” the patient was important. If your culture is truly patient-centered,
then the patient is not a background concern and the budget is not the main
topic of discussion.
Another window into customer orientation is to discern how the employees
are also viewed and treated. As one CEO said, describing the corrosive customer
service culture in his organization, “The top guy kicks the guy or gal in the next
level down, who kicks the guy or gal in the next level below, and this goes on
down to the last guy or gal in the employee chain, the one who deals with the
customer. And what does that guy or gal do? He or she kicks the customer.”
WHAT IS ACTUALLY VALUED
Values determine choices and effective performance requires the right choices.
The best way to find out what values are operational in your organization
is to listen to how leaders assess each
other. Note what is recognized and
complimented and what is looked down
upon. Ask people what it really takes to
succeed. At GM, safety was put forth
as a high-priority value and strategy.
Yet the investigators who dissected the
company’s culture found that what was
truly held in high regard was not doing
or saying anything to make the company
look bad. Looking at what people truly
hold to be important will tell you what
is framing their choices and is a far better
way to gauge culture than examining
values written on a poster.
ACCOUNTABILITY AND
RESPONSIBILITY
Accountability is being answerable for
providing or governing so as to meet the
conditions needed to bring about the
intended results. Without accountability
the organization drifts; with accountability
it is taken somewhere. And responsibility
is about dedication beyond your stated
job. Nevertheless, the actual connection
INVESTIGATORS IN THE GM IGNITION SWITCH FAILURES RECOUNTED THAT SUPERVISORS TOLD EMPLOYEES TO “NEVER PUT THE COMPANY AT RISK.”
between results and accountability, as well as responsibility, is often hazy or gets
lost in a sea of circumstances and excuses. We were once brought in to work
with a company for a breakthrough project that was $50 million behind a $500
million target. By way of getting to know the interviewee, we asked executives
to describe the jobs and the results for which they were accountable. One after
another, we heard answers that talked about a series of tasks. Not one person
other than the person who hired us talked about results. One of the senior
leadership executives even shrugged and said that in his role he had absolutely
no accountability for business results. How about that for a bird’s-eye view of
culture and its impact on performance?
TRADITIONS, RITUALS, HEROES, LEGENDS, AND ARTIFACTS
To better discern what is reinforced, make an effort to understand a company’s
status symbols and what gives people a sense of belonging and pride. We once
worked with a new CEO whose
company had long-term success in
the past, but was now struggling with
a protracted stretch of flat growth
and lower margins compared to their
competitors. The CEO believed one
way to kick-start competitiveness was
to create a thrifty corporate culture
and restore profitability. But what we
discovered was that a sign of being a successful executive at this particular company
was wearing a diamond-encrusted Rolex. How can you authentically drive a
culture of thrift while sitting in a room full of diamond-encrusted watches?
There are also legends or stories that are
repeated and referred to almost on a daily
or weekly basis. Often these stories have a
negative tone and can even be corrosive,
such as with one manufacturing company
we worked with. The business had been
struggling with quality issues, and when
we interviewed employees we repeatedly
heard about a wave of layoffs that had
occurred seven years earlier. The workers
who remained at the company identified
themselves as “survivors,” which created
a serious sense of disenfranchisement
between them and management that had
to be addressed before the culture could
begin to change.
LEADERSHIP DYNAMICS
We all know that the tone of an
enterprise is set at the top. How leadership
is viewed and overall leadership style
in a company is another significant
contributor to culture and the ability to
execute on strategy. For example, one
very successful bank we worked with was
intent on creating a culture of customer
CULTURE TRUMPS STRATEGY IN DRIVING CORPORATE PERFORMANCE
ALL OF THE AVENUES TO SUCCESS WITHIN AN ORGANIZATION ARE NOT SPELLED OUT IN THE EMPLOYEE HANDBOOK. RECOGNIZING THESE UNWRITTEN RULES — AND ALTERING THEM, IF NECESSARY — IS AN ESSENTIAL PART OF A CULTURAL TRANSFORMATION.
FALL 201430 INSIGNIAM QUARTERLY
service. As part of that effort, executives were required to spend several hours
each week listening in on customer calls and a certain chunk of time each month
actually answering calls. Every floor in the headquarters had glass-enclosed
“listening rooms” where management could be seen listening to customer calls.
Executives also served lunch to employees in the company cafeteria during the
holidays. All of these things reinforced that great service was essential to the
company’s core.
UNWRITTEN RULES FOR SUCCESS
As much as we’d like to think otherwise, all of the avenues to success within
an organization are not spelled out in the employee handbook. Recognizing
these unwritten rules — and altering them, if necessary — is an essential part
of a cultural transformation. Indeed, one company we assisted was a top three
performer in an industry, yet couldn’t catch its leading rivals. Part of the reason
was because there was an out-and-out adversarial relationship between the chief
merchandising officer and the chief store officer in this retail operation. Far from
being a results-driven meritocracy, everyone in the company knew that in order
to get promoted you had to align yourself with one of these executives and were
judged based on your loyalty to them. While everyone was busy navigating this
dynamic, the overall success of the company became secondary.
DECISION RIGHTS AND PROCESSES
One of the most powerful tools in setting a culture is who makes what
decisions, at what pace, and whom they have to consult to make those calls.
In successful service-oriented companies like Ritz-Carlton, each employee is
allowed to spend up to $2,000 per day to “delight” a customer or fix a problem
without consulting a manager. But in other companies, decision rights are
extremely limited. One global company we worked with had 45,000 employees
and instituted a rule that no contract involving more than $25,000 or travel over
$500 could be approved by anyone outside the C-Suite. It was an aspect of the
culture that made it very difficult for senior vice presidents and anyone lower
in the company hierarchy to feel independently accountable or responsible.
And managing these relatively minute amounts of money took up a significant
amount of the executive’s time, keeping them from being out in the field or
meeting customers. And most importantly, these actions reinforced the idea
that money saved was more important than taking care of customers — which
resulted in a stream of customers lost to competitors.
LEGACY
Every company has a story about the origins of the company, the visions of
the founders, or major successes and failures along the way. Spend more than a
day in any Johnson & Johnson Company and someone will bring up the J&J
Credo as a reference point for action. The credo is a clear-cut statement aimed at
generating an allegiance to the mission of serving patients, physicians, nurses, and
so on — and makes a point to list shareholders last in a long list of stakeholders.
And whilst the company has at times had breakdowns, the credo always serves
as a mechanism to get back on course, resulting in one of the most consistently
high-performing companies of all time.
FALL 2014 INSIGNIAM QUARTERLY 31
80PERCENTAGE OF EXECUTIVES RESPONDING TO THE 2014 INSIGNIAM EXECUTIVE SENTIMENT SURVEY SAID THEY “LOSE SLEEP” OVER PEOPLE ISSUES IN THE COMPANY THEY LEAD
Understanding the power of culture,
having accountability at the top for
the culture, and revealing the facets of
the current culture goes a long way in
managing and guiding the culture of your
enterprise. However, there is one more
critical dynamic, and that is aligning
strategy and culture with individual
transformation.
It requires executives and employees to
take ownership of their part in creating
that culture. All too often people discuss
culture as though it’s something that
has been imposed on them. We all play
a role in maintaining and reinforcing it.
Once that is understood, it is much easier
for people to begin acting in a way that
invents a culture everyone desires.
One thing we’ve learned over the
course of almost three decades of work
supporting executives in generating new
levels of performance is that amazing
things happen as this evolution unfolds.
Engaging employees and executives to
create a new culture quickly unshackles
everyone from the old way of doing things
and energizes them with a passion, purpose,
and potency for new achievements.
FALL 201432 INSIGNIAM QUARTERLY
At any company, corporate culture is your most
prized asset — it supports the strength and
viability of all your operational objectives.
OF EXECUTIVES LOSE SLEEP OVER PEOPLE-RELATED ISSUES
80%ACCORDING TO GALLUP, THE MAIN REASON PEOPLE STAY IN THEIR JOB ROLE: CULTURE
1ST
AMOUNT GM’S RECALL DEBACLE — A CULTURAL BREAKDOWN — HAS COST THE AUTOMAKER
$1.3 BILLION
NINE FACETS OF CORPORATE CULTURE
FALL 2014 INSIGNIAM QUARTERLY 33
LANGUAGE AND NETWORK OF CONVERSATIONS
CUSTOMER ORIENTATION
WHAT IS ACTUALLY VALUED
ACCOUNTABILITY & RESPONSIBILITY
TRADITIONS, RITUALS, HEROES, LEGENDS & ARTIFACTS
LEADERSHIP DYNAMICS
UNWRITTEN RULES FOR SUCCESS
DECISION RIGHTS AND PROCESSES
LEGACY
FALL 201434 INSIGNIAM QUARTERLY
According to Mary Kay CMO Sheryl Adkins-Green, powerful, lasting corporate transformations need not always stop traffic. Sometimes, understated transformations can yield ravishing results.
BY CHRIS WARREN WITH GORDON PRICE LOCKE
FALL 2014
It all could have ended very badly. A few years ago the local marketing team for Mary Kay Inc. in China came up with the idea for a promotion — a model search contest — that frankly didn’t dovetail neatly with the global brand strategy the cosmetics giant had developed at its corporate headquarters a world away in Dallas, Texas. Faced with the question of whether to
nix the idea altogether, Mary Kay’s chief marketing officer, Sheryl Adkins-Green, instead offered some guidance about how her Chinese colleagues could tweak their idea to be more synergistic with company-wide efforts, but otherwise gave her blessing. “We said we look forward to what you’re going to learn from this,” recalls Adkins-Green, who has been Mary Kay’s CMO for the past five years.
Mary Kay Inc. celebrates its 50th anniversary with the company’s largest ever pink Cadillac rally, 50 years to the day after the iconic beauty company was founded.
36 INSIGNIAM QUARTERLY
FALL 2014 INSIGNIAM QUARTERLY 37
The resulting program was such a
rousing success that the team behind
it was invited to the company’s global
marketing conference to share what they
learned – the contest has continued to
evolve, and Adkins-Green herself is now
a judge. More importantly, the hands-off
approach is symbolic of the philosophy
that has allowed this half-a-century-old
company to grow from founder Mary
Kay Ash’s single 500-square-foot Dallas
storefront into a global leader in the ultra-
competitive cosmetics industry. “I think
that is an example of knowing when,
where, and how to let go and leverage
local insight and the talent of the local
marketing team and look to that as
content that other markets are going to be able to leverage down the road,” says
Adkins-Green.
In other words, it’s about trusting and empowering people to drive the kind of
continual transformation companies need to flourish — both internationally and at
home. There is an abundance of evidence to demonstrate that this quintessentially
American brand has developed an enviably successful approach to the always complicated
and nettlesome goal of global expansion. Indeed, Mary Kay, which manufactures and
distributes over 600 cosmetic and beauty products, currently operates in 37 countries
and has a global network of over 3 million independent sales consultants.
China has long been a focus of attention, particularly areas of the country other
retailers might ignore. “Over the course of the last five to eight years, we’ve started
to look at what China will need in five years,” Mary Kay CEO David Holl told
Bloomberg News in 2011. “We’ve managed the transition, so it’s no longer all about
the U.S. …We don’t need a shopping mall to sell, so we can do extremely well in
[Chinese] cities where they don’t have all the infrastructure.”
It has been an effective strategy. At the start of this year, Forbes ranked Mary Kay
at number 163 on its list of the largest privately held companies, with estimated
FALL 201438 INSIGNIAM QUARTERLY
[Clockwise from top left] Independent sales force members organize and host Mary Kay Skin Care Parties — a critical component to the company’s business model; Scenes from the 2014 Mary Kay Seminar, an 18-day event in Dallas, which is estimated to have pumped $32.1 million into the local economy; Mary Kay’s corporate headquarters, located in Dallas; Mary Kay Foundation donates $25,000 to Hope’s Door, which is aimed at helping families affected by domestic violence; Purdue University Calumet wins the 2014 AAF National Student Advertising Competition for a campaign showcasing Mary Kay.
FALL 2014 INSIGNIAM QUARTERLY 39
revenues of around $3.5 billion annually.
Several independent analysts pegged
2013 as a marquee year for Mary Kay
— it’s estimated that the company
recorded a number of its highest grossing
months in history during the year — and
international sales play a central role in
its ongoing growth. In fact, over the past
decade, the portion of Mary Kay’s overall
revenue from international markets
spiked from 30 percent to 70 percent,
with countries like China, Russia and
Brazil growing in importance.
While Mary Kay has clearly found
a recipe that seems to work as well in
Shanghai and São Paulo as it does in St.
Louis and Seattle, Adkins-Green is the
first to say there’s nothing easy about
international success (see sidebar for
her tips on going global). Take China,
now the company’s largest market.
Everything about succeeding there
is a challenge, starting with the huge
geographic distance, which makes it
hard to train or even communicate in
real-time with colleagues. But even when
communication is not an issue, culture is.
“The challenge with China is not actually
because of cooperation, but culturally,
it’s probably the most different than the
U.S.,” Adkins-Green says.
A CULTURE OF QUIET,
EVERYDAY TRANSFORMATION
Although it’s just one small example,
the Chinese model search contest Mary
Kay pulled off is emblematic of the kind
of transformation and adaptation that is
required to win in new and challenging
markets — one that doesn’t necessarily
require seismic changes to strategy
and culture. Rather, while less splashy
and much less disruptive, Mary Kay
has established a culture that embraces
daily transformation — perhaps more
accurately described as evolution — that
nimbly adapts to the inevitable avalanche
of new opportunities and challenges.
TIPS ON PURSUING GLOBAL GROWTH
Expanding into global markets isn’t easy. Besides the obvious
challenge of different languages and cultures, there are legal
and regulatory hurdles to overcome. Is it worth the hassle? Well,
for Mary Kay, which first ventured internationally when it entered
the Australian market in 1971, the answer is a resounding “yes.”
Over the past 10 years, the company’s international revenues
have grown from 30 percent of total earnings to 70 percent.
As one of the executives who has helped guide that growth,
CMO Sheryl Adkins-Green has some suggestions about how
brands can successfully expand globally.
1 THINK LIKE MARCO POLO: When you have an
explorer’s mindset, she says, you are not judging
but you’re very open to learning.
2 GIVE YOUR EARS A WORKOUT: Engaging a
global team will determine your success. And they
have a lot to tell you about what works and what
doesn’t on a local level. Listen to them.
3 MAKE THOMAS EDISON PROUD: Or, for that
matter, make Mary Kay Ash proud. Ash once said
“we fail forward to our success,” which is an eloquent
way of saying that you won’t succeed if you don’t embrace
experimentation. Adkins-Green says she loves that she can go
back to those words and encourage her team that it’s OK to fail
when something hasn’t gone as planned. Although she has
a team of perfectionists, she often points out why a particular
action was taken, what was learned, and why it’s usable.
4 COLLABORATE: This doesn’t just mean
coordination and consensus building. Collaboration,
Adkins-Green says, relies on trust. To collaborate
means you let go and let your partners run with the ball. If the
CMO is the quarterback, you need to be comfortable handing
things off.
5 CELEBRATE: If you have success in your overseas
efforts, indulge in some well-deserved celebration.
It’s a way to keep good things going. Bring the
energy back to what got accomplished, what was fun along
the way, and the excitement of that accomplishment. It is that
energy that’s going to fuel the next round. That’s how you keep
momentum going.
FALL 201440 INSIGNIAM QUARTERLY
Adequately listening to and serving the
needs of millions of beauty consultants
located around the globe requires the
capacity to adapt and transform on a daily
basis. Still, while allowing for the sort of
fluidity and flexibility that is so essential in
order to have success in different markets,
there is a bedrock core to the Mary Kay
culture that provides important focus.
“We are all aligned around a common
mission of enriching women’s lives and
supporting the success of the sales force,”
says Adkins-Green. “By definition, we are
all on the same page.”
Which is not to say that the best way
to serve the sales force and, ultimately,
women customers is not a subject of
vigorous internal debate. “While we have
differences of opinion, it will never really
get to the point of being a struggle or an
argument,” she says. “When we do have
a difference of opinion, we talk in terms
of what is going to help the independent
beauty consultant be successful and that is
usually the tie-breaker if there is a debate.”
With customers and beauty consultants located across the globe, one of the most
difficult questions Adkins-Green has faced as CMO is how to settle on the right
messages to appeal to customers. “The toughest challenge when I took over
this responsibility was to really consolidate and combine our brand messaging
around the world because it means so many things to different people,” she
says. As a start, she examined the kind of adjectives people already used to
describe Mary Kay and found a mixture of positive and negative, old-fashioned
and innovative terms — it was a confusing mélange for some members of the
executive team, many of whom didn’t agree on what the brand stood for. So
Adkins-Green worked with a team to crystallize the essence of the brand and
develop a vision statement. “It’s aligned around three key components: irresistible
products, a rewarding opportunity, and positive community impact. So, with just seven words, we built a communication strategy
that not only resonated with the Mary Kay business around the world but, most importantly, with the independent sales force.”
DISTILLING THE MARY KAY MESSAGE
Mary Kay VP of Public Affairs, Anne Crews (right) with winners of the Unsung Heroes Awards — an anti-domestic violence task force — in Washington, D.C.
There are a host of reasons why Mary Kay eschews the typically painful culture
pivots that so many companies endure when they decide reinvention is a must.
Simply put, the company’s executives have never lost sight of the value of the
trusted relationships between the Mary Kay sales force and their customers.
“In the case of Mary Kay, the brand is the independent beauty consultant,”
says Adkins-Green. “The independent beauty consultant knows her customer
personally,” she says. “She’s going to see her next week at the PTA meeting, so
there’s an accountability and trust that comes out of that relationship.”
The CMO says it’s the executive team’s job to provide their salespeople with
whatever they need to excel — which, of course, makes sense because the
company’s business model is such that the individual success of a salesperson
translates to company success. The most obvious way Mary Kay helps its beauty
consultants is by developing and distributing a steady stream of high-quality
products while also handling the not insignificant regulatory requirements that
come from serving dozens of markets around the world.
FALL 2014 INSIGNIAM QUARTERLY 41
Like every large company, Mary Kay grapples with how to best
use technology to drive results. “As a brand that has always been
driven by word of mouth, the whole shift for digital and social media
to be the primary marketing channels is a huge opportunity for
Mary Kay,” says Adkins-Green.
“The independent beauty consultants websites are like a
personal makeup concierge,” Sara Friedman, Mary Kay Inc.’s vice
president of U.S. marketing, said in a press release announcing the
changes, which came as part of the company’s 50th anniversary
celebrations in 2013. “Once a woman goes to her personal Mary
Kay independent beauty consultant’s website or connects with
one through the help of the consultant locator, she can save her
favorite products, view application tips, get personal product
recommendations, and order products. Plus, she can always see
how the newest trend looks on her with our popular online virtual
makeover. The website makes running a Mary Kay business easier
and makes buying our products even more fun and convenient.”
TECHNICALLY BEAUTIFUL THE COLLABORATIVE NATURE
OF TRANSFORMATIONAL
LEADERSHIP
For her part, Adkins-Green feels
as though she landed at just the right
company to match her own personality,
skills, and leadership style. Before
arriving at Mary Kay in 2009, Adkins-
Green held senior marketing positions at
Alberto Culver, a leading beauty products
manufacturer whose brands include
Noxema and St. Ives, as well as Citibank
and Kraft Foods. As has been the case
in her previous jobs, Adkins-Green has
seen her role largely as a facilitator. “I’m
passionate about connecting ideas and
people and I think that’s always been my
strength,” she says.
While that talent has undoubtedly
played a central role in Adkins-Green’s
successful career, at Mary Kay the
ability to build and foster relationships
is particularly resonant — after all, that’s
how the company’s beauty consultants
have performed so exceptionally. Not
surprisingly, Adkins-Green estimates
that about 80 to 90 percent of her time
is spent engaging people at Mary Kay
and cultivating relationships — which
is far different from her job at Kraft, for
example, which included devoting plenty
of hours to product development.
It’s important to understand the
nature of all of this people-focused
effort. While it’s true that Adkins-Green
has an essential role in developing and
implementing branding and marketing
strategies, she also says that it’s her task to
influence and shape decisions rather than
outright dominate them. Part of that, she
says, means being an internal advocate.
“Part of my style is that I’m a cheerleader
for the brand and for marketing’s role in
the sales force’s success every day,” she
says. “So when it comes time to actually
advocate for a new initiative, I feel like I
already have some momentum before the
conversation even starts.”
Clearly, that’s not all there is to making sure that marketing efforts receive the
C-Suite attention and assistance they need. When she wants to push an important
initiative that she thinks is the “proverbial no-brainer,” she’ll often “come in and
hit it hard with an energetic pitch.” Then again, if something is potentially more
controversial and delicate, she’ll seek out input from as many people as possible
before she even puts together a recommendation. “It really does depend on the
initiative and where I think that stakeholder is, in terms their ability and readiness
to support,” she says.
But if Adkins-Green wants any confirmation that she made the right decision
in coming to Mary Kay, it comes each night at bedtime. What prevents slumber
aren’t challenges and headaches and deadlines, she says. “What keeps me up, with
all sincerity, is excitement about what we can do and what we will be doing,”
she says. And when does she sleep like a baby? “It’s when I have good feedback
from the sales force.”
FALL 201442 INSIGNIAM QUARTERLY
STOKING THE FIRES OF TRANSFORMATIONBY NATHAN OWEN ROSENBERG
Think change and transformation are the same? It’s time to transform your perception.
FALL 2014 INSIGNIAM QUARTERLY 43
FALL 201444 INSIGNIAM QUARTERLY
source of great stress, tension, and lots of sweat. I tried every
tip and technique to relax and make it easier — to change the
situation, but it never really improved.
One day, I was flying with a mustang lieutenant commander,
returning from a mission. “Okay, Nate, you’ve got it. Bring us in.”
I locked my eyes on the deck of the carrier — pitching,
slewing, and rolling — and could feel my grip on the stick
tighten automatically; sweat began rolling down my spine.
Starting down the glide path, I tried to keep up with the dancing
motion of the ship.
Jack Shioli’s voice came through my earphones, “Look at
the horizon.”
Every instructor with whom I had ever flown said, “Look
at the horizon.” I glanced up at the horizon to comply and
immediately bore-sighted right back to the deck of the ship.
“Dammit, Nate, look at the horizon.” Jack grabbed my helmet
and pulled my head up, so that I had to actually see the horizon.
I realized that, while the ship was moving all over the place, the
horizon was not moving. A moment later, we eased on the deck.
After that I never had a problem landing on the ship — a
transformation in my experience and ability, not just a change.
Change and transformation are not the same. Having said
that, if you read most management literature, visit the websites
of the big IT consulting firms, and listen to corporate executives,
you would conclude that transformation is simply big change. This
lack of distinction is costing companies and other organizations
significant opportunities for real competitive advantage and
organizational success. Different than what? Different than what
already is? Different than the past? Change, by its very nature, is
rooted in more than, different than, or better than what has been.
Change keeps us attached to the past in some way.
Apple’s dictionary defines change as “make or become
different.”
The same dictionary defines transformation as “(in physics)
the induced or spontaneous change of one element into another
by a nuclear process.” Think transubstantiation.
Transformation is putting the past where it belongs, in the
past, and not letting it determine the present or the future.
Looking at change in mathematical terms, you start with X,
which represents current circumstances, and then you change
x or ∆X. You end up with some function of X or ƒ(X). That
is change.
With transformation, you start with current circumstances,
represented by X and then, putting X into the past, you have ø
and end up with {…} — a space of possibility within which
you can create possibilities, a new something or, even, some
of X that is desirable. This is transformation. This work is
absolutely essential before an organization can transform. By
completing the past, you generate a space to create — not fix
or improve or upgrade. It is this space of creating from nothing
that distinguishes transformation from change. Without doing
this work, the best you can expect is good change.
Transformation is a powerful discipline for shifting what
people think is possible in a company and what is possible for
themselves. At its most fundamental level, transformation is
opening up a new possibility or a shift in one’s point of view.
In the ’70s, Werner Erhard, who Fortune called the father
of humanistic management, developed a method of personal
transformation with the highly popular “est” training. In this
training, people from all walks of life created new possibilities
for themselves and transformed their lives. A decade later, these
generating principles began to be widely applied in businesses
and other organizations and institutions.
As far as we know, the first intentional organizational
transformation of a large corporation occurred at Ford Motor
Company. In the midst of the onslaught of Japanese competition,
AS A YOUNG ENSIGN AND NAVAL AVIATOR, LANDING ON THE SHIP WAS A
FALL 2014 INSIGNIAM QUARTERLY 45
Don Peterson and Harold “Red” Poling, Ford’s CEO and COO,
realized that Henry Ford’s corporate culture was no longer a
source of the company’s success and was actually interfering
with the company’s ability to compete in a rapidly globalizing
marketplace. They wanted to replace the old culture, not merely
change it. Nobody knew how to do it but doing so was an
organizational imperative.
When we began working with the automaker in the early ’80s,
we interviewed executives, managers, and line employees. At
Ford, they talked about “The Job” and “Job One” as a shorthand
for an urgent priority. We asked a plant manager what Ford’s
number-one job was; he replied, “Getting cars out,” the answer
that we heard most often in one form or another. When Red
Poling was asked the same question, he replied emphatically,
“Quality is job one.” That one statement, the COO’s crystal-
clear stand, was transformative. The now famous ad slogan “At
Ford, Quality Is Job One” encapsulated the transformation that
fueled the company’s sluggish sales and degrading reputation,
leading to record profits.
Transformation occurs on three levels: individual,
organizational, and strategic. Sometimes, a transformation in
strategy requires an organizational transformation and then the
people in the company have their own personal transformation.
Sometimes, an organizational transformation opens up a strategic
transformation. Most often, a CEO sees new possibilities for the
company and leads the organization’s transformation.
How does a leader inspire, lead, and realize transformation
in her or his organization? Quite simply, by being transformed
him or herself.
Warren Bennis, who just passed away and who was the
godfather of leadership studies, points to a crucible experience as
a common thread that he discovered in hundreds of transformed
business leaders. He defines a crucible experience as a severe
test or trial that is intense, often traumatic, always unplanned,
and transformative. “Crucibles,” explained Bennis and his co-
author, “force leaders into deep self-reflection, where they
examine their values, question their assumptions, and hone
their judgment.”1 As a transformed individual, he or she is
not managing the organization based on the past; his or her
leadership is based on their commitment to a new future for
the organization that is discontinuous from its past.
As Tim Bailey, Executive Vice President, Global Product
Supply, Business Services & Technology, at S.C. Johnson & Son,
Inc. puts it, “If you start with possibility and work your way back
to the current circumstances, you always end up with something
bigger than if you start with the circumstances and try to figure
out what is possible.” Tim is a brilliant, transformational leader
who knows what it takes to cause a breakthrough, having led
and championed dozens of breakthrough projects that have
brought hundreds of thousands of dollars to the bottom line.
In the Winter 2013 issue of IQ, Werner H. Erhard and Michael
C. Jensen authored “The Four Ways of Being That Create the
Foundation for Great Leadership, A Great Organization & A
Great Personal Life.”
These foundations are central to a leader’s transformation
and ultimate success in transforming his or her organization.
How does an executive know that it is time to transform the
organization? The most common sign is that by doing what it
knows to do with a reasonable rate of improvement, the likely
results are not acceptable or satisfactory. Amazingly, the best time
to transform is on the shoulder of organizational success — just
when everyone else wants to reproduce and proceduralize the
source of that success.
Most companies are saddled with “that’s the way we get
things done around here” or “that’s the way things work around
here.” We call that ‘business as usual’ which sets up predictable
results that we call ‘the drift.’ These are proven ways of working
and operating that reduce risk and deliver expected results.
Performance improvement is tied to past performance. The best
that can be achieved is incremental improvement.
Breakthrough performance requires a transformation —
breaking out of the business as usual — inventing anew the
way the organization perceives what is possible and thinks and
acts. Transform any one element — perceiving, thinking, acting
— and you are on the road to transformation and breakthrough
performance.
1. Bennis, Warren G. and Thomas, Robert J., “Crucibles of Leadership,” Harvard Business Review, September 2002, pg 1.
Authors Werner H. Erhard and Michael C. Jensen describe the four foundations of being a great leader as such:
1 Being authentic
2 Being the cause in the matter of everything in your life
3 Being committed to something bigger than yourself
4 Being a person and an organization of integrity
FALL 201446 INSIGNIAM QUARTERLY
A plant manager at a large telecommunications firm told us,
“All of this quality stuff is just a waste of time. But, I’m going back
to the plant and acting like I believe in it because that is what
the company wants.” At the time, Total Quality Management
was relatively new and was transformational when done right.
He started acting in the way that his manager expected him to
and simply repeating what he heard in our work session. Four
months later, he was the company’s biggest proponent of total
quality next to the chief quality officer and the CEO. He saw
the impact of his new actions on his people and the results
that they were producing. This transformation in acting led
to a transformation in thinking and perception that began the
transformation of his plant and achieving a breakthrough in
performance: a 32 percent increase in quality and a 27 percent
decrease in cost in two years.
Transformation happens in a moment and, at the same time,
is a structured journey. The first step is facing reality, separating
fact from interpretation and assessment and peeling back the
long-held layers of belief and misperception that are inherent in
the corporate culture. As a part of this work, we interview and
survey a big sample of folks from every level and every function.
We listen for aspirations as well as likely barriers. We ask, “When
you need advice about something, to whom do you go?” and
“When you hear a rumor, with whom do you check it?” The
folks whose names are mentioned most often are invited to
serve with selected executives to lead the effort.
Next comes letting go of decisions about how it is and must
be and putting those in the past, creating a space to design a
future from possibility. This also requires confronting the future
that is predictable based on business as usual and the drift.
Starting with this blank sheet of paper, the executives work
together to create a bold, exciting, inspiring, and challenging
future for the company. We use the Merlin process, working
backwards from the future to the present, to identify what it will
take to make the future happen and to get the organization to
achieve a breakthrough. The executives then design a corporate
culture that will pull for success in that future, one that would
be a source of competitive advantage in the marketplace of
the future.
Then, we launch an intensive campaign to enroll everyone in
the organization. Both titled and informal leaders enroll people
throughout the organization to inspire and gain authentic
commitment.
When people are truly enrolled — having authentically
chosen to get on the bus traveling the transformation journey
— sustaining transformational momentum is relatively easy,
given executive courage and sustained commitment. There is
nothing more transformative than involving people in the work
to achieve transformation, so we get people to work on projects
that are critical to fulfilling the new future.
The projects are derived from a keystone project that was
designed and committed to by the executives. A keystone
project is a commitment to critical business results that are
achievable only in the new culture. The keystone
project team is led by the CEO and made up by
select executives and key informal leaders.
The first ground rule for the project teams is
to operate consistent with the new culture. A
cross-functional team works on the project, and,
as they progress, the process of transformation is
accelerated. This focus on performing work and
achieving results that seemed impossible in the old culture keeps
everyone’s eye on the prize.
Managers are equipped to educate employees about
the changes that are taking place, what’s different, what the
organization won’t be doing any longer, and what the company
will start doing differently. Every person in the company is
educated in how to operate in the new culture and is given the
opportunity to discover what aspect of the new future inspires
her or him. They have the opportunity to sign up for various
roles in the company’s transformation: project team leaders,
project team members, coaches, and trainers. The executive
team serves as the steering committee for transformation with
the CEO leading the entire effort.
Paradoxically, the biggest barrier to transformation is past
success. We all want to win. Once we have a formula for
winning, we hold on for dear life. When the formula for success
stops working, we tend to hold on even harder, do more of what
made us successful. This is true for executives and organizations.
They are like a survivor in the middle of the ocean holding onto
a deflated life preserver. As long as they hold onto the past, even
past successes, transformation is not possible. The point is not
to forget the past; the point is not to be dictated to by the past.
The second key barrier is senior executives’ need to look
good and be well thought of. Most senior executives operate
like they know more than anyone else in the room. The bad
ones operate like they are the smartest ones in the room. It is
a rare executive who openly admits mistakes and is willing to
FALL 201446 INSIGNIAM QUARTERLY
TRANSFORMATION HAPPENS IN A MOMENT AND, AT THE SAME TIME, IS A STRUCTURED JOURNEY.
FALL 2014 INSIGNIAM QUARTERLY 47
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INDIVIDUAL
STRATEGIC
ORGANIZATIONAL
THE THREE LEVELS OF TRANSFORMATION
FALL 2014 INSIGNIAM QUARTERLY 47
be accountable for failures. The myopia produced by success
and looking and sounding like you know it all precludes
transformation. Too many executives are unwilling to let go of
what has made them individually successful for the possibility
of greater organizational success. Putting the past in the past
and venturing into the unknown territory of a new, unproven
possibility involves a high risk of failure. In a transformed
organization, everyone is a beginner. Better to keep doing what
you are already doing to look good and appear smart.
The third barrier is closely related to the second: fear. Fear of
failure. Fear of the unknown. Fear of looking bad. Fear of loss
of approval. Fear of not being liked or not fitting in. There are
almost no facts known about the future. Indeed, the nature of the
future is that it is unknowable. What can be predicted is a kind of
security blanket for too many executives. Predictability has given
them confidence that they will succeed. Fear freezes them, stops
radical thinking and acting which in turn stifles the possibility of
transformation. In the middle of every transformation effort on
which Insigniam has worked, there is a moment of truth — the
valley of the shadow of death — in which the transformation
becomes risky and the executives want to go back to what
they know. If they do, this ends transformation, and the people
who are the organization are demoralized. When the executives
lead and choose to persist — despite contrary evidence —
breakthrough results start to build up.
If you can see opportunities that are outside the reach of your
organization, embrace transformation. Put the past in the past.
Create a space for possibility. Enroll others in the transformation.
These are the ingredients for stamping out the instrumentalism
of change and stoking the fires of transformation.
FALL 201448 INSIGNIAM QUARTERLY
INSIGNIAM’S 2014
EXECUTIVE SENTIMENT
SURVEYRESULTS FROM OUR ANNUAL SURVEY SHOW CULTURE
IS THE MOST CRITICAL FACTOR OF SUCCESSFUL TRANSFORMATIONS
FALL 2014 INSIGNIAM QUARTERLY 49
In1835, Samuel Slater — widely considered to be the father of the American
industrial revolution, as denoted by U.S. President Andrew
Jackson — published his memoir. Slater, a textile magnate,
wrote that “graduate and elevation of standing are founded
… on the industry and enterprise of the people.”
Amazingly, 179 years later, executives are still trying to
crack people and culture issues.
The latest snapshot of executive thinking and motivation,
captured in the 2014 Insigniam Sentiment Survey, captures
an environment beset by disruption; one that challenges
executive leaders to reconsider their strategies for achieving
organizational success and sharpen their focus on the
powerful impact of culture and alignment.
Our annual survey captures the thinking of Insigniam’s
extensive international network of major business
sectors including healthcare, pharmaceuticals, chemicals,
manufacturing, fast-moving consumer goods, energy, and
biotech industries.
Organizational culture and its influence on a company’s
ability to launch a major change initiative was a key
component of this year’s survey. Why this focus on culture?
When asked what aspect of their job caused them to lose
sleep, 80 percent respondents identified issues related to
people — culture, talent, accountability, and execution.
Surprisingly, only half of the executives surveyed said
that their company’s actual culture matches what the
company claims to have. Some executives said that even if
the actual culture matched the stated culture, it still needed
to be changed, regardless of current circumstances.
Perhaps the most shocking finding related to culture
was that many respondents said their organization’s culture
couldn’t help them realize their strategy because they had
no strategy in the first place.
Alignment between corporate culture and strategy
was another major theme highlighted in the survey.
Respondents recognized the cost of misalignment to
their organizations. Seven out of 10 who reported that
their company’s culture did not align with their strategy
said that their employees were more likely to have lower
engagement and suffer from lower morale, with one-
half believing that it would cause a drop in performance
and one in three saying it increased staff turnover and
contributed to a loss of talent.
Interestingly, those who felt their previous change
initiatives were not successful cited a lack of resources as a
perceived inhibitor. However, those who had led successful
transformations said an overreliance on resources was,
instead, a factor for failure.
So what actions need to be taken? In our forthcoming
report, coming late 2014, we’ll diagnose the breakdowns
and offer pathways for breakthroughs. Before it arrives,
take an advanced look at the data that unpins our findings.
CONTINUED
FALL 201450 INSIGNIAM QUARTERLY
CULTURE TRUMPS STRATEGY Results From Insigniam’s Executive Sentiment Survey Show Culture is The Most Critical Factor in Successful Transformation
$20 billion of leaders felt previous change initiatives were fully successful
50% of European and Asian executives said their company’s stated culture doesn’t match actual culture vs. 40% of American executives
93% of American executives believe proper alignment is critical for a successful change initiative vs. 50% of European executives who hold this belief
of executives from all geographies agree that efficiency and execution are
critical to success
of executives cited insufficient resources as a cause of a less than
successful change initiative
of executives don’t believe their company’s culture is the one it claims
or strives to have
Leaders of companies with revenue above $20B worry about culture twice as much as leaders of smaller firms.
29%
50% 40%
93% 50%
75% 44% 50%
Insigniam’s 2014 Executive Sentiment Survey captures a snapshot of what’s keeping global leaders awake at night and their thinking about their
organization’s culture and the importance of alignment with current strategies to ensure successful implementation of change initiatives.
FALL 2014 INSIGNIAM QUARTERLY 51
agreement on the benefit of having a culture that aligns with corporate
strategy
50% of European leaders have attempted a change initiative during the past two years vs. 75% of U.S. executives
of respondents reporting successful change initiatives cited communication
and transparency as crucial factors
of executives believe a misalignment between company culture and strategy
would cause a drop in performance
types of results
executives point to
from proper align-
ment: financial and
perfomance-based.
A heightened awareness of
culture is shown to influence success
Poor planning is repeatedly cited in unsuccessful
initiatives
The most critical factor for achieving
transformation? Alignment.
75%
100% 50% 71%
50%
Once executives were able to align corporate strategy and corporate culture
55%cited
increased focus and
direction for the company
55% reported better
results
58.4% believe there is increased collaboration
VStop2
When a company gets to be 83 years old, such as the tire manufacturing giant Bridgestone Corp. — with well
over $33 billion in annual revenue — it can get set in its ways.
And when a company has manufacturing, research, and
development operations in 25 countries, as is the case with
Bridgestone, problems such as poor internal communications
and cross-cultural misunderstandings can become roadblocks
to the company’s success.
Such was the state of affairs in June 2013, when Steve
Shelton was promoted to the newly created position of senior
vice president, Technology, Manufacturing and Procurement at
Bridgestone Americas Tire Operations.
Between 2010 and 2013, Shelton had run what is now
called the Bridgestone Americas Technical
Center for Research and Technology in
Akron, Ohio. The Center, a key research and
development shop for the company, simply
wasn’t on the same page as the Bridgestone
Americas headquarters it reported to in
Nashville, Tenn.
“The business side of the house didn’t
think we were responsive to their needs,” Shelton says.
“Geographically, we were in different places. As an R&D group,
we weren’t as responsive as we could have been,” says Shelton,
a 30-year veteran of the tire industry who has held 14 different
jobs at Bridgestone during his 21-year tenure with the company.
The “us vs. them” mentality that existed in the Akron facility
was apparent to outsiders as well.
“One of the things they were convinced of was that nobody
really understood their business. Nashville and Japan didn’t,” says
Bruce Zimmer, a partner and consultant at Insigniam, which
Bridgestone engaged in 2013 to help. “That perspective and
belief resulted in them not being proactive in critical areas.”
In fairness to the Akron folks, they simply had a tangled web
FALL 201452 INSIGNIAM QUARTERLY
PREVENTING CROSS-CULTURAL BURNOUT How Japanese tire manufacturer Bridgestone treaded cultural issues to gain market traction. BY JEFF BOUNDS
FALL 2014 INSIGNIAM QUARTERLY 53
of people to answer to and had been boxed into
focusing on execution, Zimmer says.
“They had a complexity of relationships to
manage, very often with conflicting messages
and priorities,” Zimmer says. Indeed, the
Americas unit of Bridgestone “needed an American identity,
rather than just a top-down structure from Japan.”
As de rigueur in Japanese companies, the American managers
and executives who were in place had been judged by their
ability to make the proverbial trains run on time and not on
dealing with the bigger picture.
“They had been trained in executing what had been given
to them, instead of thinking about what was needed for success
tomorrow,” Zimmer says.
HYDROPLANING INTO CULTURAL ISSUESIt’s easy enough for differences to arise between working
groups in different cities, such as in Akron and Nashville. It’s
even easier to have that happen in a company like Bridgestone,
whose global headquarters is half a world away in Tokyo.
A major reason why cross-cultural differences can arise in this
scenario is that Japanese society typically places
a greater emphasis on harmony and consensus
than does America, according to Dr. R. Ray
Gehani, an associate professor at the University
of Akron whose titles include Founding
Director of Graduate Programs in Technology Management
and Innovation.
“What I’ve found is that, cross-culturally speaking, the Japanese
are highly civilized and highly conforming,” says Gehani, who
has worked in that country and speaks fluent Japanese.
Most new college graduates in Japan “end up conforming to
either what their bosses say they want or what they think their
bosses want,” he adds.
While Japanese values such as harmony and consensus-
building work well on many fronts, they “can act as brakes to
radical innovation,” Gehani says.
Indeed, the ability to bring innovation and positive change in
a business is a big factor in determining which companies remain
at or near the top of the Fortune 500 list over time, according to
Dr. Derrick D’Souza, professor of management at the University
of North Texas, College of Business.
IT’S EASY ENOUGH FOR DIFFERENCES TO ARISE BETWEEN
WORKING GROUPS IN DIFFERENT U.S CITIES, LET ALONE IN TOKYO.
FALL 201454 INSIGNIAM QUARTERLY
Firms that fall out of the top slots of that
ranking can experience everything from inept
management and rigid cultures to organizational
complexities, D’Souza says. Winners like Wal-
Mart and ExxonMobil, on the other hand,
“change constantly,” he says.
“It’s the ability to change — and change in a way that allows
them to compete differently,” he says.
NAVIGATING THE CHICANES
When Shelton first took over the job of running the Akron
R&D facility in 2010, he not only had to deal with the cultural
dynamics and regional tensions he encountered, but also a series
of ancillary issues that needed solving.
One of the immediate issues was with Bridgestone’s
involvement with the Indy Racing League. The league, an
American-based sanctioning body for championship open-
wheel racing, at the time oversaw four racing series: the premier
IndyCar Series and three developmental series, including Indy
Lights, the Pro Mazda Championship, and the U.S. F2000
National Championship. “It was too expensive for the value
we were getting,” Shelton says. But keeping that relationship
was important to the company, the brand, and to the employees.
This management realignment came on the heels of an 18
percent staff reduction. That cost cutting, Shelton says, allowed
for the rescue of Bridgestone’s participation
in the Indy Racing League, and “that got us
credibility with the team in Akron,” he adds.
Shelton also realized that the gaps in
collaboration were aggravated by a lack
of understanding between colleagues of each manager’s
job function. To help stimulate greater adhesion within the
Bridgestone organization, Shelton rotated 70 percent of that
group to different roles.
“There’s nothing like walking in the shoes of another person’s
job,” he says.
To further develop his managers to acquire a broader
perspective, Shelton had Bridgestone participate in a program
called “Leadership Akron.” The initiative involved having a
Bridgestone employee visit six companies in the Northeast
Ohio area to see how things could be done differently, Shelton
says.
“With all of that, the executive team developed the view that
if we’d done such a good job with the R&D group, we could
roll the manufacturing and procurement arms together and get
synergies, and then take further steps,” Shelton says. “That’s the
purpose of what we’re doing now.”
GOING FOR ANOTHER LAPStill, there was a less than perfect harmony between the Akron
FOR BRIDGESTONE, PARTICIPATION IN THE INDY RACING LEAGUE
WAS IMPORTANT TO THE COMPANY, BRAND, AND EMPLOYEES.
FALL 2014 INSIGNIAM QUARTERLY 55
group, the manufacturing arm, and the procurement unit. So Shelton did what
he has done so many times before: He took a different job to get a new view.
“I became a procurement guy for four months,” he says. “I had no experience
in that. I wanted to see what we were doing.”
And, not surprisingly, he began making changes. For instance, Shelton began
buying forward commodities to take advantage of inexpensive prices. More
importantly, Shelton began making the procurement group more responsive
to the needs of the other Bridgestone units it served.
“We’d been getting a lot of complaints from our Latin American business
group about not helping them with their procurement,” Shelton says. After our
changes, “We pounded stuff for them in a fashion they’d never seen before. We
took those who had been our biggest detractors and made them our promoters.”
Finally, Shelton hired a top-notch procurement expert to take his place in
that group.
The end result: “We’ve made dramatic savings in procurement,” Shelton says.
On another front, Bridgestone officials from Akron began meeting with the
folks they worked with in Nashville.
“A lot of them got to see that embedded assumptions didn’t have anything
to do with the reality today,” Zimmer says. “They started to repair relationships
that, in the normal course of events, were damaged. And they started to take
responsibility for their role in the disconnect, rather than blaming the other
group.”
As a result, Akron and Nashville are getting along much better. “There’s now
an environment where things work a whole heck of a lot better and great things
are getting done,” Zimmer says.
THE NEXT MILEPresently, a significant focus for Shelton is on Bridgestone’s manufacturing.
“It’s world class,” he says. “But world class today probably isn’t good enough
for tomorrow.”
One of the broader Bridgestone goals is to reduce the time it takes to
make a tire — from compound to finished product — from 24 to 12 months,
according to Zimmer.
While that process is still underway, ratings firms like J.D. Power have
recognized Bridgestone quality in all four categories in which the company
competes.
Going forward, Bridgestone will become more focused on who the decision
maker is for buying its tires, be that for passenger cars, buses, or tractor-trailers,
Shelton says.
“We need to better understand what they want,” he says. “We want to be
the brand of choice for the decision makers, and our chief marketing officer
is doing a lot of work to ensure we’re defining what those parameters are.”
The tire business is competitive, which means Bridgestone lacks the luxury
of resting on its laurels. “We’re in the durable goods business,” Shelton says. “We
have to be sharp in everything we do.”
BRIDGESTONE FACTS
6,656 MILES SEPARATE THE HEADQUARTERS LOCATIONS
NUMBER OF COUNTRIES WHERE BRIDGESTONE
MAINTAINS MANUFACTURING, RESEARCH AND DEVELOPMENT
OPERATIONS
YEAR BRIDGESTONE WAS FOUNDED IN FUKUOKA, JAPAN
IN ANNUAL REVENUE
NASHVILLE
TOKYO
1931$33 BILLION
25
FALL 201456 INSIGNIAM QUARTERLY
Over the past five years, Faurecia has achieved a
great deal. It has doubled its size to reach € 18 billion in 2013
revenues and to become the sixth-largest maker of autoparts
in the world, according to Automotive News. The company,
headquartered in Nanterre, France, operates 320 production sites
and 30 research and development centers across the world.
Its customer list includes all the major automakers: Nissan,
the Volkswagen Group, Ford, General Motors, and others.
Coming out of the 2008-2009
economic downturn — at a time
when many companies were slow to
reinvest their resources due to lingering
concerns about market instability — the
French company’s leadership team took
a proactive stance, readily identifying
areas and processes that were ripe for
enhancement.
Doubling the number of employees
in just a few years had put a huge strain
on the management system. In addition, two major acquisitions
had brought different cultures into play, including the doubling
of the company’s size in North America.
As a consequence, the company had become increasingly
top-down and focused on its procedures and reporting. The
result was that local managers no longer felt accountable for
their performance and decisions had to be passed to the remote
headquarters in France.
TRANSFORMATION IN THE DRIVER’S SEAT
BY JEFF BOUNDS
For Faurecia — a world leader in auto parts manufacturing — revolutionizing results began by reengineering corporate culture.
FALL 2014 INSIGNIAM QUARTERLY 57
“We realized that we could experience a
fantastic return on investment if we explored
ways to empower our employees in a way that
didn’t feel like the top-down approach other
companies sometimes use, which we felt was
inefficient and too administrative,” says Patrick Koller, Executive
Vice President of the Automotive Seating Business Group.
TRANSFORMATION: BEING FAURECIA
At the beginning of 2014, Faurecia launched a new initiative
dubbed “Being Faurecia” aimed at transforming the company’s
management style to be one where employees take responsibility
both for the targets they are supposed to meet and the ways in
which they achieve them.
“We have decentralized our organization,” Koller says.
“We are trying to simplify and reduce the complexity of our
organization wherever possible, and make people autonomous
and accountable.”
Faurecia has two broad types of divisions, which Koller calls
“the key elements of our organization.” One
division type is regional, meaning managers
are in charge of large geographic territories,
such as North America, Europe, or China. The
other type of division centers on product lines,
albeit with global scope. “We make sure we produce products
to the same quality level in different locations,” says Koller,
who also notes that division managers are both accountable
and autonomous. Managers are given benchmark targets, and
then propose budgets of their own. “We want our managers to
behave as entrepreneurs,” he adds. They are responsible for the
company’s assets and for creating value. Be they managers of
plants, programs, or customer business units, these entrepreneurs
have benchmarks, and they work in concert with corporate
leadership to set their targets accordingly. Furthermore, given
Faurecia’s progressive culture, they have significant flexibility in
how to achieve them.
To help deploy the new culture, Faurecia has also nominated
“Being Faurecia Champions” in each division who essentially
FOR THE COMPANY TO KEEP ITS POSITION AND GROW, FAURECIA KNEW IT HAD TO CULTIVATE A NEW MANAGEMENT CULTURE.
FALL 201458 INSIGNIAM QUARTERLY
conduct themselves as role models.
“We make them visible so others can
understand how to behave and what’s
expected,” Koller says. To get all employees
on board, Faurecia managers and executives
spread the message about goals and
expectations.
“We elaborate with the team so it’s
their objective,” Koller says. “They accept
this objective in order to be recognized as
a performer in our organization.” To chart
progress, Faurecia utilizes score cards, which
maintain performance scores and the results
that each business unit is to achieve. “That’s
a very useful management tool,” Koller says.
REFINING ITS EDGE
Although the business launched the Being
Faurecia project recently, it has been working
for years to hone its innovative edge. Since
2006, it has launched three “think tanks” –
collectively called the global xWorks network
– in Germany, Shanghai, and Michigan, along
with an outpost in Palo Alto.
The think tanks’ purpose is to build
relationships with universities, research
centers, and other companies with which
Faurecia can cooperate on future products,
such as automotive seats.
“They fulfill a critical role, helping us to
understand consumer needs,” Koller says.
Through this network that the think tanks
are forging, Faurecia also has what are called
“technology scouts” whose job is to keep tabs
on products, services, and innovative thinking
from newcomers to the market. “We want to
explore ways these ideas could create value,”
Koller says.
THE CHALLENGE OF AN EVOLVING
CULTURE
Fewer things are tougher to change at a
large corporation than its culture, experts say.
“Culture change, by definition, is not for the
faint of heart,” says Larry Peters, professor of
Management & Leadership Development
in the Neeley School of Business at Texas
Christian University. “We’re not trying to
change one person at a time,” Peters adds.
“We’re trying to change all the people [in
FAURECIA ORGANIZED
THREE INTERNAL THINK TANKS
TO BUILD RELATIONSHIPS
WITH UNIVERSITIES, RESEARCH
CENTERS, AND OTHER COMPANIES
TO COOPERATE ON FUTURE
PRODUCTS, SUCH AS AUTOMOTIVE
SEATS
FALL 2014 INSIGNIAM QUARTERLY 59
the business] all the time.”
To succeed, any culture change initiative needs to involve
all level of leaders in the business — from executives to the
employee on the production line, says Bill Becker, a professor
at the Neeley School. “You need to get them to buy in, he says.
“Then, leaders should address and understand any concerns
their people may have. That’s when they’ll start to believe it.”
“This is the approach taken at Faurecia where the new culture
is being deployed in service of real business issues,” says Katerin
Le Folcavez, partner at Insigniam.
ACCELERATED RESULTS
All the work aimed at changing the business seems to be
paying off. Koller reports that by mobilizing the right resources
in areas like manufacturing and engineering, Faurecia was able
to put a new generation of seat mechanisms on the market
within four years. “Which is short,” he says. “We’re now
producing millions of units per year and the seat mechanism
is a key element in safety, so we can’t take any shortcuts.”
“What is also very encouraging is how much the teams at
the divisional level now own their targets,” says Le Folcavez.
“Prior to the new culture, we had gotten to the point where
someone in France was supposed to validate the recruitment
of a quality supervisor in Mexico, even if the situation was
urgent and within the budget of the plant, ” Koller says. Now,
local teams are responsible and the number of validations has
been slashed from seven to three.
The most notable thing about Faurecia’s overhaul,
according to Koller, is how the employees have reacted.
“What’s remarkable about this initiative, this cultural shift,
is the enthusiasm we’ve generated,” he says. “We’re telling
employees that they’re the creators. We’re telling them what
the expectations are, and it’s up to them to help transform
the company.”
That, in turn, has led to a big change in how management
and employees interact. “We’ve been able to improve
communication and give better direction to our employees,
which has resulted in more trust, greater empowerment, and
more autonomy to the people,” Koller says.
Koller also concedes that large-scale, strategic
transformations and more granular tactical changes can be
difficult for everyone involved. “A few years ago, we weren’t
prepared for this,” he says. “It took time to get the results to
where we wanted, to have a good chance to perform.”
But even now, he says, the evolution at Faurecia is alive
and organic.
“Will it be easy? Not every day. We have to deal with issues
related to this significant change,” he says. “But I’m optimistic.
People are dealing with this at the right level and with the
right understanding.”
CHANGE ISN’T EASY, BUT KOLLER SAYS HE’S VERY OPTIMISTIC. “PEOPLE ARE DEALING WITH THIS AT THE RIGHT LEVEL,” HE SAYS.
FALL 201460 INSIGNIAM QUARTERLY
FALL 2014 INSIGNIAM QUARTERLY 61
THE SKY’S THE
LIMIT FOR AT&T
BY JOE GUINTO
How a process of continual
transformation put the telecom giant at the forefront of cloud-based,
mobile technology solutions.
FALL 201462 INSIGNIAM QUARTERLY
But we do know that for more than 100 years, people have
been making a statement about New York City that, more or
less, goes like this: “New York will be a superb/great/wonderful
city when it is finished.”
When will that be? In New York today, construction cranes
still dot the landscape. No, it’s not finished. It never will be. But
the continual process of transformation is part of what makes
New York superb.
AT&T knows something about this kind of continual
transformation. The company’s history stretches back nearly as
long as people have been commenting on New York’s ongoing
transformation. The American Telephone and Telegraph
Company was established in 1885, as a small subsidiary of the
Bell Telephone Co. that was founded by Alexander Graham Bell.
He was a visionary and transformative figure, but it’s still hard to
believe Bell could have imagined that AT&T would someday
transform into a multinational diversified telecommunications
company providing everything from long-distance services to
cutting-edge, cloud-based mobile technology solutions. In fact,
just seven years ago, it was hard to believe that AT&T would even
transform into the diversified telecommunications provider it
is today.
In 2007, AT&T’s executives set the company — and its
subsidiaries — on its current course, in what was a dramatic
departure from the company’s longtime roots in long-distance
service.
One of the first things the company did was to declare, both
internally and externally, that they would be known as a wireless
company. AT&T’s executives have noted, in various interviews,
that there was pushback from the owners, stating that the fixed-
line side of the business generated a majority of revenue and
that’s where the bulk of the company’s employees worked.
Other companies trying to implement transformation know
something about this. Transforming an enterprise carries risk.
It can fail in small ways that slow the company’s progress. Or it
can fail outright.
For AT&T, failure was not an option. Last year it made
$18.2 billion on $129 billion in revenue thanks to the high-
level transformation that shifted the company’s strategy toward
wireless service, as well as other, smaller transformations that
have changed everything from the company’s financial systems
to the way AT&T’s corporate offices look.
But AT&T, like New York, is still not finished. It’s now
embarking on a transformation of its cloud-based services, one
it hopes can help other companies transform the core of their
businesses — moving increasingly to the cloud as a way of
doing business.
CRYSTAL CLEAR RECEPTION
When you adopt cloud-based solutions, you’re not just
upgrading an operating system, you’re embarking on a new
way of doing business. You’re embarking on a transformation.
Or, certainly, that’s how Jon Summers, senior vice president
for growth platforms at AT&T who is responsible for cloud and
security solutions targeted to AT&T business customers, sees it.
And he sees the cloud as a tool for change.
“Businesses are looking at cloud and evaluating it as a
significant opportunity to improve efficiencies for their
business,” Summers says. “They view it as an opportunity to
help them increase their agility and help them deliver products
and services to the market faster.”
But moving to cloud-based methods of doing business,
whether it’s just giving your employees access to all of their
internal communications tools or developing sales platforms that
customers can access with mobile devices, is a big change. And
Summers says many businesses are cautious about committing
to that kind of transformation.
“Customers are really looking hard at making this shift,”
he says. “They want to enable their workforce with mobile
applications on mobile devices. But, at the same time, they want
NO ONE KNOWS WHO SAID IT FIRST.
FALL 2014 INSIGNIAM QUARTERLY 63
to have some degree of control in terms of providing security
for those mobile users. This is the dilemma a lot of them are
working their way through.”
Concerning security, Summers notes that many CIOs
are increasingly concerned regarding the exposure of highly
sensitive or proprietary information.
“By combining our mobility, security, NetBond (the
company’s proprietary cloud-computing platform which
isolates traffic from other customer traffic, creating a private
network connection), and cloud capabilities, AT&T is able to
deliver a differentiated, secure mobile cloud solution.”
DIALING IN ON GROWTH
Summers says AT&T is aggressively working to not only
transform the customer relationship, but to also deliver innovative
solutions in new growth areas.
“Our growth platforms not only expand our clients business
potential and contribute significantly to revenue growth, but
they also reduce churn and create value with our core network
and mobility services,” says Summers.
For the moment, he says some of the companies who are
adopting cloud-based solutions are start-ups and web developers.
There are other cloud users in the enterprise space who will
require products like NetBond to enable migration to the cloud,
and AT&T is currently enabling NetBond with companies like
IBM and HP.
Furthermore, AT&T is starting to
convince clients across an array of
industries — everything from retail
to healthcare to manufacturing —
that it has secure and reliable cloud
platforms that bypass the public
Internet and can reshape everyday
business.
“We see a hybrid landscape
evolving in which companies
require choice,” says Steve Caniano,
vice president of networked cloud
solutions, who is on Summers’
team at AT&T. “That’s why AT&T
introduced NetBond and our network-enabled cloud. We want
to create a seamless, on-net service that delivers an enterprise-
class solution with performance, cost, and security advantages.”
Summers says that the shift toward the mobile cloud is
revolutionary for the industry.
“This is a pretty massive transformation for AT&T and for
our customers,” Summers says. “Like our customers, we want
to take advantage of cloud. When we started this effort a few
years ago, the cloud market was still in its infancy.
However, according to AT&T, one thing is fairly constant
as cloud adoption advances: Decision makers are not just
following the latest technology buzz when they consider their
next-generation cloud architectures. They are balancing business
needs, such as market differentiation, economics, ROI, and
scalability, with a build-vs.-buy analysis.
“As we study the market and talk to customers, we see
even more growth ahead as these issues around security and
performance are addressed. We think as customers gain more
confidence about the security and performance of cloud that
the adoption rate will start to accelerate.”
Just seven years ago, AT&T was a long-distance company
whose move to mobile was scoffed at both internally and
externally. But after a successful transition helped it become a
leader in the space, today, when a company official says, “Mobility
is how businesses do business,” it’s hard not to listen closely.
TRANSFORMATIONS HAVE CHANGED EVERYTHING FROM AT&T’S FINANCIAL SYSTEMS TO THE WAY THE COMPANY’S CORPORATE OFFICES LOOK.
IQ BOOST
BY SCOTT BECKETT
THE POWER OF COORDINATED ACTION
Extraordinary success is accomplished when multiple
people working on a multitude of tactical objectives
toward a common goal are able to coordinate their
actions — and pull in the same direction — because
they have established trust in their colleagues and
counterparts by being able to take them at their word.
If at first blush it seems obvious, it’s actually quite
novel.
While coordinated action, in literal terms, is the
ability to coordinate the contributions of many toward
a singular goal, the most critical facet in aligning these
efforts is our ability, as leaders, to say what we will do
and do what we say. This is imperative to not only the
success of executing our plans but also maintaining
accountability with those we lead.
At any company, a leader sets forth visions and
goals and maintains momentum. So how can leaders
coordinate large-scale strategic plans — and nurture
a culture where colleagues can trust that their
counterparts are just as dedicated to achieving an
intended result — if everyone inside an organization
cannot be taken at their word?
The key to successful coordinated action lies in
the operational context that dominates one’s life:
Are you committed to honoring your words over
circumstances? If you are setting forth a strategy or
executing any number of action items but continually
point to circumstances undermining your best efforts,
it becomes obvious that you can’t be taken at your
word. And despite all modern advances to assist in
productivity, accountability is still the most important
metric for success that, culturally, you’ll find in any
organization.
Scott Beckett is an Insigniam partner. He serves as
a member of Insigniam’s Design & Innovation Team
and is a member of the Management Committee,
responsible for consultant talent acquisition.
FALL 201464 INSIGNIAM QUARTERLY
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